April 5, 2012

US beef prices to rise up to 20% on continues foreign demands

The smallest US cattle herd will likely result in higher beef prices in the next two years with costs expecting to climb from 10-20% and could even go higher if demand from other countries continues, experts say.

The average retail cost of a pound of hamburger has been on the rise for months, up 23%, from US$2.38 in December 2010 to US$2.92 last December, according to the USDA.

In the short term, however, demand in the US has actually dampened because of publicity and concerns surrounding the meat filler dubbed "pink slime," said Lane Broadbent, a livestock analyst with KIS Futures in Oklahoma City. Meat processors are facing a backlash over the use of the ammonia-treated product, even though federal regulators say it is safe to eat.

On Monday, Pennsylvania-based AFA, one of the largest US ground beef processors, filed for bankruptcy protection citing among other issues the controversy swirling around the meat filler.

In addition, big US supermarket chains, including Kroger, the parent company of the Utah-based Smith's Food & Drug Stores, have said they will stop buying the treated filler that processors call "finely textured beef."

"Domestically, our demand for beef has been destroyed in the last three weeks," said Broadbent. "But long term, we'll be struggling with tight supplies of meat for the next two years. If all things stay the same, we'll likely see [at least] a 10% [price] increase at the supermarket."

This year, the US cattle herd has declined to 90.8 million head, 2% less than the previous year, and the lowest inventory since 1952, when there were 88.1 million head, according to the USDA.

In Utah, the total cattle inventory remains unchanged from the previous year, according to a report from the USDA's Utah field office. Cattle and calf numbers total 800,000 head, while the 2011 calf crop was 365,000 head, the same number as the previous year.

"We went through several years of drought in Utah but things have been better the past couple of years," said Brent Tanner, executive vice president of the Utah Cattlemen's Association and a northern Utah rancher. "State-wide, we've been slowly building up our numbers or maintaining our herds."