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Consumers chew on soaring beef prices
With supply low and demand high, the cost of a steak or a burger has never been higher. And high prices will be around for a while. One big reason: the Atkins diet.
By MSN Money staff and wire
Don't ask, "Where's the beef?" Ask who can afford it.
Americans are facing record high prices for everything from T-bones to brisket -- prices rose 18% in October alone -- and those prices will stay at, well, rare highs for another two years, the Agriculture Department says.
Blame increased demand, a drought in the U.S. Plains region and a case of mad cow disease in Canada for much of the problem. The USDA report, according to Reuters, notes that this year's crop of calves will be the smallest since 1951, at 38 million. And beef production wont increase until 2006 since, with the current high prices, ranchers will be sending as many head as possible to slaughterhouses.
Cattle prices have risen to more than $100 per hundred pounds from about $60 last year. That put the average retail beef price in September at $3.08 per pound, up from $2.82 per pound last year, according to Reuters.
And in the real world?
At Lunardi's market in San Jose, Calif., the Mercury News reports, ground beef that was $1.89 a pound is now $2.59 a pound. Filet mignon that was $14.99 a pound is now $22.95 a pound. A butcher says many customers are giving up on beef.
Restaurant prices are higher, too. "It's wreaked havoc on our food costs,'' Maurice Dissels, executive chef at Birk's restaurant in Santa Clara, told the newspaper. "I've never remembered a time when beef was this high.''
And prices seem to still be rising -- fast. "We just experienced a huge jump in beef tenderloin prices," Frank Saverino, meat and seafood director at Holiday Market in Royal Oak, Mich., told the Detroit Free Press. "Even four weeks ago it was very affordable, but now . . . it's $20.99 a pound. Last year it was right around $14."
Strip steaks that sold for $8.99 at this time last year were $11.99. At the current $10 a pound, a Christmas prime rib roast could top $100. And prime beef, the higher grade issued by the USDA, was hard to find at any price, other restaurateurs said.
Good times for producers
Costly times for beef, well, consumers and restaurants do seem to be helping beef producers and farmers. Rising prices have lifted the earnings and earnings forecasts for a number of companies. A screen for meat producers using MSN Money's stock screener shows three big stock names - Smithfield (SFD, news, msgs), Hormel Foods (HRL, news, msgs) and Rica Foods (RCF, news, msgs) -- with double-digit gains in just the last month. (For the complete list, click here.)
Dont expect prices to fall anytime soon, Harlan Hughes wrote recently in Beef magazine. While one of the supply problems -- the United States cut off cattle imports from Canada in May after a mad cow case -- should ease, beef production remains low, and will for some time.
And the trend of rising demand, Hughes writes, isn't going away soon. One big reason: high-protein diets like Atkins have given beef a healthier gleam. The effect of the diets can't be understated in the high prices, said Ann Barnhardt, an analyst with the livestock research firm Hedgersedge.com.
"I credit a lot of that to the Atkins diet," she told the Chicago Tribune.
Beef, the diet food
Books such as "Atkins for Life" and "The South Beach Diet" reverse decades of dietary advice and say the way to lose weight is to cut out carbohydrates in favor of more protein, including red meat. Many dieters say they've quickly lost weight on the diets.
Just how popular is Atkins? We did a little survey," Texas Land & Cattle Steak House President David Franklin told the Houston Chronicle, "and it indicated that 30-40 percent of our customers are on the (high-protein) Atkins diet."
It's hard to say exactly how much of the recent uptick in demand for beef is because of fad diets, but they are clearly a factor, said James Hilker, professor of agricultural economics at Michigan State University.
"My guess is that the diets are showing people that beef isn't all that bad, so even if people aren't on the diets, they're eating more beef,'' Hilker said.
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