Beef Prices are Up
Beef prices are up, but consumers are getting a break.
A reduction of the U.S. beef herd, early marketing of cattle and the closedown of the Canadian border have combined to send beef prices spiraling upwards. Processors are paying 50% more for cattle than only three months ago. Prices have gone from $.75/lb. up to $1.10 per pound for live steers. At the same time, wholesale beef prices have gone up even more - they are 75% higher than last year at this same time. But, while grocery store beef prices have been climbing, they are up only about 20%, giving buyers a chance to catch a comparative bargain.
Wholesalers and some retailers have been unable to pass on all of their price increase for several reasons. In some cases, groceries bought ahead at fixed prices. This will shield their customers, but only for a short while. Once the contracts expire, the supermarkets will be paying much more for beef. Other grocers are worried about scaring customers away, so are only raising prices slowly - $.20 to $.30 at a time, and hoping demand will slow and the wholesale price will slide back to more normal levels.
Shoppers may want to take advantage and stock up now, because most likely prices will continue rising quickly. The reason is simple - very tight supplies. The story starts with a consumer shift away from beef more than 10 years ago. Farmers reacted to low prices by gradually cutting back on their herds. In the last couple of years, numbers have hit bottom, but supplies were artificially increased by adding extra weight to each head sold. Then, Canada found one cow with BSE in Saskatchewan and countries including the U.S., Mexico and Japan all closed their borders to Canadian beef and cattle. That effectively shut out 6% of the U.S. beef supply. Finally, cattle producers have been rushing cattle to market to catch high prices, resulting in a loss of 50 pounds in weight on each steer and heifer. The bottom line is a lot less beef and much higher prices. The high prices will continue because the only solution is the long term increase that comes from breeding more cows.
Not all beef industry experts are enthused about the record high prices. They like the higher income but are worried about the impact of the sharp increases on the customer base that they have rebuilt since 1999. They know that shoppers will substitute other types of meats and meat alternatives to protect their household budgets. Some of these shoppers may not return to the beef part of the meat case even after prices return to today's levels. Supermarket ads are already specialing pork and chicken and ignoring beef cuts. The high prices will also cause restaurants to promote more non-beef menu items.