Cattle inventory dropped to the lowest level in 53 years, reports Jim Ethridge of the National Cattlemen’s Beef Association, but worldwide demand for beef and other animal proteins is very strong. Although the larger size of each steer is somewhat offsetting low cattle count, the simple laws of supply and demand indicate that beef prices should be trending up. What other factors will have an impact on red meat prices?
Cattle inventory dropped to the lowest level in 53 years, reports Jim Ethridge of the National Cattlemen’s Beef Association, but worldwide demand for beef and other animal proteins is very strong. Although the larger size of each steer is somewhat offsetting low cattle count, the simple laws of supply and demand indicate that beef prices should be trending up. What other factors will have an impact on red meat prices?
•Higher input costs are affecting the price of all proteins. Four out of every ten rows of corn are now going into ethanol production, leaving very low feed stocks for cattle, pigs and chickens. In April, corn was selling at $7.60 a bushel and it’s predicted that it will plateau around $7 even as the 2011 crop comes in. The big question mark is weather; a summer drought can jack up prices even higher.
•The export market is very strong. China’s appetite for red meat is boundless, and U.S. producers are ramping up exports to meet demand. That means less beef and pork for American tables—and higher prices. The aftermath of the earthquake in Japan is hampering imports for the short term, but long term, there will be a desperate need for beef and pork exports. The weakness of the dollar against other currencies is worsening the situation—our meat prices don’t seem that high in foreign markets.
•Wholesale meat prices have already jumped. February marked the largest one-month increase in 37 years for wholesale food prices, with beef and pork climbing by 4 percent, reported The Food Institute of Upper Saddle River, NJ. “These wholesale prices are just starting to push through the channels, but most restaurants haven’t seen increases yet,” says Karl Skold, president of Westside Economics in Omaha, NE. “By summer, prices for raw meat will definitely be higher.”
•Rising commodity prices are reheating inflation. In April, the year-over-year inflation rate for meat and poultry was up 6.8 percent, states Dr. Chris Hurt, an agricultural marketing specialist at Purdue University. He estimates that beef prices will rise 11 percent and pork prices, 9 percent, by the end of 2011—figures above USDA predictions.
With the price you pay for meat sure to go up, how can you work with vendors to maximize your purchasing dollars? Strengthening ties and communication with suppliers is key, feels John Doherty, chef with Certified Angus Beef. “They know when larger quantities of meat are coming on market and when price and production fluctuations may occur,” he says. “Operators should work with suppliers to buy a certain quantity at those times and lock in prices. Vendors will make the same margins whether the price is low or high, so lock in low, when possible.”
Read more about the state of meat here.