Steak Lovers Squeezed With Record Beef Premium

December 4, 2014 09:48 AM
 
Steak Lovers Squeezed With Record Beef Premium

Meat shoppers will have more reasons than ever to steer clear of steaks as the cost of U.S. beef rises to a record compared with pork.

Bloomberg's "Chart of the Day" shows that the premium on the wholesale prices rose to a record $1.6469 a pound on Nov. 25, according to U.S. Department of Agriculture data. Retail ground beef in October climbed to an all-time high compared with chicken breasts.

The U.S. cattle herd started 2014 at the smallest since 1951 after years of drought forced producers to cull herds. Beef production next year will drop 3.2 percent to 23.736 billion pounds, the lowest since 1993, while pork and chicken output will increase to records, the USDA forecasts.

“Beef is going to be even at more of a premium to pork and chicken than it has been this year,” Will Sawyer, Rabobank International’s vice president of U.S. animal protein research in Atlanta, said in a telephone interview. “The industry is retaining cows, and as a result, there’s even less beef to go around.”

It takes as long as two years for a calf to reach slaughter weight, according to the USDA. That compares to about six months for hogs and seven weeks for chickens. This year, cattle futures in Chicago have climbed 24 percent. Only coffee has gained more among the 22 components in the Bloomberg Commodity Index of 22 raw materials. The broad gauge has dropped 11 percent in 2014. Wholesale beef has jumped 28 percent, while pork has advanced 9 percent.

“We’re still down on cattle numbers,” John Nalivka, the president of Sterling Marketing Inc. in Vale, Oregon, said in a telephone interview. “That situation is what it is for a minimum of a year and a half. We’re going to to be increasing hog numbers and pork production into 2015. Given that situation, you’d expect the spread to stay relatively wide.”

Yesterday, the beef premium against pork was $1.6445.

 

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