Spend Matters welcomes another guest post from Blair Scott of Mintec.
As barbeque season is approaching, I thought I would take the opportunity to have a look at meat prices in the US. Unfortunately for consumers, meat prices have been increasing across the board and this is despite falling feed costs. So what is happening?
The price of beef is currently up 26 percent since the start of the year. This is a direct result of the lowest supply of cattle in the US since 1952. The tight supply was expected because of the drought which has hit the main beef producing areas in the US for the past three years. During drought, famers feed costs are higher as cattle cannot feed on pasture. The price of feed itself also tends to be higher during drought as the demand increases. Eventually, it becomes more economical for farmers to send their cattle to slaughter rather than feed them. Cattle herds are subsequently reduced and fewer calves are born.
Consequently, beef production in the US is forecast to fall by 5 percent to 11.2m tons in 2014. This is a 20-year low and the third consecutive year where production has fallen. Texas, the largest beef producing state, is still suffering from the worst dry spell on record which initially hit the state three years ago. Even now more than 80 percent of the state is abnormally dry. The tight beef supply is coupled with strong consumer demand and therefore beef prices have increased.
Pork prices have increased a staggering 45 percent since the start of 2014. As we examined in a previous article, the outbreak of Porcine Epidemic Diarrhoea Virus (PEDv) has led to higher rates of piglet mortality and low growth rates amongst adult pigs. The result is a drop in supply and pork production in 2014 is forecast to fall 2 percent year-on-year to 10.3m tons. Just like beef, the consumer demand for pork remains strong.
Chicken prices have also been increasing, although not quite at the same rate as pork. The higher beef and pork prices have prompted some consumers to switch to chicken. The resulting increase in demand has led to the average price of chicken in the US rising 25 percent since the start of 2014. The US is forecast to produce 17.3m tons of chicken in 2014, an increase of 2 percent year-on-year, but consumption is set to outpace production.
Unfortunately for barbeque lovers, it is expected that prices will remain high throughout the year as demand is likely to remain strong and the pressures on supply shows no sign of easing.