Is beef in danger of becoming a ‘luxury’ item?

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The cattle industry knew shrinking herd sizes and steady demand for beef would raise prices, but as the trend continues, some in the industry are worried.

Economists are wondering if beef prices will rise to the point that consumers will see it as a luxury good and choose alternatives such as chicken, pork and fish.

USA Today reports beef prices have increased by an average of a dollar per pound since 2007 and are expected to increase by up to an additional 10 percent before this summer.

With grocers and restaurants observing higher beef prices, they’re searching for ways to maintain consumer demand. Restaurants have previously avoided passing on high food costs to customers by serving smaller portions. As prices continue higher restaurants will have to increase menu prices as well.

Mike Hoffman, meat director at Dahl’s Foods supermarket in Des Moines, has adopted a similar strategy, selling higher-grade beef cuts in 12-ounce packages rather than the typical 16-ounce packs. He told USA Today he’s also selling smaller, cheaper cuts for four dollars to "keep customers' taste for beef alive."

Oklahoma State Livestock Marketing Specialist Derrell Peel expects consumers to continue eating beef, however they may exchange middle meat products for cheaper options like ground beef and other value cuts. A similar pattern was observed during the recession, but the beef industry has since made a slow recovery.

Ed Greiman, president of the Iowa Cattlemen’s Association, is also concerned with the rising beef prices and its effect on demand and the cattle industry. “We can't let beef turn into lobster," he told USA Today.

Beef consumption in 2012 was 57.3 pounds per person, steady with the previous year but more than 8.5 pounds below 2006 levels. South Dakota State University’s Darrell Mark expects beef consumption to fall as a result of smaller herds, but higher prices also play a role. Forecasts show beef consumption may fall below 55.5 pounds per capita in 2013 and will likely drop under 53 pounds per capita in 2014.

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Mike Jones    
Mount Airy, North Carolina  |  February, 19, 2013 at 10:15 AM

My family and I raise grass fed beef. We have priced it to be fair to customers and us also. This is done by not using stored feed very much such as hay or grain. Year round grazing is the key.

Tom Neff    
SWMO  |  February, 19, 2013 at 10:47 AM

Why is the herd size shrinking? Could it be the high risk involved with raising a cow/calf pair, high input cost (fertilizer, fuel, equipment, property) and unpredictable weather patterns. The market will set itself. If the price per pound will not support the risk, if it's not profitable, don't expect the numbers to rebound. The farmer/rancher that has managed to stay in business to this point should be reaping some reward, good luck trying to buy in with our current economic outlook.

c. andrews    
chicago-kansas  |  February, 19, 2013 at 01:35 PM

The Rockfellers as I like to refer to "if you have to ask what it costs you can't afford it" is a very fickle user. Beef is about the "blue collar" consumer. Taste does exceed price as the spread between pork & beef proves that fact but price limits demand and pork is divorcing "the other white meat" . The "other white meat" turned out to beef greatest friend. Pork lost its tastebut is now regaining taste as chefs now advertise Durock pork. Excessive tonnage will not be consumed until probably August 2013 before a restart happens.

c andrews    
chicago-kansas  |  December, 27, 2013 at 09:12 AM

Dam tootin beef overall prices need to drop to pick up and maintain tonnage over chicken. Finally the facts about how chickens are raised and more important sanitation in slaughter will allow beef to gain but not if prices surge from all time highs. Higher prices are not always producers best friend.

December, 27, 2013 at 10:44 AM

Beef, especially beef cuts, are already a luxury item for my family. Have been for at least 5 years now. But we don't grow our own beef.

December, 27, 2013 at 11:27 AM

I think you mean Berkshire pork.

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