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State of the industry report: meat and deli merchandisers are being hampered by higher wholesale and retail protein prices, but growth opportunities still exist.

Article Excerpt
A lousy economy and an upswing in protein prices are key elements in the black cloud hanging over the retail meat and deli sectors.

With cash-strapped shoppers tightening their spending, merchandisers have the arduous task of sustaining sales as the cost of products escalates.

Much of the added cost is resulting from steeper production expenses. Animal feed prices are skyrocketing under a federal policy that has increased the amount of ethanol required in gasoline.

Ethanol is most commonly used to increase octane and improve the emissions quality of gas. Developers produce alcohol-based ethanol by fermenting and distilling starch crops that have been converted into simple sugars. That is causing feedstocks, including corn, barley and wheat, to jump in price.

The Washington, D.C.-based National Turkey Federation (NTF) reports that corn prices are 80-percent higher than last year, contributing to a 41.8-percent cost increase in prepared animal feeds.

"The government's decision to convert a third of our corn crop into ethanol continues to drive up production costs for meat and poultry products and is foisting a greater burden on the pocketbooks of consumers," J. Patrick Boyle, president and chief executive officer of the Washington, D.C.-based American Meat Institute, said in a statement. "Alarmingly, the federal government's ethanol mandate for next year is to convert even more of our food into fuel. Consumers should be forewarned that this is just the beginning of higher prices for meat and poultry, unless Congress changes the law."

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Bill Roenigk, senior vice president and chief economist for the Washington, D.C.-based National Chicken Council (NCC), concurs.

"Higher feed costs will be with us until the government incentives, subsidies and market protection for ethanol get scaled back or eliminated," he notes. "If that doesn't happen, we will have to wait until there is a breakthrough with genetics so...

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