It is rare when an economist will admit they don’t know why something happened, but that seems to be the case with the record high beef prices that have occurred. Everyone expected cattle prices and eventually retail beef prices would be up in 2014. What was not expected were the record high prices we had for cattle in the first quarter of this year. Nebraska steers averaged $147 CWT, up over $20 from the previous record high. Overall, finished cattle prices were up 17% . Purdue economist Chris Hurt admits he is baffled, “We really don’t have a clear picture of what caused the record high, but there is a long list of possible causes.”
Some of those include overall low meat and poultry supplies, reduced beef production, low broiler egg hatchability, and the expected reduction in pork availability from the porcine epidemic diarrhea virus. “PEDv in hogs may have been the real kicker, primarily because the pork market appears to have sharply overshot prices due to the uncertainty of the actual death loss from the disease,” Hurt said. “Much like pork, we are left with an incomplete understanding of why cattle prices were so high, especially in March and April. Like in the pork sector, this may mean that cattle prices were caught up in the fear of very short meat and poultry supplies and may have become overpriced.” The high cattle prices translated to higher retail beef prices for consumers.
While beef and cattle prices are still high, Hurt says the panic may be subsiding, “Live cattle prices have started to come down a bit, however, and the moderation should continue. Finished cattle prices are expected to move to the mid- to low-$140s per live hundredweight in May and June; range between $135 and $139 in the third quarter; then bounce back to the low- to mid- $140s for the last quarter.” The average price per live hundredweight last year of $126 is expected to be near $142 for 2014. Higher cattle prices could ultimately lead producers to consider growing their operations, Hurt said.
There are indications that cattlemen are expanding production, but Hurt points out it is going to take a long time before prices move lower. “The expansion of the beef herd is just beginning and will likely extend for multiple years,” he said. “This means small supplies and strong prices of beef in 2015 and 2016.”
With the grilling season getting started, consumers are seeing record high retail meat prices beef averaging $5.40 up 23%. Pork prices average $3.38, with some bacon prices topping $7.00 lb. Poultry producers are ramping up production, and poultry will provide some stiff competition in the meat case this summer and into the fall. The good news for consumers is that, although they will pay a bit more for meats this summer, there will be plenty of everyone’s favorites to go around, says John Anderson, AFBF’s deputy chief economist. “Meat supplies will continue to be plentiful,” said Anderson. “From burgers to brats, steaks to chops, and everything in between, consumers will have no problem finding their favorite meats for summer barbeques and cook-outs.”