The cow jumped over the moon and beef prices may do the same
FARGO -- With the arrival of spring, it won't be long before steaks and burgers start sizzling and popping on backyard grills.
But be aware: A cloud in the shape of high beef prices may cast a shadow on the warm-weather pastime.
Very dry conditions have scorched grazing lands in the southern Plains, where a third of the country's beef cattle are raised, and that has prompted ranchers to cut herd sizes to avoid having to feed their cattle expensive corn.
Large-scale downsizing began in 2011 and continued last year.
The drop in beef supply sent cattle prices and retail beef prices to record highs and that trend is very likely to continue, said Tim Petry, a North Dakota State University livestock economist.
Retail beef prices have risen about $1 a pound since 2007 and they may rise 4 to 5 percent this year, said Petry, adding that while it may not sound like much of a jump, the potential hike comes at a time when consumers are losing their buying power for several reasons, including:
- The expiration of payroll tax relief for many U.S. workers, who will see their income drop by 2 percent as a result.
- Income tax refunds that are expected to be sent out later than usual this year.
- Gasoline prices that have been prone to sudden jumps.
"A 5 percent increase in beef prices, all things equal, wouldn't be a huge problem, but these other issues are accentuating the problem," Petry said.
Matt Leiseth, president of Hornbacher's grocery stores in Fargo and Moorhead, Minn., said the company has been hearing about a possible surge in beef prices this summer, but so far there have been no alarming developments.
"The price of beef is going to go up and it's going to go down. It's a moving target, almost like gasoline," Leiseth said.
"When beef prices go up, when they really go up, everyone will notice it," he said.
If beef prices do rise appreciably, consumers may simply shift to a different source of protein, such as pork, Leiseth said.
And that, he said, could take pressure off beef demand, causing prices to stabilize, or even drop.
Leiseth said if beef prices continue to increase, it could cool demand for U.S. beef overseas, leaving more for the domestic market.
"That might help moderate it (the price of beef)," he said.
For now, customers don't appear to be too worried, Leiseth said.
"I don't know of a lot of people that are stocking up," he said.
ND ranchers expanding
While drought is causing ranchers elsewhere in the country to cut back on herds, the picture is different in North Dakota, where producers have expanded herds in some areas.
Petry recently reported that all cattle and calves in the U.S. on Jan. 1 totaled 89.3 million head, which is 1.6 percent below the 90.8 million on Jan. 1, 2012. This was the lowest Jan. 1 inventory of all cattle and calves since the 88.1 million head in 1952.
Beef cows in the U.S., at 29.3 million head, were down almost 3 percent from the previous year, he reported. Texas is the leading beef cow state, with more than 4.01 million cows on Jan. 1, compared to second-place Nebraska at 1.81 million beef cows.
The number of beef cows in Texas was down 12 percent on Jan. 1, compared with 2012.
This was also down 9 percent from the previous year, for a total two-year decline of more than a million head, Petry reported.
Beef cows in Nebraska declined 4 percent from last year. Beef cow numbers in third-place Missouri were down 5 percent and fourth-place Oklahoma lost 1 percent. All of those states were hard hit by drought conditions.
In contrast, northern states that were not as severely affected with drought saw increasing beef cow numbers. Minnesota, North and South Dakota, Montana, Idaho and Washington combined for a 243,000-head increase in beef cows.
"We did that because grass was available," Petry said, though he added dusty conditions are creeping into the southwest corner of North Dakota.
"Southwest North Dakota did get dry and will need rain this year," he said.
Jason Zahn, president of the North Dakota Stockmen's Association, agreed.
"I can tell you, that corner of the state is pretty worried about drought conditions," said Zahn, who has his own opinion on what will happen with the price of beef at the meat counter.
"I think it will stay pretty steady. I don't see a big change," he said.