ADVERTISEMENT

Stella Stanger grilled a couple of New York strip steaks at her home Tuesday in Edina.

Jerry Holy • jerry.hot@startribune.com,

A large side of sticker shock with your beef, pork, bacon?

  • Article by: Mike Hughlett and Steve Fischer
  • Star Tribune staff writers
  • April 27, 2014 - 4:04 PM

Before you polish up the barbecue tongs for the grilling season, brace yourself: Beef prices are at all-time highs, and still rising, and pork prices are climbing too.

“Everything is high now,” said Richard Vanguilder of Richfield, echoing the sentiments of many grocery shoppers. “Beef is sky high. Bacon is getting ridiculous.’’

The price spikes are rooted in a shrinking supply of beef and pork. The U.S. cattle herd is the smallest in decades, a problem anchored in drought. Meanwhile, a virulent virus is sweeping the hog industry, killing piglets at an alarming rate.

Neither issue is expected to be resolved anytime soon.

“I don’t see any relief in terms of red meat or pork prices,” said Michael Boland, director of the University of Minnesota’s Food Industry Center. “I think it will play out this way throughout the year.”

Federal government estimates see food prices rising 2.5 to 3.5 percent this year — the most since 2011 — with meat costs a key driver.

Beef cuts at the grocery store averaged $5.28 per pound in February, up almost 8 percent from over a year ago and 33 percent since 2008, according to the Department of Agriculture. Meanwhile, pork prices were up 9 percent in March from over a year ago, according to the USDA.

The high prices are shaping shoppers’ decisions.

“I’m really irritated, ” Stella Stanger of Edina said outside a Cub Foods store. “I will cut down on beef consumption. Beef is my favorite, too, but that will change.”

Megan Mosbek of New Hope has already shifted her meat purchases. “Lately, I’ve been buying ground turkey or chicken,” she said. “Plus it’s healthier.”

Supply constraints

Chicken prices haven’t been climbing at the same clip as beef and pork. But rising beef and pork prices can put the squeeze on chicken, too. As consumers swap out beef and pork, the demand for chicken — and other proteins, for that matter — increases.

While U.S. beef and pork consumption has been declining over the long term, demand for both meats at home and abroad is strong right now. Supply is another story.

“The Number 1 issue is the low cattle inventory in the U.S.,” said Richard Volpe, a USDA food markets economist.

The cattle industry has been beset by drought, recession and high feed costs for much of the last five years. Dry conditions in prime cattle raising areas toasted pastures, and high feed prices made matters worse. So ranchers culled herds, slaughtering heifers that might otherwise be used for breeding.

The U.S. cattle herd is at a low not seen since the early ’50s. The first-quarter commercial steer and heifer slaughter is on track to be the lowest since 1965. And drought continues to parch much of the West and Southwest.

Still, there’s hope for a rebound in the herd. In cattle growing areas that are getting moisture, pasture is coming back. With a significant decline in corn prices since last summer, feed costs are down. Profitability for ranchers is potentially high.

The same is true for hog producers, particularly good news for Minnesota, the nation’s third-biggest producer.

Pig epidemic

But hog growers have their own problem: porcine epidemic diarrhea virus or PEDv. It surfaced in the United States last spring, but accelerated this past winter. It poses no food safety threat to humans, but it has a very high mortality rate for piglets and so far has no cure.

“The primary catalyst for the pork price increase is the PEDv virus or the fear of it,” said Bill Lapp of Advanced Economic Solutions in Omaha, which specializes in food and commodities. “There’s been a concern about a lack of supply.”

Estimates over the size of pig losses from PEDv have varied widely. “There are still a lot of question marks on how severe it’s going to be,” Lapp said.

Consumers aren’t only feeling the effects of higher meat prices at grocery stores. Restaurant patrons are feeling the pinch, too, as are restaurant owners.

Rye Deli, a critically acclaimed eatery in Minneapolis, closed March 30, and high beef costs were a culprit. Rye had a beef-heavy menu, and its owner told the Star Tribune he couldn’t keep raising the price of sandwiches to keep up.

Meat price hikes tend to hit grocery stores before they hit restaurants, said Dennis Lombardi, a restaurant consultant with Ohio-based WD Partners. That’s because big restaurant chains tend to be locked into longer-term supply contracts, and use future markets to hedge their costs.

But eventually costs catch up. Just last week, Chipotle announced it was considering a 3 to 5 percent price hike, its first in three years. The company cited higher costs for beef — as well as avocados and cheese.

Chipotle will have company, Lombardi said. “You’re just seeing the beginning of restaurant price increases.”

 

Mike Hughlett • 612-673-7003

© 2014 Star Tribune