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.