(Bloomberg) -- It looks like it's going to be a big summer for ribs.
Record inventories and lower prices are pointing to a ribs feast for U.S. summer barbecues. Retailers and restaurants including Chili's and Del Frisco's Grille are promoting the dish, and consumers are increasing grocery purchases, especially for juicy, well-marbled St. Louis spare ribs.
Pork is getting cheaper after the U.S. pig herd expanded to the largest on record for this time of year amid lower feed expenses. The cost of wholesale ribs at the end of June was at a six-year low, just in time for the U.S. Fourth of July holiday, the No. 1 day when Americans fire up their grills, according to the Hearth, Patio & Barbecue Association. There are signs that prices could keep falling. Hedge funds last week cut their bets on a hog rally for the first time in a month.
When it comes to ribs, “many consumers would like to buy more,” Bonnie Riggs, a restaurant-industry analyst for researcher NPD Group, said by telephone from Chicago. “I view it as a treat.”
More Pigs
The U.S. hog herd rose to 68.4 million head on June 1, the most for the date since the data begins in 1964, the Department of Agriculture said June 24. More animals means bigger meat supplies, with inventories of ribs as of May 31 rising to a record for the month, government figures show. Wholesale ribs dropped 32 percent over the past 12 months to $1.3246 a pound on Friday. On Thursday, prices touched $1.271, the cheapest for this time of year since 2010.
The net-long position in hog futures and options shrank 1.5 percent to 67,761 contracts in the week ended June 28, according to Commodity Futures and Trading Commission data released three days later. Hog futures for August settlement in Chicago declined 1.2 percent last week to 83.95 cents a pound, a second straight loss.
Americans are especially hungry for St. Louis spare ribs, a square-shaped cut near the belly. In May, 14 percent more pounds of the variety were sold than a year earlier, following a 20 percent jump in April, according to data from market researcher Nielsen. During the week ended June 30, supermarket prices for the meat declined 9 percent from 2015 to $3.13 a pound, while stores advertising the item increased 76 percent, according to USDA data.
When Barry Sorkin opened Smoque BBQ in Chicago almost a decade ago, 90 percent of the ribs the restaurant served were the baby back variety. Today, sales of the St. Louis-style cut account for 50 percent of sales.
St. Louis Virtues
“It's catching on, and for certain, more and more people are seeing the virtue of St. Louis ribs and spare ribs,” Sorkin said by phone. “Chicago has always been a baby-back town, so this was a big shift. People ordered baby backs out of habit -- it's what they were used to.”
Ribs are processed year-round and stored in U.S. freezers during the fall and winter. Most are then consumed in the spring and summer months of peak barbecue season. More than 75 percent of grill owners will fire it up for the Fourth of July, the Hearth, Patio & Barbecue Association estimates.
Americans are eating ribs away from home, too. While visits to full-service restaurants declined 3 percent in the year through May 2016, servings of the dish increased 1 percent, said Riggs of NPD. That's surprising because even though rib prices are down, they're still more expensive than items like chicken sandwiches, she said.
Eating More
People could be eating more because restaurants are offering more deals on the meat. Chili's, the chain that spurred Americans to sing for ribs with its commercial jingles in the 1990s, is going back to its “heritage” by featuring the dish again, Krista Gibson, a senior vice president at the restaurant's parent company Brinker International Inc., said on a June 9 earnings call. The eatery is offering a baby-back-ribs dinner bundle with fries, salad and dessert for $10.99. Ribs are also being featured on the menu at Dave & Busters, and Ruby Tuesday just had a promotion.
“Ribs have always been a favorite at Ruby Tuesday, but we've seen piqued interest,” said Peter Glander, the Maryville, Tennessee-based executive chef at Ruby Tuesday. “It's a little bit of an indulgence, while still being super flavorful. Because of the different preparations and flavor profiles, ribs are becoming more of a staple in the American diet.”
Robust demand had sparked a rally for hog futures in early June. Money managers were loading up on net-long bets in the previous three weeks, partly as exports to China surged. Since then, the figures on the bigger herd were released.
Cheaper Grains
And, it's not just pig farmers that have taken advantage of cheaper grains supplies to increase production. Chicken flocks and cattle herds are getting bigger, too, sending total U.S. meat production to a record. The competition will help keep pork prices low, according to Andrew Strelzik, an analyst at BMO Capital Markets Corp.
“A lot of other inexpensive proteins are putting a cap on the price of ribs,” said Altin Kalo, an analyst at Manchester, Mew Hampshire-based Steiner Consulting Group, an economic and commodity-trading adviser. “There's quite a few more ribs around, and we're going to eat whatever's there. It's just at what price point.”
--With assistance from Leslie Patton To contact the reporters on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net, Shruti Date Singh in Chicago at ssingh28@bloomberg.net. To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi, Steve Stroth
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