Spend Matters welcomes a guest post from Rachel McIntyre of Mintec.
I hope you all had an enjoyable Memorial Day.
At this time of the year when the sun is out and the skies are mostly blue, this can only mean one thing. Let’s buy steak and burgers and have a barbeque!
In the U.S., Memorial Day is second only to July 4th with respect to beef sales, and typically reaching around $370 million. It’s normal for beef prices to increase seasonally in early summer, but this year has seen prices rise to the highest level since 2003, up 7% year-on year.
The effects of last summer’s drought are still affecting beef prices. Corn production fell dramatically and led to an increase in corn prices of roughly 20% over the course of July 2012. Cattle feed became more expensive and resulted in the early slaughter of some cattle. The excess supply did contribute to the 10% drop in beef prices over the course of June/July 2012. However, beef prices are now back up with a vengeance, with cattle herds down to their lowest numbers in 61 years as of the beginning of May.
An extended period of time is needed for cattle numbers to recuperate, which in turn is likely to affect prices into next year. Corn planting for this year has gotten off to a sluggish start due to wet weather delaying fieldwork, but forecasts from the USDA still call for a substantial rise in US corn production. Current forecasts stand at a massive 359 million tons, up 31% on 2012’s drought-damaged crop. This should help to ease the price pressure on feed and support the farmers with restocking.