Meat Costs Skyrocket 50% Over The Past 7 Years

(Richard Piersol)  Retail beef prices in February recorded their biggest monthly gain in a decade and set a record high for the second month in a row, even as inflation at the consumer level generally was tame, according to the federal government’s statistics.

Retailers are planning adaptations as the jump in the cost of beef continues a trend of higher food prices caused by drought, disease and overseas demand for U.S. meat and harvested crops.

“We are sure the weather is to blame, but what happens when pent-up demand (from a frosty East Coast emerging from its hibernation) bumps up against a drought-stricken West Coast unable to plant to meet that demand?” a columnist using a pseudonym wrote on “The spot price (not futures speculation-driven) of U.S. Foodstuffs is the best-performing asset in 2014 — up a staggering 19 percent.”

Indeed, that’s how much the Commodity Research Bureau’s Foodstuffs Index of butter, cocoa, corn, hogs, lard, soybean oil, steers, sugar and wheat has risen this year as of end of business Wednesday.

Beef and veal prices, seasonally adjusted, climbed 4 percent in the U.S. Bureau of Labor Statistics’ Consumer Price Index for February, the largest monthly jump since 2003, when anxiety about mad cow disease in Canada caused prices to surge.

“Suffice it to say, ‘you ain’t seen nothin’ yet,'” said John Harrington, a livestock market analyst from Hastings. He expects prices to go even higher.

Cattle and hog prices were already at record highs. Cattle numbers are at modern record lows in the United States, generally due to drought-related liquidation of herds, and hog prices have been driven higher by the spread of porcine epidemic diarrhea virus, which can kill entire litters of baby pigs.

All the beef that hit the market when those herds were culled theoretically should have driven prices lower. But that didn’t happen, USDA data shows, as demand for beef and sources of protein around the world has soared.

“The growth of the middle class in developing countries probably has more to do with the increase in demand and related prices than anything else,” Jeff Sindelar, an associate professor who studies the meat industry at the University of Wisconsin-Madison, told the Milwaukee Journal Sentinel.

In other words, more people around the world can now afford to have a steak or burger, but there are fewer animals to meet that demand. The result has been predictable.

“The cost of meat has gone up significantly — 30 to 40 percent and in some cases 50 percent — in the past five to seven years,” Sindelar said.

Soybeans, another influence on meat and other food prices, are in almost unprecedented demand because of Chinese buying. U.S. reserves are 30 percent of estimated annual use and exports, the lowest ratio for this time of year since at least 1965, U.S. Department of Agriculture data show.

In the wheat market, drought and freeze worries were the primary fuel for a 15 percent increase in futures prices for hard red winter wheat during just 13 recent trading days at the Kansas City Board of Trade.

One of the popular meat substitutes, cheddar cheese, is also setting record high prices on the spot market of the Chicago Mercantile Exchange. The cheddar block spot market broke through its price record two weeks ago and began last week at $2.4275 per pound. Futures prices for Class III milk, used for making hard cheese, were also standing at record highs last week.

Harrington said earlier this month he expected retail beef prices to move another 25 cents per pound higher by April, and pork to rise 50 cents per pound.

Retailers are trying to adapt accordingly to keep their customers well fed, if not entirely happy.

“When the price goes down, we try to reflect it as soon as we can,” said Marty Jarvis, marketing director of B&R Stores in Lincoln. “But when it goes up, we don’t keep much inventory so everything’s fresh. We do look at competition, not just in meat, to make sure we’re in line with where we need to be.

“With beef, and this looks like it’s going to be a long-term issue, we reflect (higher prices) as we get new inventory. If it were a blip, we’d try to make sure the consumer doesn’t even notice. It’s not just a certain packing plant going down for some reason, it’s global.”

Meat managers at B&R stores — Russ’s Markets, Super Saver, Apple Markets and Save Best — will be merchandising alternate items for the grill, Jarvis said.

“We’ll have as good prices as we can on steak, but we’ll be featuring a lot more hot dogs, sausages and patties of all sorts, beef, chicken, different flavors of turkey. We know people want to grill, and we’ll have less-expensive alternatives.”

This is not an opportunity to make more profit, according to Jarvis.

“If some of the predictions come true, every time we buy fresh meat it’ll be more expensive, so margins will be condensed,” he said.

When wholesale prices go up, Hy-Vee Inc. stores try to keep prices in check as long as they can, said Christine Friesleben, a Hy-Vee spokeswoman at the company’s headquarters in West Des Moines, Iowa.

“But at the point where we have to raise retail prices,” she said, “we encourage shoppers to shop our weekly ad and buy what’s on sale that week, even buy extra to freeze for future meals. Customers can also look on our website for budget-friendly recipes and other ways to maximize their food dollar. And we’ve got knowledgeable meat specialists, chefs and dietitians who are always anxious to help people put healthy, well-balanced meals on the table.”

From January to February, seasonally adjusted prices for ground beef were up 3.8 percent, beef roasts were up 8.2 percent, and steaks were up 2.9 percent, according to the Labor Department’s Consumer Price Index. Lamb and mutton prices were up 4 percent.

A detailed look showed the U.S. city average price of ground chuck was $3.73 in February, up 4.1 percent from January. In the Midwest, it was $3.70, up from $3.43 in January, or 7.8 percent. USDA Choice sirloin steak in the Midwest was $6.63, up 40 cents a pound in a month.

The price of pork was up 0.2 percent in February, and the price of chicken fell 0.1 percent.

The porcine diarrhea virus will have a bigger influence on prices as time passes. Jarvis said he expects retail pork to be higher in price later in the summer.

“Some of the futures look pessimistic,” he said. “California is in a drought; that’s where the fruits and vegetables are grown. … A lot of commodity items are showing shortages.”

The government’s overall food price index rose 0.4 percent in February, the largest increase since September 2011 and much higher than consumer-level inflation generally.

The Consumer Price Index for all items excluding food and energy rose only 0.1 percent in February.

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