Higher Retail Beef Prices Caused
by Rising Production, Transportation Costs
COLLEGE STATION – Rising feed
and transportation costs continue to keep retail beef prices edging
higher, a Texas AgriLife Extension Service economist said.
“
One of the big stories this year as we start 2008 is we’re
seeing higher prices for consumer beef, whether it’s at the
grocery store or restaurants,” said Dr. David Anderson, AgriLife
Extension Service livestock marketing economist.
The annual average retail beef price for 2007 was $4.16 per pound,
which was 5 percent higher than 2006 and exceeded the previous 2005
record of $4.09 per pound, according to U.S. Department of Agriculture-Economic
Research Service data. Factoring into the high beef prices is record-priced
crude oil, which is increasing transportation costs for many beef
suppliers, he said.
“
There are higher costs of getting it to the store,” Anderson
said. “When we talk about $100 per barrel oil, it ripples through
the economy. Everything you get at a restaurant or grocery store,
we have to get it from somewhere else.”
Another reason is a leveling of beef production across the U.S.,
Anderson said. With fewer cows and calves in national inventory,
and increased export demand for U.S. beef, “that’s keeping
pressure on beef prices,” he said.
At the producer level, calf prices have been forced lowest by rising
feed costs which are tied to ethanol production. Lighter-weight calves
are getting the most discounts because they require more feed to
add weight before slaughter, Anderson said.
Anderson described the current calf market as a “tug of war.” USDA
inventory indicates 1 percent fewer beef cows, which will lead to
a smaller calf crop, he said.
“
From a supply standpoint, that means fewer calves, and fewer calves
usually means better prices for calves,” Anderson said. “I
like to describe it as a tug of war going on in the calf market this
year. You have feed on one side and high prices pressuring calf prices
lower, then tight supply of calves on the other side pushing them
higher.
“
Still for 2008, we should see calf prices where they were in 2007,
but a little bit lower due to the high feed costs. Given where we
are in inventory, we should expect to see fewer cows in 2009, so
tighter supplies keeping upward pressure on calf prices.”
Meanwhile, profit margins have also been tough for stocker producers.
Recent USDA data indicated there were fewer calves on wheat pasture.
“
That (report) confirmed what we all knew,” Anderson said. “That’s
down 30 percent or basically one-third fewer calves. What that means
for stocker producers is typically they see the lowest prices for
700-800 pound steers in March. They come off wheat then and go to
feedlots.
“
There were not a lot of calves on wheat pasture this year, so what
is a seasonal low may hold up and we could see some moderation in
the springtime that we usually don’t see. Consequently, we
could see some heavier calf weight prices over the next couple of
months simply because there’s not that much supply.”
Factors Affecting the Beef Industry:
- Rising feed and transportation costs are having a ripple effect
throughout the beef supply chain.
- Continued decline in U.S. beef cow inventory could drive calf prices
upward, but higher feed costs will weigh heavily in pricing outcome.
- Calf prices for 2008 are predicted to be lower due to high feed
costs.
Source: Texas AgriLife Extension Service
