May 30, 2012

 

Memorial Day weekend increases US meat sales, prices

 

 

As May's official national beef month celebrations close out, outdoor grilling over Memorial Day weekend increased meat counter sales and prices skyrocketed.

 

The money people saved on gasoline when prices dropped in recent weeks was likely going toward buying steaks, ribs and chicken for the barbecue, said one economist. Normally summer prices usually increase 1-3% from the spring as more consumers take advantage of warm weather to grill meat, said Ricky Volpe, an economist with the USDA's Economic Research Service.

 

However, meat prices are expected to increase 3.5-4.5% in 2012, Volpe said. The meat price increase is greater than the 2.5-3.5% rise in overall food costs the government is forecasting.

 

When Memorial Day weekend kicked off Friday (May 25), a pound of lean ground beef was selling for US$4.49 at a Denver supermarket, according to USDA data.

 

Beef rib-eye steak was US$9.99 per pound. Boneless, skinless chicken breasts were US$3.49 per pound and boneless pork chops were US$4.49 per pound.

 

Steaks cost about 6% more this spring than a year ago. Pork prices were up just 3%, while chicken prices jumped 5.3%.

 

Meanwhile, the nation's cattle inventory is the lowest since 1952 with most of the decline contributed to last year's historic drought in Texas.

 

Last year was the single largest decline in beef cow numbers recorded, said Jason Johnson, Texas AgriLife Extension economist from Stephenville.

 

"All of these things are supportive of high calf prices and in support of beef overall. We are not in a situation where we are building cow-calf numbers up. The price forecast looking ahead to April 2013 is US$163 per hundredweight for 700-pound calves."

 

Johnson said the declining cattle numbers and higher prices likely will hold for a while.

 

"Cattle on feed prices are going higher as well as live cattle prices. Fewer cows, fewer calves and less beef … that's signalling higher prices," he said.

 

More than 900 head of cattle sold last week at Producers Livestock Auction in San Angelo, Texas' largest cattle market, with calves and yearling bringing from US$1-2 more than the week before.

 

Better quality steers, 400-600 pounds, sold from US$145-170 per hundredweight. Heifers, 400-600 pounds, brought from $133-157 per cwt.

 

"All and all, I think we are going to see an even better market going forward," Charley Christensen, Producers general manager, told me last week.

 

As for rebuilding the nation's cow herd, Johnson urged producers at the recent O.D. Butler Forage Field Day at Camp Cooley Ranch to use caution and carefully develop a strategy. He said Texas is down some 25% in cattle inventory since 1971. The most important issue producers must determine is when pastures will recover from the drought and provide enough forage to consider restocking, he said.

 

"When it comes to replacement heifers, beef producers should consider how much they can sell their heifers versus raising them. With market prices climbing producers may elect to sell those animals and make a nice profit," Johnson said.

 

"You really have to answer the question, am I willing to forgo that pay check I would receive holding on to that replacement heifer rather than selling it?" he said. "It's going to be two years before I get that first pay check out of that animal if I hold on to it and raise it as a replacement."

 

Johnson also suggested ranchers consider storing up to two years' worth of hay supplies to cut down costs. In 2011, hay prices skyrocketed above US$300 a round bale, so he advised developing the capacity to store excess hay so producers could avoid the necessity of buying hay in extremely expensive years like last year. Other suggestions included getting soil samples so producers can apply fertiliser at an economical and recommended rate. He also advised producers to consider purchasing drought insurance to further protect from downside operation risk.