U.S. meat prices are poised to extend their rally this year driving retail costs to the highest levels since the 1980s, according to a Bloomberg report.
The number of breeding hogs last month was near the lowest ever and the U.S. cattle herd in July was the smallest since 1973, government data show. Corn futures jumped to a two-year high Monday and are currently priced more than 70 percent above the 10-year average.
U.S. per-capita beef supplies next year will be the lowest since 1952 and pork the smallest since 1976, industry researcher CattleFax said. According to a Bloomberg survey of analysts, hog futures will rise 14 percent by July and cattle may gain 3.6 percent by April. Wendy’s/Arby’s Group Inc. and CKE Restaurants Inc., owner of the Hardee’s chain, have signaled warnings that they are contending with higher commodity costs.
“If grain prices go up, then meat prices are going to have to move up,” said Mark Greenwood, a vice president at AgStar Financial Services Inc. in Mankato, Minn., who oversees $1 billion in loans and leases to the hog industry. Corn costs “tempered any enthusiasm there was on expansion,” he said.
Livestock producers have not increased their herds due to rapidly rising corn prices which has supported strong prices for beef and pork.
Consumers also may buy more poultry to cut costs, said Lawrence Kane, a market adviser in Yates City, Illinois, for Stewart-Peterson Group. U.S. retail prices for bone-in chicken breast were 35 percent cheaper than center-cut, bone-in pork chops in August and 53 percent less than sirloin steak, government data show.
Livestock prices failed to keep pace with third-quarter rallies of as much as 40 percent for corn and wheat, as too much rain and heat eroded U.S. yields and drought hurt crops in Russia and Europe. Cattle futures rose 11 percent in the period and hogs dropped 8.3 percent.
Pork producers may earn $5.46 per hog in the first seven months of 2011, according to Steve Meyer, president of Paragon Economics in Des Moines, Iowa. That’s down from his July forecast of $19. Cattle feedlots lost about $17 a head last month, compared with profit of $42 in the first half of 2010, Plain said.
Hog futures will advance to 84 cents a pound on the Chicago Mercantile Exchange by July, up from 73.85 cents on Oct. 8, according to the average estimate of seven analysts surveyed by Bloomberg. The top estimates were 90 cents, which would be the highest level since 1996.