Meat prices likely to dip before surging

07/21/2012 5:00 AM

07/21/2012 4:29 PM

If you’re a meat-eater, you may want to keep an eye on prices and stock up the next time you get a chance.

Beef, pork and poultry prices are predicted to take a roller-coaster ride soon that is expected to end uphill next year, the result of the drought and a withering corn crop.

“It is important to recognize that corn is a core ingredient in livestock feeds, and that other ingredients are priced in relation to corn," said Glynn Tonsor, an agricultural economics professor at Kansas State University. “Accordingly, as corn prices increase, the cost of producing meat goes up, and therefore retail meat prices will also increase."

But before that happens, there likely will be a drop in prices, experts say.

“There’s a huge volume of cattle being sold because nobody has the feedstuff, so they’re liquidating herds,” Alan Waggoner, owner of Yoder Meats, said. “The market will be flooded.”

Waggoner said the price of ground beef, for example, will go down when that happens. But then hamburger will “come roaring back to a huge, huge price per unit.”

He predicts that a price increase may occur in about three months, then hold its own for a while.

“Probably by Christmas a few items will get crazy,” he said. People who eat beef at the holidays may opt for turkey or ham, he said. And “then, by a big demand from Easter through the Fourth of July next year, I think it will get pretty wicked.”

Nobody knows, of course, just how bad the drought will get, and corn is not the only food getting burned out by it. But federal weather forecasters predicted last week that the unusually hot, dry weather in the heartland would linger at least until around Halloween, and spread a bit farther north and east.

“Significant portions of many crops are impacted – for example, according to the most recent U.S. Drought Monitor report, 88 percent of our nation’s corn and 87 percent of our soybeans are in drought-stricken areas,” the USDA said Friday on its blog.

Agriculture Secretary Tom Vilsack cautioned consumers about potential price gouging in the short term, saying that any increase in retail costs would likely come late this year and next year.

“If in fact people are beginning to see food price increases now, it is not in any way, shape or form related to the drought, and we should be very careful to keep an eye on that to make sure that people do not take advantage of a very difficult and painful situation," Vilsack said.

Beef prices are a particular worry because it takes longer to raise a cow for slaughter than it does a chicken or a hog, Waggoner said. Still, he said, “you’ll probably see higher-priced turkeys at Thanksgiving.” The price of bacon and other pork also is expected to go up, as is the price of milk and milk products.

People who have to closely watch their money need to start planning for the expected increases, Karen Blakeslee, K-State Research and Extension food specialist, said.

“It’s going to be a tough year," Blakeslee said. “It’s not just corn. It could get down to how well the soybean crop can do. That’s in a lot of things. …

“People are going to have to watch their budgets. … It’s not just a certain population that’s going to get hit – it’s everybody."

In his latest hogs outlook, Chris Hunt, professor of agricultural economics at Purdue University, said “the immediate view is that crop producers will bear the brunt of the financial losses, but losses in animal industries will be enormous over the next year, perhaps becoming considerably greater than for the crop sector."

“Over time, meat, milk, and milk product production drops, and prices of animals and products rise such that the costs of higher priced feed is passed to consumers. Animal producers ultimately do get compensation for the higher feed costs, but that comes after a prolonged period of losses that some producers cannot make it through."

Agriculture Secretary Vilsack met with President Obama last week to discuss a response to the disaster. Vilsack said farmers need Congress to pass a five-year $500 billion farm and nutrition bill that is awaiting action in the House of Representatives or at least approve additional disaster programs or provide more flexibility in the availability of credit.

The administration has declared drought disasters in one-third of the counties in the country, making them eligible for assistance such as low-interest loans.

For consumers who can afford it, buying a whole beef and putting it in the freezer now could save more than $1,000 over buying the individual cuts in a retail store, Waggoner of Yoder Meats said. And once prices start to go up, “the other thing that tends to happen is more additives: You see more water, more flavor solutions,” Waggoner said.

“It might be a good time to fill up your freezer,” Tim Stroda of the Kansas Pork Association said. “It might not be the worst idea you ever had.”

Contributing: Associated Press

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