Rise in beef prices expected to continue

Donnelle Eller | The Des Moines Register

DES MOINES, Iowa — If the snow piled on your patio has you dreaming of firing up the summer grill, make sure to imagine doling out even more cash for the juicy steaks and hamburgers you're flipping.

Beef prices climbed 19% in January over a year earlier, the federal government reported. And prices are expected to continue climbing this year, up 5-6%, according to the U.S. Department of Agriculture's Economic Research Service.

"We're in uncharted waters, given the level of prices," said Lee Schulz, an Iowa State University economist. "They can't get too much higher before it will begin to impact demand."

Prices will likely bump higher, too, for pork, chicken and turkey this year. But the increases are expected to be more modest, based on federal government estimates: Pork chops, ham and rib prices are expected to push 2-3% higher, and chicken breasts and ground turkey 2.5-3.5%.

That's after a strong run-up last year for pork, climbing 7.4% in January compared with a year earlier, and poultry, a smaller 2%.

Overall, grocery prices are expected to increase 2-3% this year, which is slightly lower-than-average food price inflation, according to Annemarie Kuhns, a USDA economist.

Despite higher meat prices, Kuhns said consumers can expect slower-growing or lower prices for "middle-aisle products," such as snacks, breakfast cereals and sweets. It's the area where consumers spend more of their money.

Despite higher prices for meat, demand for beef, pork and poultry will likely remain strong, even if consumers shift between them as they find better buys, economists say.

Increasing incomes drive demand, whether it's from higher pay or more people employed, said Schulz, the Iowa State economist. "We've seen demand improve as the economy has recovered," he said.

And falling gas prices help consumers, Kuhns said, with extra cash to cope with higher grocery bills and lower transportation costs to move food across the country.

Kuhns said the drought in Texas and Oklahoma drove ranchers to reduce cattle herds last year, decreasing supplies and pushing prices higher. "The drought made it more expensive to feed and care for livestock," she said.

And a disease that's deadly to baby pigs reduced herds last winter, a problem that impacted prices throughout the year, said Steve Meyer, president of Paragon Economics in Clive.

New vaccines that help boost pigs' immunity and more experience in controlling the spread of the porcine epidemic diarrhea virus have reduced new cases, Meyer said. That should help boost pig populations and lower prices, especially with demand for Easter hams around the corner.

"Consumers should get a break on chicken, pork and gasoline," Meyer said. "There's some good news out there."

Schulz and Kuhns expect to see producers also rebuilding cattle and poultry populations.

Some Western states have received rains, helping to relieve drought conditions, Kuhn said. That has ranchers looking to build herds. And while building supplies typically is good for consumers, in the cattle industry, it means heifers that normally would go to market are being held to boost herd sizes, Schulz said. That results in a tightening in the market.

Kent Wiese, who owns Amend Packing Co. in Des Moines with his wife, Amy Amend Wiese, said higher prices for beef have done little to slow his cattle processing business.

He's seeing growing business from producers who take their beef to farmers markets and specialty grocery stores across the state.

But he wonders if lower pork and poultry prices will lure shoppers away. "I'm a beef guy and I bought a pork loin the other day," he said.