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Pricey Beef Becoming a Concern

April 12, 2012

Beef prices strong, but rising costs and consumer confidence are concerns.

Although interest in beef production is high in part because of record-high prices producers have been fetching, some producers have concerns about rising prices for feedstuff and gasoline, which could make consumers less likely to buy pricey beef cuts, an Ohio State University Extension expert says.

"There's a lot of enthusiasm because of what animals are worth at the market, but input prices such as fuel, feed and fertilizer are still an issue," said John Grimes, beef coordinator for OSU Extension.

Grimes spoke recently at the Ohio Beef Expo, sponsored by the Ohio Cattlemen's Association. The event, in its 25 year, is the single largest event in the state devoted to cattle producers.

He said the overall outlook for U.S. beef is good for the next few years, with trade with Canada, Mexico, Japan and South Korea remaining strong. In addition, the rise in the growth of upscale hamburger chains has led to increased demand for higher-quality beef.

But Grimes cautioned that rising consumer costs, including gasoline prices, could influence spending.

"So we have a home for our product, but challenges are there," he said. "The biggest concern is pricing ourselves out of the market. Could the prices get so high that the consumer is going to push back?"

While that hasn't happened yet, Grimes said, it could.

"Who knows?" he said. "If gas prices go over $4 a gallon, that's going to have a big effect on consumer spending because of concerns about disposable income. Will they be able to afford the higher-priced steaks?"

Part of the issue is that the country's beef supply is tight right now, with U.S. producers having the smallest cow herds nationwide since the 1950s, Grimes said. That's due in part to drought in the Southwest and higher-than-average export sales.

With 1.27 million head of cattle, of which about 25 percent are dairy cows, Ohio ranks 16th nationwide in beef operations, according to the Ohio Beef Council. The state's beef industry is valued at $1.3 billion and produces nearly 500 million pounds of beef each year.

"Looking from the outside in, sale prices are very good, which is very much a function of supply and demand," Grimes said. "We have fewer cows, export sales have been record-high, and domestic demand has been solid."

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RELATED TOPICS: Beef, Cattle, Consumer Demands



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