BEEF OUTLOOK: PRICE CUT, SHARP COMPETITION

PAMELA BLAMEY

DENVER -- Retail meat departments may see even lower beef prices and sharper competition in 1996, perpetuating a condition that persisted throughout last year, according to the National Cattlemen's Association, Englewood, Colo.

The association reported that prices could drop 2% from current levels, as they did in 1995. The drop will come as a result of continued cyclical increases in production, the association said.

The average retail price for beef in 1995 was estimated at $2.60 per pound, with the average advertised feature price at $2.40 per pound. This encouraged an average per capita consumption of 68 pounds, and this is likely to increase slightly to 69 pounds in 1996, according to NCA's analysis.

Beef production will increase about 3% in 1996, to 25.9 billion pounds from 1995's production of 25.1 billion pounds, the association said. "These supplies are going to be at their highest level since 1976," said Kevin Yost, beef retail manager at the Beef Industry Council, Chicago.

"What this means is that there will be such volumes that retailers can get aggressive on pricing and very aggressive on featuring, attracting new shoppers to the meat case, getting regular meat shoppers to increase their volume, and prompting an increase in total store sales," he told SN.

"The challenge for retailers will be, 'how do I continue to increase my volume of beef, yet maintain my sales dollars and margin dollars?' It's going to be such a competitive environment and price is going to be so critical," Yost said.

Yost said that in 1995, supplies were high overall but the condition was mitigated somewhat by high demand for certain cuts.

"Middle meat prices hit a high in June 1995," he said. "It's the increased supplies of end meats that continue to pose a challenge, and aggressive pricing is one way to deal with that. What we really need to be concerned about [this year] is the beef industry moving high supplies of chucks and rounds in the summer."

An end is in sight to the surplus that has been keeping beef prices depressed, but that end will probably not come until 1997, according to NCA.