June 16, 2004 | By: Aimee Heald-Nielson
LEXINGTON, Ky.

 Beef and pork prices in grocery stores have risen more than 10 percent since April of last year. The price of turkey is up almost as much, while chicken is only slightly higher than last year.

University of Kentucky Agricultural Economist Lee Meyer said the causes of the price increases are complicated.

“Part of it is production and part of it is related to imports and exports,” he said. “But really, it is consumer-driven and it gives us an interesting view of Americans.”

Meyer said Americans spend about 12 percent of their income on food and that percentage is slowly decreasing. In the 1970s, Americans spent about 15 percent and as much as 20 percent from the 1930s to the 1950s on food. Of that percentage, about 60 percent is spent on food consumed at home and 40 percent is spent on food eaten at restaurants or from other food services. However, Americans spend less than 2 percent on beef, pork and poultry. Beef is the largest at 0.9 percent with pork and poultry each a little more than 0.5 percent.

“People often confuse consumption – the amount people actually eat, with demand – the amount people are willing to pay,” Meyer said. “Farmers and business decision-makers basically determine how much is going to be eaten.”

This year, Americans easily will consume what farmers produce, mostly because they will consume record amounts of meat before the year is over – to the tune of more than 220 pounds of combined beef, pork and poultry per person.

With pork and beef production up, some consumers are asking why prices are up 10 percent. Meyer said normally more supply would mean lower prices, but it’s more complicated than that.

“A key reason for the higher prices is an increase in consumer demand – not how much we will eat, but our willingness to pay for our beef and pork,” he said. 

He added that the recent rise in popularity of diets that emphasize protein consumption could be part of the reason as well.

“But if you look at the number of Atkins type dieters and the impact on meat demand, it can’t come close to explaining the whole situation,” Meyer said. “Apparently, a broad base of U.S. consumers has decided it is okay to eat meat and this change in attitude is fueling an increased demand.”


Another factor in price increases is the changing types of meat products on the market.

“Large numbers of consumers quit eating cuts of meat that required long cooking times, even though they really liked those comfort foods,” Meyer said. “Now processors have figured out how to make those comfort foods convenience foods and sales are going very well.”

Meyer believes that while prices are higher, the increase in demand will probably bring its own solution. Higher prices reach all the way back to the farm level. Pork, beef and poultry production are all profitable enterprises.

“Expansion is on the way,” he said. “Pork and poultry producers can move the quickest, so we’ll see more product on the market in 2005. Beef takes somewhat longer to change, so it will probably be two or three years before supplies in grocery stores expand.”
 

Contact: 

Writer: Aimee D. Heald 859-257-4736, ext. 267

Source: Lee Meyer 859-257-7272, ext. 228