Record-high wholesale beef prices are spawning fewer traders who believe in another year of such gains as mainstream media point out to consumers that they really are seeing record-high meat prices while their paychecks remain flat.
An NBC News story this morning is a case in point. In the article, “Meat Prices Expected To Keep Climbing In 2015,” author Martha White says meat is not on the menu in 2015 after prices shot up in 2014, “putting them further out of the reach of America’s working poor.
The story quotes Kathy Pellitier, the food bank coordinator at the Gardiner Food Center at Chrysalis Palace in Gardiner, Maine, who said, “Food went up, oil went up…everything went up except their wages.” She spoke of the influx of working families seeking food-bank assistance.
Last year, red meat prices shot up thanks to drought, disease and demand, the story said. And while production conditions have improved, there is a long lag time between the start of production increases and lower prices at retail. Even then, wholesale price declines are rarely passed on as fully as price increases.
BEEF PRICE DECLINES ARE A SINGULAR ISSUE
The USDA has said it expects further price gains in 2015 before turning lower, particularly with beef. An average of about 5% after an estimated 11% to 12% in 2014 is what USDA economists are saying.
If it hasn’t happened already, beef has become something of a luxury item, at least for the more expensive steak and rib items. Ground beef and roasts still are on the menu, but further price gains may take them out of the reach of even more consumers.
Beef’s long lag time from the decision to increase production to the time the meat shows up in the grocery store may work against it. Chicken producers can ramp up production in as little as six weeks, and pork in six to nine months. But beef production increases don’t hit the table for 1 ½ to 2 years.
Even then, some potential slaughter heifers must be retained for breeding, making the recovery in beef supplies a slow grind. Beef prices likely will remain high at the retail level long after pork and chicken prices have tumbled because of increased production.
By the time beef prices drop low enough for consumers to afford it again, many may have lost a taste for it, a market that will have to be retaken.
CASH CATTLE, BEEF PRICES UP THIS WEEK
As if to fulfill the fears of many, beef and fed cattle prices were up this week.
The USDA Wednesday reported its choice boxed-beef cutout value at $248.90, up $1.70 from Tuesday. The USDA’s select cutout was $238.57, up $1.83.
Both were up from a week earlier when choice was reported at $243.94 per cwt and select was at $233.19.
However, as if to throw a monkey wrench into the whole theory of lowered consumer demand, the spread between choice and select beef remains near average through December. This shows that underlying demand for a better beef-eating experience likely is near average, and if paychecks would ever catch up, beef purchases might pick up as well.
Cash cattle prices in the plains this week were up sharply as well. Cattle changed hands at $166 up to $168 per cwt on a live basis, up about $4.00 from last week, and at around $264 on a dressed basis, up $6 to $8.
It remains to be seen whether cattle prices will approach 2014 records in the mid-$170s in 2015, but pork and chicken appear poised to steal market share.