Short supply of beef and pork sends prices soaring

07/25/2014 12:22 PM

07/27/2014 3:55 PM

Smokeys BBQ in Fort Worth, Texas, needed to do something.

The price it paid for brisket jumped a net 54 percent in just six months. It had cut its staff from 13 to seven. The only thing left was to raise prices for its customers, the first time in three years. A pound of Smokey’s brisket went from about $13 to $16. Pork spare ribs jumped from $22 to $27.

“We had to raise our prices. We had to adjust,” said owner Rosco Carrasco, who’s 47, noting his own costs. “If they continue to go up at this pace, we’ll have to do it again.”

Soaring meat prices are hitting producers, suppliers and consumers across the country. The price of beef and veal shot up more than 10 percent from June 2013 to June 2014, according to the most recent Consumer Price Index. Pork prices rose by 12 percent.

The largest price increases in three years are driven by one main thing: supply. Drought has thinned herds of cattle. Disease has struck pork.

While demand is high and technology allows more producers to get more meat than ever out of cattle, the domestic beef supply is at a 63-year low, according to beef industry experts and U.S. Department of Agriculture data.

Meanwhile, pork farmers in over 40 states have reported cases of a pig virus called porcine epidemic diarrhea (PEDv), an illness most fatal to newborn pigs. The virus has hit many pork farmers in Midwest states and North Carolina harder than others. The nation’s pig population is at its lowest since 2006.

Although swine populations probably will rebound soon, experts said, the beef supply could be a problem for several years.

“We’re seeing unprecedented price levels,” said Derrell Peel, an agricultural economics professor at Oklahoma State University. He added: “Ultimately, everyone will pay part of that impact.”

The drought that started in 2011 in many major cattle-producing states, especially Texas, cut down the grazing space for cattle. That forced farmers to sell animals to feed lots to be slaughtered. The economic recession and price shocks in cattle feed also contributed to the beef supply problem, Peel said.

The weather has improved in the past 90 days, making some cattle ranchers “cautiously optimistic” that the drought might end soon and farmers could start to rebuild their cattle populations, said Mike Miller, a senior vice president at the 35,000-member National Cattlemen’s Beef Association.

By and large, cattle ranchers “would probably say that they’re holding steady if not increasing.” Miller said of their herds. “It’ll take some time.”

Indeed, a cow can give birth to only one calf a year, and the calf can take 18 months to reach its required weight before it’s sent to market. With the lowest cattle population in over half a century, cattle farmers are reluctant to sell much of their herds as they rebuild them, experts said.

“Even if we start rebuilding,” said Peel, the Oklahoma State professor, “that’s going to be a four- to six-year process.”

Beef prices will continue rising until 2016 before consumers can expect any relief at the checkout counter, Peel said.

Rebuilding isn’t a problem for pigs: Sows give birth to several piglets at once. But the pig virus appeared for the first time about a year ago, killing thousands of newborns, according to the USDA.

Tim Stroda, the president and CEO of the Kansas Pork Association, emphasized that PEDv can’t affect humans.

But it cuts down on the pork supply. As a result, bacon and breakfast sausage prices were 14 percent higher this May than they were in May 2013, the largest year-over-year increases since June 2011, according to Labor Department data.

A fast-tracked vaccine is expected to be available for pork farmers around September, but there’s a concern that the disease might return once temperatures drop in the fall and winter, experts said.

“This disease has been a very insidious thing,” said Peel. “It’s very widespread. It’s very contagious” for pigs.

“As we come into this time frame, companies that buy product” _ grocery stores, for example _ said Stroda, “don’t know how much product is going to be available. They’re buying ahead, pushing prices up.”

Until researchers distribute the PEDv vaccine to farms, breakfast establishments are feeling an impact.

At Bacon’s Bistro & Cafe in Hurst, Texas, a 20-year-old family-run establishment outside Fort Worth, the wholesale price of a 15-pound case of thick-cut bacon is 15 percent higher this month compared with the same time last year.

Owners Adam Daily and Eva Burrull-Daily estimate they’re spending an extra $200 weekly on bacon now compared with a year ago.

The Dailys moved the bistro into a new building across the street last October, and they didn’t want to raise prices and have customers think that was related to the new building. But with pork costs rising, they expect to bump up their prices sometime this summer.

“Pork-wise, we’re at the highest price levels in the four years that we’ve had the restaurant,” said Daily, who’s 40. He later added: “We’ve held on knowing eventually we’re going to have to make that increase.”

The lack of beef and pork hurts the job outlook in the meat industry too.

Cargill, one of the nation’s largest beef processors, closed a factory last year in Plainview, Texas, which put over 2,000 people out of work in a town of about 22,000. National Beef Packing Co., which is based in Kansas City Mo., closed a plant in April in Brawley, Calif., and subsequently fired 1,300 workers.

“We’re in uncharted waters,” said Mike Martin, a Cargill spokesman. “We’re seeing some pretty historic highs in terms of prices.”

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