February 6, 2012

 

US 2012 beef prices to climb 8%

 

 

US beef prices hit a record high in December at an average of US$5/pound and could climb 5-8% higher this year, analysts predict.

 

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 2011, 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. As a result, the number of cattle in the US fell 2% from the beginning of 2011 to 90.8 million head, the USDA reported last week.

 

"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 Missouri's St. Charles County. "Our input costs are just really high."

 

For the cattle industry in general, the numbers come as good news. Prices, per pound for a steer, have topped US$1.70 of late, compared with about US$0.95 five years ago. For the average 1,300-pound steer, that adds up.

 

"Times are good," said Mike Miller of Cattlefax, a Colorado- based cattle industry research firm. "Our expectation is it's going to be good for some time." But the good times for the industry have not come without some trials.

 

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.

 

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 Institute 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."

 

The country's cattle producers have helped compensate for the decline by making inroads into overseas markets.

 

"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."

 

That will put more pressure on prices in American supermarkets. 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.