Consumer beef prices flirt with record highs
By Janet Kubat Willette
Date Modified: 05/20/2013 9:28 AM
AMES, Iowa — Consumers are seeing higher prices at the meat counter and the impact of those higher prices on beef consumption remains to be seen, said Lee Schulz, an Iowa State University Extension livestock economist.
Supermarket beef prices are nearing historical highs, but Schulz wonders how high those prices can rise before there's push back on demand.
Boxed beef prices made a run at $200 per hundredweight before falling back with pressure from sequestration, and economic and export uncertainty, he said. The restaurant performance index is sputtering.
Beef prices at the meat counter have risen, raising concern that consumers may switch to pork or poultry or decrease their meat consumption altogether.
That plays into producers decisions to rebuild their cow herds. If the consumer turns away from beef, will that market be easy to get back? Will beef once again be able to capture market share? How long will it take? There's uncertainty out there, Schulz said.
The supply situation is more certain than the demand situation, he said. The United States beef cow herd is the smallest since 1962. The last two years, year over year, producers have increased the percentage of heifers held for replacement. Last year, the number of heifers held for replacement was up 1.9 percent, but expansion hasn't shown up because the numbers are so low.
USDA projects the nation's cow herd will be at low levels through 2014, with expansion realized in 2015.
A lot of heifers went to feedlots as the nation went through the regional drought of 2011 and the more national drought of 2012. There's been feed availability issues and also issues of pasture deterioration and loss.
There aren't exact estimates on pasture lost to row crop production, but there's been reports of pasture tilled up for row crops because of record high corn and soybean prices.
Pasture condition is also a concern. Last year, a majority of Iowa pastures were rated as poor or very poor as the season came to an end. Luckily, beef producers in Iowa had a lot of corn stalks available to supplement winter feeding, Schulz said. Hay stocks were tight.
Now, Iowa State University Extension is doing a lot of heifer development programming, Schulz said. Producers are talking about increasing their herds, but if prolonged dry weather were to occur, a drought response is likely.
Calf and feeder cattle prices are at records, and there is the potential for profits for cow-calf producers. The question is, are those profits at the level needed for industry expansion?
The price for fat cattle has stabilized around the mid $120s per hundredweight for 65 percent to 80 percent choice cattle in northern Iowa and southern Minnesota, Schulz said. That is well below breakeven for some producers.
Fat cattle futures are $122-$123 for July-August, $126-$128 for October through December and $129 for the first part of 2014.
Producers are optimistic that there'll be a record corn crop and that will alleviate some concerns for cattle feeders.