Friday, January 28, 2011

Beef -- it's what may not be for dinner

Cowabunga! Even beef production is suffering in this economy. Bloomberg reports
The U.S. cattle herd probably shrunk to the smallest size since 1958, and the drop in beef supplies may boost prices to a record, analysts said.

Ranchers held 92.211 million head of cattle as of Jan. 1, down 1.6 percent from a year ago, according to the average estimate of seven analysts surveyed by Bloomberg News. That would be the smallest herd in 53 years, said Ron Plain, a livestock economist at the University of Missouri in Columbia.
Look for prices for your favorite hamburger or steak to rise and profit margins at many restaurants to fall in the coming year.

One culprit for the declining herd and higher prices may be the government's push to promote corn-based ethanol as a fuel. The Bloomberg story cites "surging prices for corn," up 82 percent this year as a key factor in declining profit margins for beef producers.

One other thing to look for is an oversupply of beef in about two years, as producers follow the well-worn cobweb cycle (and no, it's not the "some pig" variety of cobwebs).