Beef's the red-hot meat again, so expect to pay more
By Roxana Hegeman
Associated Press
WICHITA, Kan. — Market prices for beef, driven by drought and the mad-cow disease scare in Canada, have reached new highs.
The tight supplies come at a time when consumers have rediscovered their taste for beef, bolstered in part by the renewed popularity of the high-protein Atkins diet.
So far, consumers have been insulated somewhat from the 40 percent spike in cattle prices; retail meat prices are up 11 percent this past year, to $3.73 a pound for choice meats in August.
But analysts say that won't last — and meat prices at the supermarket are bound to go up. Cattle futures market prices have rallied for three months and aren't abating, putting more pressure on grocers to pass along higher costs.
"We had not had consumer shock yet, because they don't have a 40 percent increase. How long will that last? Not forever," said Chuck Levitt, a market analyst with Alaron Trading in Chicago.
When that happens, it will temper consumer demand for beef — which is now very strong, he said.
Americans ate slightly more than 67 pounds of beef per capita last year, up about 2 percent from 66 in 2001. That compares to 1993 when per capita consumption levels dropped to 64 pounds, according to figures compiled by Hedgers
Edge.com, an agriculture industry consultant. But it is still a far cry from 1976, when Americans were eating 94 pounds of beef per capita.
"Just the fact some of these diets are promoting beef consumption really gives the consumer license to go back and eat the product after a 20-year period when everything we saw in nutrition circles was negative. Now we are seeing positive information out there. Consumers are responding," said Todd Domer, spokesman for the Kansas Livestock Association.
Monte Reese, chief executive officer of the Colorado-based Cattlemen's Beef Promotion and Research Board, said the proliferation of convenient, precooked beef products designed for busy lifestyles also has helped.
Meanwhile, supplies have been squeezed, the result of years of herd liquidations coupled with the loss of Canadian supplies after a mad-cow disease scare in Canada this past spring shut off exports of beef from that country. The United States gets between 7 percent and 10 percent of its cattle from Canada.
Many meat packers and retailers miscalculated available beef supplies because they thought the Canadian ban would be lifted by this time, Levitt said.
"We are looking at the highest prices of cattle on the hoof in history, as we speak," he said.
Slaughter cattle prices the first week of October were at $90 per hundredweight, compared with $64.17 per hundredweight a year ago at this time.
The high prices have come as a godsend for ranchers battling a persistent drought.
As dry weather shriveled his pastures in Dighton, Kan., rancher Don Hineman sold off 20 percent of his herd in 2002. With the return of drought again this past summer, Hineman hung on to his remaining herd.
"By then I could see prices picking up, and I was reluctant to sell anything at that time because I felt better times were coming," he said.
The nation's cattle herd reached its peak in 1996 with 103.5 million cattle. In its last Jan. 1 inventory, the U.S. Department of Agriculture counted 96.1 million head, essentially flat with the previous year.
For states like Kansas — where cattle receipts account for $4.8 billion a year — the record high cattle prices ranchers are now enjoying provides a welcome respite from years of losses.
"It is a tremendous financial boost to the industry and to the state's economy," Domer said. "Profits like this will help them rebuild their equity that was lost in the years prior."
