The grilling season this spring is shaping up to be the costliest ever for Americans already feeling the pinch from rising gasoline prices.
Backyard grilling is a tradition observed by most households as the country breaks out of winter, but this year the cookouts could be subdued as retail prices for beef in January set a record high for the fifth straight month.
The U.S. government’s cattle-on-feed report on Friday will tell if beef prices are heading even higher as it details cattle supplies at the country’s feedyards -- places where the animals are fattened to about 1,200 lbs for dining tables.
The report will also show the highly watched placement numbers -- which is the amount of young cattle that moved into these feedyards to be fattened in about six months time. Analysts surveyed by Reuters, on average, expect a 1 to 2 per cent decline in January placements from a year ago.
“It could well be the costliest,” said livestock analyst Les Aldrich of Zia Commodities in Albuquerque, New Mexico.
“Retailers, grocers, restaurants are placing orders (for meat) ahead of time because there are fears of short supply during the grilling season,” Aldrich said, adding that this early demand was a primary driver of the surge in beef prices.
With still a month before the start of the spring, wholesale meat buyers have indeed got off to a flying start in securing supplies because a devastating drought in the southern Plains has shrunk the cattle herd to its smallest in 60 years.
The absence of pasture combined with record-high feed costs last year forced most ranchers, especially in the top cattle state of Texas where the drought was one of the worst since the Dust Bowl in the 1930s, to send their calves to feedyards months earlier.
The result of that has been a sharp reduction in the number of calves available in the southern Plains for fattening. That has helped push live cattle futures at the Chicago Mercantile Exchange to successive record highs the past week.
On Wednesday, live cattle futures reached an all-time high of 129.775 cents (U.S.) per lb.
Also, prices for feeder cattle -- those that sold to feedyards for fattening --- have also hit record highs in the cash markets, fueling speculation of a price bubble.
“If this is a bubble, it’s going to take a long time to burst, at least three years,” said Aldrich.
It takes about that long to rebuild a cattle herd and produce more beef for dining tables. Plus, there are no definitive indications that ranchers are planning to expand their herds at this time.
Beef still king among consumers Retailers usually begin stocking up on beef and other meats for the grilling season in early March to April, but with the mild winter this year the season could be off to an early start.
The unofficial kick-off of the summer grilling season is when the United States celebrates Memorial Day on May 28.
Analysts said that despite the surge in beef prices, there has not been a significant drop in beef consumption or a major switch to cheaper meats like pork and chicken.
The National Chicken Council said it was, however, seeing a small increase in chicken consumption.
“As competing red meat prices have increased more rapidly than chicken prices in recent months, poultry marketers are beginning to see a small and somewhat steady shift in consumers’ purchasing patterns towards more economical cuts of chicken,” said council spokesman Tom Super.
“Most analysts project that a much more significant shift will not happen until the beef supply tightens even further later this year. Chicken producers anticipate having a more abundant supply of product at that time to provide consumers with relatively more affordable center of the plate options,” Super said.
He said that since December 25, chicken prices are up 3.5 per cent while beef has surged 12.1 per cent.
Consumers to pay more for beef Meat packers like Tyson Foods Inc. and the U.S. operations of Brazil-based JBS have been competing for slaughter-ready cattle in the cash markets, where prices hit a record high $129.50 per cwt last week.
Mike Martin, spokesman for Cargill Inc. said the record high prices for beef have hurt demand.
“Especially given the fact we still are in a somewhat weak economy, there would be some trading to lower price cuts of beef or some other animal proteins that are priced lower,” he said.
Analytical firm Hedgersedge.com data calculates that meat packers continue to lose money, with losses of $34.25 per head estimated for Wednesday. That’s an improvement from last month when losses exceeded $100 per head.
“Smaller supplies of available calves and feeders are working their way through the sale barns and into feedlots,” Rich Nelson, research director for Allendale, Inc. in McHenry, Illinois.
Jim Robb with the Livestock Marketing Information Center in Denver, Colorado, said shrinking cattle supplies could portend even higher beef prices for consumers.
“The story hasn’t changed. The consumer is going to be paying more year-to-year as we look ahead on average for 2012 and for 2013 due to the smaller calf crop,” said Robb.