Beef prices climb to record level and are still rising

By Georgina Gustin

St. Louis Post-Dispatch

ST. LOUIS -- For anyone who loves a good steak, a juicy burger or a nice Sunday roast, these are anxious times.

Prices for beef, which have been climbing for months, hit a record high in December -- an average of $5 a pound -- and analysts predict they could climb 5 to 8 percent higher this year.

"Prices have gone up quite a bit. That usually happens around the holidays, but we expect them to come down," said Pam Neal, owner of the steak-centric Al's Restaurant in St. Louis. "Not this time. They're going to be jumping even higher. It's hard to handle."

Beef prices are soaring for a number of reasons. Producers, who struggled with high feed costs and diminishing profits, began shrinking their herds roughly five years ago. Since then, demand from overseas markets has shot up -- a record 11 percent of American beef went overseas last year, up from 8.7 percent in 2010.

In July last year, the U.S. beef herd had dropped to its lowest point since 1958. Also last year, the severe drought in Texas and Oklahoma, the top two cattle-producing states, forced producers to cull herds. As a result, the number of cattle in the United States fell 2 percent from the beginning of 2011 to 90.8 million head, the United States Department of Agriculture reported recently.

"There's not enough beef out there," said Ron Plain, an agricultural economist with the University of Missouri. "This year, there's going to be less beef, more people, the supply is going to be tighter, and that means more records."

Texas was among the worst hit by prolonged drought, with producers deeply culling herds, cutting even into vital breeding stock, because of the shortage of hay and water. In a survey, 35 percent of ranchers belonging to the Fort Worth-based Texas and Southwestern Cattle Raisers Association said they reduced herds and 11 percent completely liquidated, the industry group's president, Joe Parker, told the Star-Telegram.

"The southern part of the state still hasn't had any rain," Parker said from Nashville, where he was attending the annual meeting of the National Beef Cattlemen's Association.

Overall, Texas ranchers "will require a lot more capital and see a lot more risk restocking and will have to work with their banker and commodity broker to get that done," said Parker, who runs stocker cattle in Clay County, east of Wichita Falls. "They'll do it because it's their livelihood, but it will be a challenge."

Compounding matters for beef lovers are soaring feed, fuel and production costs, which are forcing price increases all along the production chain.

"Look at our fertilizer costs, our grain costs. Any piece of machinery we buy has just gone up," said Tom Sachs, who raises cattle in Missouri's St. Charles County. "Our input costs are just really high."

For the cattle industry in general, the numbers come as good news. Prices, per pound for a steer, have topped $1.70 of late, compared with about 95 cents five years ago. For the average 1,300-pound steer, that adds up.

"Times are good," said Mike Miller of Cattlefax, a Colorado-based cattle industry research firm. "Our expectation is it's going to be good for some time."

But the good times for the industry have not come without some trials, and some work in courting overseas markets.

Since 1980, according to the USDA, per capita beef consumption has plummeted 25 percent. In 2011, the average American consumed 57.6 pounds of beef, down 13 percent from a decade prior. This year the number is predicted to decline again to 54.1 pounds.

The reasons for the decline are difficult to isolate. But they include health concerns over the higher fat content in red meat, worries about humane treatment and links to environmental problems, including greenhouse gases -- all of which have gotten a lot of attention in recent years. Some people point to public health campaigns, such as "Meatless Mondays," launched by the Johns Hopkins University's Bloomberg School of Public Health, for the shrinking numbers.

The industry insists that the American appetite for beef is still strong, while some analysts and researchers suggest the decline, at least in recent years, is simply because of the recession.

"These noneconomic factors are really tough to talk about," said Scott Brown, a livestock economist with the Food and Agricultural Policy Research Center at the University of Missouri.

Whatever the reason for the decline, the country's cattle producers have helped compensate for it by making inroads into overseas markets, particularly in Asia.

"Worldwide consumption of meat and demand has increased," said Jeff Windett, who heads the Missouri Cattlemen's Association. "I think it's just good business sense to expand market opportunities for producers."

Staff writer Barry Shlachter contributed to this report.

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