January 30, 2012

 

US beef prices continue to soar

 

 

After hitting a record high in December, US beef prices continue to increase and will climb even more this year, analysts said.

 

Prices for beef, which have been climbing for months, hit a record high in December - an average of US$5 a pound - and analysts predict they could climb 5-8% higher this year.

 

"Prices have gone up quite a bit. That usually happens around the holidays, but we expect them to come down," said Pam Neal, owner of the steak-centric Al's Restaurant, north of Laclede's Landing. "Not this time. They're going to be jumping even higher. It's hard to handle."

 

Beef prices are soaring for a number of reasons. Producers, who struggled with high feed costs and diminishing profits, began shrinking their herds roughly five years ago. Since then, demand from overseas markets has shot up - a record 11% of American beef went overseas last year, up from 8.7% in 2010.

 

In July of last year, the US beef herd had dropped to its lowest point since 1958. Also last year, a drought in Texas and Oklahoma, the top two cattle-producing states, forced producers to cull herds. That means that the 2012 cattle numbers, due out today, will be even lower. Some estimates predict the country's cattle herd could shrink by 600,000 head this year. Last year's cow inventory was 30.9 million, while the total number of cattle was 92.6 million.

 

"There's not enough beef out there," said Ron Plain, an agricultural economist with the University of Missouri. "This year, there's going to be less beef, more people, the supply is going to be tighter, and that means more records."

 

Compounding matters for beef lovers are soaring feed, fuel and production costs, which are forcing price increases all along the production chain.

 

"Look at our fertiliser costs, our grain costs. Any piece of machinery we buy has just gone up," said Tom Sachs, who raises cattle in St. Charles County. "Our input costs are just really high."

 

For Missouri's US$3-4 billion cattle industry, which currently raises the third-most calves in the nation and for the nation's cattle industry in general, the numbers come as good news. Prices, per pound for a steer, were US$1.75 on Tuesday, compared with about US$0.95 five years ago. For the average 1,300-pound steer, that adds up.

 

Since 1980, according to the USDA, per capita beef consumption has plummeted 25%. In 2011, the average American consumed 57.6 pounds of beef, down 13% from a decade prior. This year the number is predicted to decline again to 54.1 pounds. The reasons for the decline are difficult to isolate. But they include health concerns over the higher fat content in red meat, worries about humane treatment and links to environmental problems, including greenhouse gases - all of which have gotten a lot of attention in recent years. Some people point to public health campaigns, such as "Meatless Mondays," launched by the Johns Hopkins' Bloomberg School of Public Health, for the shrinking numbers.

 

The industry insists the American appetite for beef is still strong, while some analysts and researchers suggest the decline, at least in recent years, is simply because of the recession.

 

"These noneconomic factors are really tough to talk about," said Scott Brown, a livestock economist with the Food and Agricultural Policy Research Center at the University of Missouri. "Frankly, when the consumer goes to the store or restaurant, it's the relative price that's driving their decision." Whatever the reason for the decline, the country's cattle producers have helped compensate for it by making inroads into overseas markets, particularly in Asia.

 

"Worldwide consumption of meat and demand has increased," said Jeff Windett, who heads the Missouri Cattlemen's Association. "I think it's just good business sense to expand market opportunities for producers."

 

Overseas markets also embrace pieces of the animal that American's typically don't consume, bringing more dollars to American beef producers.

 

Japan, a major beef importer, restricted US beef in 2003 after an outbreak of mad cow disease but has since eased the barriers. With Japan a major trade destination again, American beef exports are poised to hit another record this year - nearly US$5 billion in sales. China, which does not officially import US beef, could be on the horizon.

 

That will, inevitably, put more pressure on prices in American supermarkets, at least in the short term. Because cattle herds take years to rebuild and require huge amounts of capital, it could be some time before the American cattle inventory can help even out costs to consumers, cattle ranchers say.