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Consumers, restaurants to feel hit from beef prices

By Sarah Thomas
March 2, 2013 at 11 p.m.

It's good news-bad news for beef producers - and not good at all for restaurants and consumers.

With beef prices expected to increase by 10 percent this summer, producers and sellers are worrying their product could become a <em>luxury</em> as meat market and restaurant menu prices spike.

"People are going to start looking for pork or chicken - something that is a little cheaper," said Billy Tevebaugh, manager of Tevebaugh Meat Packing Co. in Longview.

Retail beef prices have risen by an average of $1 per pound since 2007. And prices for cattle have jumped by as much as 25 percent in the past two years as the nation's herd dropped to its lowest level in six decades.

For beef producers, rising prices are bittersweet, said Bill Hyman, executive director of the Independent Cattlemen's Association of Texas. The association represents cow-and-calf producers who are on the market's selling side - the side that usually profits when prices increase.

But Hyman said high prices could wedge U.S. producers - including those in Texas - out of the market. Although beef prices naturally rise in the summer when demand peaks, he said a 10 percent increase in time for grilling season would open the door for foreign beef producers - namely Mexico and Canada - to profit from the U.S. demand for beef.

"We're in a world market," Hyman said. "When our domestic prices reach a certain point, beef importers will have a chance to bring in beef from other countries."

The wedge could come in as domestic producers also are contending with higher feed prices also related to the drought and increasing prices for fuel.

The situation is largely because of the 2011 drought that continues to strain the cattle industry. The dry conditions reduced herds across Texas by more than 600,000 cows since 2011, according to the Texas A&M AgriLife Extension Service. The animals were either sold and moved to another state or slaughtered.

Nationwide, the past year saw a 1.6 percent decrease in the number of cattle. The U.S. herd has 89.3 million cattle and calves - the fewest since 1952.

This year, the U.S. Department of Agriculture is expecting higher prices to start showing up in meat cases by summer - prime time for backyard grilling.

Choice cuts such as New York strip, porterhouse and ribeye usually are guaranteed to be regular fare, Tevebaugh said. But higher prices could move them to reduce beef consumption - substituting chicken and pork early in the week and saving beef for the weekends. Already, per capita beef consumption is declining.

Tevebaugh's also sells chicken and pork, but beef is its bread and butter.

"We just have to gradually increase our prices. There's not much else to do," he said.

It's not just meat packing companies getting hit.

Tammy Woods, general manager of Gladewater's Tumbleweed Steakhouse, said the restaurant would no longer be able to maintain its menu prices because of vendors charging more for beef. Though prices went up about $3 per pound in December, Tumbleweed held the line on menu prices to avoid hitting diners during the holiday shopping season. But after a slight price decline in January, costs went back up.

"We're currently redoing our menu to raise prices," Woods said. Tumbleweed sells sirloins, ribeyes and New York strip steaks.

The new menu will reflect a 3 percent increase in steak prices across the board. Woods said the new menu prices would hold as long as the price per pound doesn't go up another $3, but said high prices sustained for more than six months could change that.

Tevebaugh agreed prices have been jumping steadily.

"Ten or 15 years ago, we knew every week what our beef prices were going to be pretty much for the whole year," he said. "Now we've reached a point where we have to keep an eye on it. From week to week the prices jump."

Hyman, with the cattleman's association, said he couldn't recall similar price increases in his 40 years in the business.

"I'd definitely call them record setting," he said.



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