May 3, 2014 in Business

Beef, pork prices continuing to rise

Drought, virus shrink market supply
Mike Hughlett And Steve Fischer (Minneapolis) Star Tribune
 
Associated Press photo

Freddie Quina cuts meat at Super Cao Nguyen in Oklahoma City in 2012. The highest beef prices in decades have some consumers looking for cuts that won’t break their budgets.
(Full-size photo)

Before you polish up the barbecue tongs for the grilling season, brace yourself: Beef prices are at all-time highs, and still rising, and pork prices are climbing too.

“Everything is high now,” said Richard Vanguilder, of Richfield, Minn., echoing the sentiments of many grocery shoppers. “Beef is sky-high. Bacon is getting ridiculous.”

The price spikes are rooted in a shrinking supply of beef and pork. The U.S. cattle herd is the smallest in decades, a problem anchored in drought. Meanwhile, a virus is sweeping the hog industry, killing piglets at an alarming rate.

Neither issue is expected to be resolved anytime soon.

“I don’t see any relief in terms of red meat or pork prices,” said Michael Boland, director of the University of Minnesota’s Food Industry Center. “I think it will play out this way throughout the year.”

Federal government estimates see food prices rising 2.5 to 3.5 percent this year – the most since 2011 – with meat costs a key driver.

Beef cuts at the grocery store averaged $5.28 per pound in February, up almost 8 percent from over a year ago and 33 percent since 2008, according to the Department of Agriculture. Meanwhile, pork prices were up 9 percent in March from over a year ago, according to the USDA.

The high prices are shaping shoppers’ decisions.

Megan Mosbek, of New Hope, Minn., has already shifted her meat purchases. “Lately, I’ve been buying ground turkey or chicken,” she said. “Plus it’s healthier.”

Chicken prices haven’t been climbing at the same clip as beef and pork. But rising beef and pork prices can put the squeeze on chicken, too. As consumers swap out beef and pork, the demand for chicken – and other proteins, for that matter – increases.

While U.S. beef and pork consumption has been declining over the long term, demand for both meats at home and abroad is strong right now. Supply is another story.

“The No. 1 issue is the low cattle inventory in the U.S.,” said Richard Volpe, a USDA food markets economist.

The cattle industry has been beset by drought, recession and high feed costs for much of the last five years. Dry conditions in prime cattle raising areas toasted pastures, and high feed prices made matters worse. So ranchers culled herds, slaughtering heifers that might otherwise be used for breeding.

The U.S. cattle herd is at a low not seen since the early ’50s. The first-quarter commercial steer and heifer slaughter is on track to be the lowest since 1965. And drought continues to parch much of the West and Southwest.

Still, there’s hope for a rebound in the herd. In cattle growing areas that are getting moisture, pasture is coming back. With a significant decline in corn prices since last summer, feed costs are down. Profitability for ranchers is potentially high. The same is true for hog producers.

But hog growers have their own problem: porcine epidemic diarrhea virus or PEDv. It surfaced in the United States last spring, but accelerated this past winter. It poses no food safety threat to humans, but it has a very high mortality rate for piglets and so far has no cure.

Estimates over the size of pig losses from PEDv have varied widely. “There are still a lot of question marks on how severe it’s going to be,” said Bill Lapp of Advanced Economic Solutions in Omaha, Neb., which specializes in food and commodities.


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