February 21, 2012

 

 

Since the 1950s it has not been seen that beef cattle herds are shrinking which made US beef prices to be on the rise and could have an additional increase this year as suggested by experts.

 

In recent years consumers and producers have see a number of different commodity groups rise and fall on global demand, market conditions and weather concerns. Beef is the latest commodity to see a spike. Consumers in the grocery store and at the restaurant are feeling the effects.

 

The US average retail cost of a pound of hamburger rose 23%, from US$2.38 in December 2010 to US$2.92 in December 2011, according to the USDA. Restaurateurs are trying to adjust. The Woods Pub & Grill, 530 Erie Road in Green Bay has developed a number of strategies to work with increased beef costs - ranging from shopping around for the best prices available to absorbing some of the cost increases on fresh ground beef.

 

"There are certain things that have gone up more than others," said Chad Lardo, banquet manager at The Woods.

 

"We have an 18-burger menu, we use fresh ground beef that has gone up anywhere from US$0.40-0.50 (per pound) in the last six months. ... we just kind of roll with the punches when it comes to things like that."

 

"Instead of saying this is our steak and we're going to raise it US$2, we're going to give you a better steak for, say, US$2.50 more," Lardo said. "We have not had a single complaint on any of our steaks in the past six months."

 

Fluctuating food prices are nothing new to restaurants and consumers. Wheat prices, cheese, dairy and beef prices all are tied to the wider domestic and international picture.

 

"Everyone is a little more price cautious," said Lardo, who reads weekly reports on beef and feed prices. "The days when you would order everything from one supplier and never check a price on anything are done. We shop select items so we know we're getting the best price on quality items."

 

A quarterly, informal survey of grocery items by the Wisconsin Farm Bureau indicated food prices on 16 items had dropped from US$50.55 in September to US$48.35 in December. Sirloin tip roast and ground chuck all came in with increases of less than 5% from September-December. Year-over-year for December, the average price of the items in the survey increased US$2.47, or 6%, from US$45.61.

 

Last month, the USDA reported the US herd had declined to 90.8 million cattle, 2% less than the previous year and the lowest inventory since 1952, when there were 88.1 million.

 

"There's not enough beef out there," said Ron Plain, an agricultural economist with the University of Missouri. This year, there's going to be less beef, more people, the supply is going to be tighter - and that means more records."

 

Compounding matters are soaring feed, fuel and production costs, which are forcing price increases all along the production chain.

 

"Look at our fertiliser costs, our grain costs. Any piece of machinery we buy has just gone up," said Tom Sachs, who raises cattle in Missouri's St. Charles County. "Our input costs are just really high."

 

For the cattle industry in general, the numbers come as good news. Prices per pound for a steer have topped US$1.70 of late, compared with about US$0.95 five years ago. For the average 1,300-pound steer, that adds up.

 

"Times are good," said Mike Miller of Cattlefax, a Colorado-based cattle industry research firm. "Our expectation is it's going to be good for some time."

 

There are beef operations throughout north eastern Wisconsin, but the area primarily is focused on dairy production. Mark Hagedorn, an agent with Brown County University of Wisconsin-Extension, who has ties to Iowa where beef production makes up a larger portion of the agricultural picture, said high feed prices have been one of the factors driving the beef market.

 

Good times for the beef industry have not come without some trials, and some work in courting overseas markets. Since 1980, according to the USDA, per capita beef consumption has plummeted 25%. In 2011, the average American consumed 57.6 pounds of beef, down 13% from a decade prior. This year the number is predicted to decline again to 54.1 pounds. The industry insists the American appetite for beef is still strong, while some analysts and researchers suggest the decline, at least in recent years, is simply because of the recession.