There are many factors that have led to higher-priced beef in the meat case. Purdue Extension Ag Economist Chris Hurt says the high price of feed, drought in the southern states and a weak U.S. dollar, which has made it cheaper for other countries to import beef from the United States, are the chief among the reasons.
"This is going to support prices across the cattle complex at new record highs in 2011 and again in 2012," Hurt said. "Unfortunately even higher retail beef prices can be expected for consumers."
Since 2007, the price of feed has gone up sharply. Consequently, the number of beef cows in the United States has declined 5% over the last four years. So the high cost of feed has caused farmers and ranchers to feed fewer animals. At the same time, the U.S. dollar has weakened. That means people in other countries can more easily afford to eat beef imported from the United States. Hurt says there are fewer cattle going to market in the U.S., and of those, more are being consumed outside of the U.S.
"Beef trade is back as a contributor to beef prices as well," Hurt said. "In 2003 beef exports reached a record representing 9.6% of domestic production. Then the discovery of a BSE cow late in 2003 caused most buyers to shun U.S. beef and exports dropped to just 2.3% of production in 2004. It's taken a long time, but 2011 is expected to result in a record 10% of our production heading to foreign consumers."
Most of that U.S. beef is headed to Japan and South Korea, spurred by the weakness in the U.S. dollar. It paints a pretty simple economic picture for U.S. consumers. There is less beef being produced in the United States, and more of that supply is headed overseas.
"In 2006 and 2007 before feed prices surged U.S. consumers had over 65 pounds of beef per person," Hurt said. "This year, USDA analysts expect that to be down to just 57.9 pounds and drop again to only 55.6 pounds per person in 2012."
That's a 15% decline in available supplies of beef. Throw drought in the southwestern and southeastern U.S. on top of the already tight supply line and it gets even tighter. It means consumers can expect to pay more for beef this year and again next year.