August 27, 2004

US Beef Industry Looking Up

US beef had sold at record prices last winter. Despite a second mad cow scare in June, the prices climbed to well above average.

The combination of high beef prices and a bumper corn crop expected later this year means a profitable autumn for farmers, who should be banking more money than they have in several years.

But the strong commodity prices that are buoying hopes in the heartland are also crimping profit for food processors such as Kraft and Sara Lee, both based in the Chicago area, as well as Springdale, Ark.-based Tyson Foods.

Libby Lawson, a Tyson spokeswoman, said the company charged 6.3 percent more for beef in the quarter that ended June 26, compared with the same period in the previous year. Pork prices jumped 21.4 percent, and chicken rose 13.2 percent.

Lawson attributed the price rise to tight supplies of chicken and beef, in addition to increased international demand for pork. Producers have been shipping more pork abroad to replace U.S. beef exports, which are still banned in Japan because of the mad cow case.

Industry experts attribute the resilience of beef prices to a combination of factors.

Millions of people are currently following protein diets. People are also eating out more often, and diners often splurge by ordering meat.

Meat typically gets cheaper during the winter. Thus cattle ranchers, who are eyeing the rich prices for steers, have started breeding more calves. That could mean more beef cattle for sale at lower prices.

Milk and corn prices have also dropped recently. The large corn crop that will be harvested this fall should push prices down as well.

But rising demand for grain and meat may ultimately keep prices climbing, said Sung Won Sohn, chief economist at Wells Fargo Bank in Minneapolis