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Dwindling herds, overseas demand drives up beef prices

David Means of Callaway Livestock Center wrangles cattle
at a weekly auction in Callaway County, Mo., in January.
Beef prices are projected to increase 5 percent this year.

St. Louis Post-Dispatch

David Means of Callaway Livestock Center wrangles cattle at a weekly auction in Callaway County, Mo., in January. Beef prices are projected to increase 5 percent this year.

For anyone who loves a good steak, a juicy burger or a Sunday roast, these are anxious times.

Prices for beef, which have been climbing for months, hit a record high in December — an average of $5 a pound — and analysts predict they could climb 5 to 8 percent higher this year.

Beef prices are soaring for a number of reasons. Producers, who struggled with high feed costs and diminishing profits, began shrinking their herds roughly five years ago. Since then, demand from overseas markets has shot up — a record 11 percent of American beef went overseas last year, up from 8.7 percent in 2010.

In July of last year, the U.S. beef herd had dropped to its lowest point since 1958. Also last year, a drought in Texas and Oklahoma, the top two cattle-producing states, forced producers to cull herds. As a result, the number of cattle in the United States fell 2 percent from the beginning of 2011 to 90.8 million head, the Agriculture Department reported last week.

"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 for beef lovers are soaring feed, fuel and production costs, which are forcing price increases all along the production chain.

"Look at our fertilizer costs, our grain costs. Any piece of machinery we buy has just gone up," said Tom Sachs, who raises cattle in Missouri. "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 $1.70 of late, compared with about 95 cents 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."

But the good times for the industry have not come without some trials, and some work in courting overseas markets.

Since 1980, according to the Agriculture Department, per capita beef consumption has plummeted 25 percent. In 2011, the average American consumed 57.6 pounds of beef, down 13 percent from a decade prior. This year the number is predicted to decline again to 54.1 pounds.

The reasons for the decline are difficult to isolate. But they include health concerns over the higher fat content in red meat, worries about humane treatment and links to environmental problems, including greenhouse gases — all of which have gotten a lot of attention in recent years. Some people point to public health campaigns, such as "Meatless Mondays," launched by the Johns Hopkins University's Bloomberg School of Public Health, for the shrinking numbers.

The country's cattle producers have helped compensate for it by making inroads into overseas markets, particularly in Asia.

"Worldwide consumption of meat and demand has increased," said Jeff Windett, who heads the Missouri Cattlemen's Association. "I think it's just good business sense to expand market opportunities for producers."

That will, inevitably, put more pressure on prices in American supermarkets, at least in the short term. Because cattle herds take years to rebuild and require huge amounts of capital, it could be some time before the American cattle inventory can level costs to consumers, cattle ranchers say.

On the rise

Prices for beef overall hit a record high in December. Even prices for economical ground chuck have climbed in the past five years.

Average price per pound of ground chuck in December:

2007 $2.70
2008$3.00
2009 $2.83
2010 $2.93
2011 $3.27

Source: USDA

Dwindling herds, overseas demand drives up beef prices 02/04/12 [Last modified: Saturday, February 4, 2012 3:31am]

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