Living high off the herd: The price of beef soars

By Peter T. Kilborn
The New York Times

	ERIC GAY / AP A Texas ranch hand watches over cattle up for auction. Ranchers are reaping the rewards of popular meat-intensive eating plans such as the Atkins diet.
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They are being harvested younger and faster than ever.

"The last two or three years, I lost a lot of money running cattle," said Tippens, 51, parking his Lexus SUV to watch his ranch hand chase newly weaned calves from a pen, up a chute and into a trailer to be taken to pasture. "Now we've got the perfect storm. Prices are exploding. They're far beyond anything we have seen in history."

Many things, such as droughts in the Midwest and Great Plains, "mad-cow" disease in Canada and shifts in foreign trade and popular preferences, affect the price of beef.

"But the unique thing about 2003," said Gregg Doud, chief economist for the National Cattlemen's Beef Association, "is that all these factors are pulling in the same direction, pulling prices higher. That never happens."

Cattle ranchers have just one complaint: signs of more midnight rustlers running off with calves. Ranchers and the thieves, too, have been getting 90 cents to $1.15 a pound for cattle, often more than $1,000 a head. That is well above the 85-cent peak a decade ago and 30 and 40 cents of about a year ago. Many ranchers are betting these prices will not last, so they are slaughtering cattle sooner and depleting their herds of the heifers they would otherwise use to build new herds.

"This year's calf crop is expected to be 38 million head," the Department of Agriculture's Economic Research Service wrote in a report last month, "the smallest calf crop since 1951." Another result of the early slaughtering is a scarcity of the tastier choice- and prime-grade cuts, such as rib eye and tenderloin, that can make up 80 percent of the meat of the well-fattened steer and just 60 percent of a lighter steer.

Soon, Tippens said, "the final, tug-of-war stage" begins in the retail market. Because of a tight supply of cattle, the Economic Research Service said in the report, "retail prices are likely to continue on a record-setting path as the higher prices are passed on to consumers."

So far, consumers have seen an average rise of about 10 percent in restaurant and supermarket prices, the department reported. Rather than raise prices, many restaurants and supermarkets are selling lower grade, select beef instead of choice, or promoting chicken and pork.

"We've had to raise prices on beef at least 50 cents a pound, depending on the cut," said Jeff Lowrance, spokesman for the Food Lion supermarket chain. "We sell choice. What we're finding is cattle being rushed to market with less meat that will grade out at choice."

The Agriculture Department predicts the high prices at auctions and feedlots, though slipping below $1, are likely to stick for two more years, and retailers can hold out for only so long with 50-cent increases like Food Lion's. Today's $35 Porterhouse at white-tablecloth steakhouses could be heading past $50.

Robert Noland, an owner of Davis & Main restaurant in Richmond, Va., said he was paying about $6 a pound for certified Angus beef rib-eye steaks in August. "About three weeks ago, they jumped all the way to $10.20. So I've switched from certified Angus to just regular."

Jim Cannon, a vice president of the Ruth's Chris Steak House chain, based in New Orleans, said, "We're going to hold prices as much as possible." With prime cuts becoming costly and scarce, Cannon said some Ruth's Chris outlets were diverting customers with a $28.95 special of garlic-encrusted halibut.

Beef prices cycle up and down just as prices for most products, such as lumber, lobster or gasoline. But every cycle has its own characteristics.

Demand for beef has surged with the industry's development of juicier cuts and the new popularity of the Atkins diet, which promotes high-protein meals. Americans are eating 67 pounds of beef a year per capita these days, 3 more pounds than 10 years ago.

As demand has climbed, droughts have been scorching the leading cattle-producing states, leaving thinning pastures, underweight cattle and depleted herds. Ranchers have cut herds more to eke out some revenue. By the start of this year, the supply was down to 96 million head from 104 million in 1993.

On May 20 this year, the corpse of an 8-year-old cow in Alberta was found with "mad-cow" disease. Import of Canadian beef, which accounts for 8 to 10 percent of U.S. consumption, was stopped. With the supply tight, prices rocketed.

Pressure on prices should ease because the Bush administration is planning to lift most of the embargo early next year. But since supplies were tight before the embargo, economists doubt renewed Canadian imports will push prices much lower for a couple of years.

Ranchers, too, could be reinforcing high prices. Looking at the current prices, Leland Southard, an economist at the Economic Research Service, said ranchers are saying, "These are probably higher prices than I'll see next year."

So, he said, a rancher asks, "Do I sell at this price, which is very high?" Or does he build his herd and risk having to sell when prices might be lower? Many have opted to sell now.

Like cattle, Tippens said, "ranchers have a herd mentality." They could be setting themselves up for a couple of years when prices are strong but they have little to sell.

Copyright © 2003 The Seattle Times Company