October 31, 2003 | By: Aimee D. Heald
LEXINGTON, Ky.

Consumers may want to stock up on beef in the near future. Lee Meyer, agricultural economist in the University of Kentucky College of Agriculture, said tight supplies in the beef market will cause most prices to quickly rise.

“A reduction in the United States beef herd, early marketing of cattle and the closedown of the Canadian border have combined to send beef prices spiraling upward,” he said. “Processors are paying 50 percent more for cattle than only three months ago.”

The good thing for beef producers is that prices for live steers have gone from $.75 per pound to $1.00. At the same time, wholesale beef prices have gone up even more to reach levels 75 percent higher than this time last year.

Meyer said that while grocery store beef prices have been climbing, they are only up about 20 percent, giving buyers a chance to catch a comparative bargain.

“Wholesalers and some retailers have been unable to pass on all their price increase for several reasons,” he said. “In some cases, grocery stores bought ahead at fixed prices. This will shield the consumer but only for a short while.”

After contracts expire, supermarkets will have to pay more for beef and thus the consumer will have to pay more as well. Meyer said some grocers are worried about scaring consumers so they are gradually scaling prices up 20 to 30 cents at a time and also hoping demand will slow down and bring wholesale prices back down to normal levels.

Meyer said the story really started about 10 years ago when consumers shifted away from beef. In response to lower prices, farmers gradually reduced their herd numbers.

“In the last couple of years, numbers have eroded, but supplies were artificially increased by adding extra weight to each head sold,” Meyer explained. “Then, Canada found one cow with BSE in Saskatchewan and countries including the U.S., Mexico and Japan all closed their borders to Canadian beef and cattle.”

The rejection of Canadian beef and cattle basically shut out about six percent of the U.S. beef supply. 

As a result of the decrease in supply, farmers have been rushing cattle to market to take advantage of higher prices and that has caused an average loss of 50 pounds in weight per steer or heifer. 

“Not all beef industry experts are enthused about record-high prices,” he said. “They like the higher income of course, but they are worried about the impact the sharp increases may have on the customer base they have rebuilt since 1999.”

Farmers realize consumers may substitute other types of meats and meat alternatives to save money. Some are worried that customers may not return to the beef part of the meat case even after the prices come back to normal, Meyer said.

“Supermarket ads already are showing specials on pork and chicken and ignoring beef,” he said. “The high prices will also cause restaurants to promote non-beef menu items.”

Meyer said the bottom line is that there is a lot less beef at much higher prices and he expects those prices to continue rising since the only solution is the long-term increase that comes from breeding more cows.

Contact: 

Writer: Aimee D. Heald 859-257-4736, ext. 267
Source: Lee Meyer 859-257-7272, ext. 228