February 21, 2011

 

US meat prices rise 6.2% on-year

 

 

Several months of rising cattle and hog prices have affected the market prices, as the cost of meat climb 6.2% since January 2010, according to Consumer Price Index figures released Thursday (Feb 17).

 

The jump in the price of meat overshadowed the overall 1.8% increase for all food items and was topped among consumer spending items only by a 13.4% increase in gasoline prices since January 2010.

 

Cattle prices have risen 25% since October, fueled largely by a 27% increase in beef exports and a reduction in herds to their lowest levels since 1958. Hog prices are up almost 50% in the last year.

 

For Iowa's economy, the news is mixed.

 

While consumers pay higher prices, the state also is home to the nation's largest production of hogs and the fifth-largest total of cattle. The animals together consume more than 30% of Iowa's 2.3 billion bushel corn crop.

 

Iowa's beef and pork producers, as well several processing plants statewide, account for about US$70 billion in gross revenues annually.

 

Analysts suggested Thursday that hamburger, already up 30% in wholesale markets and 10% in stores since early 2010, would have further increases.

 

"Wholesale hamburger prices have been hot," said cattle trader Kevin Penner of Ag Trader Talk in Des Moines.

 

Penner and Jeff French of Top Third Ag Marketing of Chicago noted that select beef cuts, which normally are cheaper than the choice cuts used for more expensive steaks, traded higher in wholesale markets earlier this week,

 

"That tells you that the market is switching more to hamburger because demand for the choice steaks is getting soft, particularly at restaurants," French said.

 

The index report showed retail prices for choice steak up 16% from a year ago.

 

The futures markets Thursday showed no sign of slowing. Feeder cattle remain at an all-time high of US$130.60 per hundredweight, and live cattle, those ready for the packinghouse, gained another US$1.10 per hundredweight to US$110.27.

 

More ominous news for summer backyard grillers: Futures prices for delivery through the second half of 2011 are US$10 or more per hundredweight above the current delivery prices.

 

Traders have said that cattle producers are pushing as many of their animals as possible into packinghouses to take advantage of the jump in prices. That includes heifers needed to increase herds that now stand at their lowest levels since 1958.

 

"It will take a while to rebuild the herds, and producers want to get the good prices now," French said.

 

Traders expect little rebuilding of cattle herds because of near-record-high corn costs. Thursday, corn rose US$0.22 per bushel to US$7.13 for the March contract, more than double the US$3.50 that corn traded in June.

 

Corn prices have been boosted by a 5% shorter crop in the US in 2010, a drought in Russia and an expected reduced crop in Argentina.