What is in this article?:
- Consumers & The Weather Offer Double Whammy
- Nuts and bolts of the live market
Summer 2012’s challenging weather, along with rising consumer anxiety over the economy, are combining to make producers’ decision-making particularly challenging this season.
There just isn’t space to do it all justice. Consumers and weather – separately, each is a powerful market force – but mix them together and the result can be especially potent and fickle.
That’s precisely where we are – navigating the influence of both simultaneously. That creates lots of uncertainty and turbulence around the business. As noted in last month’s column, that’s an enduring theme of late making for difficult decision making.
On the people side, it appears the domestic consumer is retrenching. For example, July’s Consumer Sentiment reading (72.3) represents the low-water mark for the year. At the same time, overall consumer spending in June was flat.
Those indicators, along with several others, portray a very cautious attitude about spending among consumers and a muddling economic recovery. That’s influencing the food business all around. Recent quarterly results saw restaurants like McDonald’s, Starbucks and Chipotle all reporting spending restraint among consumers – a trend that’s seemingly accelerated during the past several months.
The hardest aspect within this environment, though, is predicting spending in the second half of the year. That’s especially true given convergence of ongoing job market stagnation, election-year politics, and continued worries regarding fallout from the Eurozone. That inherently invokes questions about beef spending, price resistance and market trends going forward.
The primary concern revolves around business strategies and management of the margin mix associated with pork, poultry and beef. Figure 1 reflects beef’s relative retail price performance over time. The price trend, particularly the relationship vs. chicken, parallels the fed market’s run since late 2009. Increasing consumer restraint coupled with an outlook for food prices to rise could prove to be dicey. The primary question within that environment revolves around beef’s competitiveness in the months to come.