US meat prices may rise to record highs on shrinking herds

American meat prices may rise to record levels this summer after producers reduced hog and cattle herds to the smallest sizes in decades as the result of surging feed costs linked to demands for more ethanol.

According to USDA figures, wholesale pork jumped as much as 25% this month to 90.68 cents a pound last week, the highest since August 2008. Beef climbed 22% this year to US$1.6896 a pound on April 23, the most expensive since July 2008. Chicken's gain in March was the most in 20 months.

Demand for pork chops, steaks and chicken breasts is rising as the economy improves, backyard barbecues resume and China and Russia allow more US imports, according to reports. Domestic supplies may drop to a 13-year low as culls-to-stem losses caused by corn prices that doubled after former President Bush set targets to increase ethanol use.

Meanwhile, hog futures have almost doubled from a low in August to 85.175 cents a pound on the CME on April 23 and may reach US$1 by June.

More expensive pork and beef may revive food inflation that dropped last year for the first time since 1961. Meat prices tracked by the UN Food and Agriculture Organization are up 5% this year, even as food costs fell 5.8%.

Smithfield, the world's largest pork processor, said that its hog-producing unit will be profitable in the fiscal year that begins in May, its first period without a loss since 2007.