Retail beef prices, already at a record level, are likely to rise even more than the 11% increase in 2011. It is predicted by the owner of Sterling Marketing that the prices could rise as much as anther 10%. That is more than double the inflation rate for all food. Although consumers are not likely to see the entire raise in price, there may be some increase. Meat packers and retailers try to absorb some of the inflation before passing it on to consumers, taking million dollar hits. But why such a drastic increase?
There are several reasons for the increase in beef prices, all working together to create this inflation. The first reason is that there was a severe drought last year that left ranches in Texas, Oklahoma and other states without an ample supply of grass and water to feed their cattle. Many animals had to be sold to feedlots or slaughterhouses. This follows the principle idea of supply and demand. With the drought it decreased supply shifting the curve in, causing an increase in price. With less cattle, there will consequently be less beef available to consumers, driving up the prices.
On top of the drought, ranchers have been battling soaring prices of corn, property costs, and increased competition for land with corn, soybeans and other crops. Because of this, ranchers are decreasing the amount of cattle they have, therefore taking away from the supply once again. Beef is now becoming harder to create from the scarce farms that hold the cattle, driving up the prices.
A final factor in the increase beef prices is the strong foreign demand. Despite the falling U.S. consumption, beef exports rose 22% last year. Because the foreign demand is so strong, the prices continue to rise. If you do a simple supply and demand graph you will see how this is the case. The demand curve shifts out because of the increase foreign demand causing a rise in the price.
All these factors lead to the simple problem of increased retail beef prices. With the nation's cattle supply at its lowest and foreign demand soaring, it looks as though the higher prices of beef will be around for the time being.
