QUOTE AND NEWS
Wall Street Journal  1 hr ago  Comment 
Hershey Co. said it plans to buy Krave Pure Foods Inc., a maker of premium beef jerky, giving the candy company a taste of the emerging meat-snack market as Hershey’s sales start to stagger.
Clusterstock  2 hrs ago  Comment 
Even though it’s one of the most classic cuts, most of us know next to nothing about standing rib roast AKA prime rib. The New York Times recently wrote about a resurgence in the cut and how more and more restaurants are putting it back on...
Insurance Journal  Jan 28  Comment 
Kansas geologists say they need more funding to investigate an unprecedented spike in earthquakes in the state. Kansas Geological Survey Director Rex Buchanan told the House Energy and Environment Committee that about half a million dollars is...
NPR  Jan 27  Comment 
Beef processors continue to block efforts to bring back Zilmax, a drug that makes cattle put on weight faster. Is it because they're concerned about animal welfare, or beef exports?
New York Times  Jan 26  Comment 
A Texas chili, like all great beef stews, combines the fragrant spices of a tagine, the succulent beefiness of pot roast and the slurpy heat of a goulash. (Article plus video.)
Agrimoney.com  Jan 22  Comment 
Macquarie foresees feeder cattle prices remaining high well into 2016. But will cow-calf producers succumb to the temptation to sell at high values?
Agriculture Online  Jan 21  Comment 
A 19-year trend of fewer calves coming to an end. Tight cattle numbers and high prices are driving producers to hold on to quality heifers and cows to rebuild their herds. Female slaughter dropped 10 percent in 2014. “We are saving more...
Forbes  Jan 21  Comment 
Inspired by his parents? experience in the wine business, Jon Sebastiani is giving a downscale snack a makeover.
Agrimoney.com  Jan 16  Comment 
Beef processors return to the black, thanks to a downturn in live cattle prices - which may have helped push feedlots back into the red
MarketWatch  Jan 16  Comment 
Film, beef, tomatoes and hotel lodging were some of the items that saw the biggest price gains last year.




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This article is about Beef Prices in general. For the specific futures contracts, see the articles on Live Cattle Futures and Feeder Cattle Futures.

In 2007, the retail value of all US produced beef was $74 billion.[1] Beef prices depend in part on the availability and pricing of cattle feed. For instance, heavy droughts often result in the reduction of available hay stocks, so prices drop slightly as more cattle are slaughtered and sent to market. However, this reduces breeding stock, subsequently reducing supply and raising prices in the long term.[2] Reliance on corn cattle feed (especially distiller's dry grain--see DDG under Ethanol Production) also makes beef prices susceptible to significant changes in corn prices.[3]

The chart at left shows spot prices for Live Cattle on the Chicago Mercantile Exchange.

Who benefits from higher beef prices?

  • Tyson Foods (TSN), and Brazilian JBS S.A. (SAO:JBSS3), owner of Swift Foods, examples of major public beef protein processors (they hold 24% and 18.5% of US market share, respectively), benefit when beef prices rise.[4][5]
  • Smaller, private beef producers and processors, such as Cargill Meat Solutions, with 21% of US market share, and National Beef, with 10.5% of US market share, also benefit when beef prices rise.[6]
  • AspenBio Pharma (OTC:APNB), Alpharma (ALO) and other manufacturers of livestock pharmaceuticals benefit from higher demand for cattle, which results in increased demand for the high-yield drugs that AspenBio manufactures.

Who benefits from lower beef prices?

Historical Beef Statistics

Trends and Forces

Increase in Feedstuff Prices Increases the Price of Beef

Beef Prices are heavily dependent on favorable pricing of feedstuffs, such as corn prices and soybeans, as food makes up the majority of the cost of raising livestock. Corn prices have risen sharply since the beginning of 2007 - more than 60% in 2007 and early 2008 - as ethanol producers have increased their demand for the commodity (rising oil prices, in turn, have increased demand for ethanol).[10] Corn is also the main input for many other food products such as high fructose corn syrup that are in increasing worldwide demand - but nonetheless the USDA expects U.S. farmers to plant 8% less corn in 2008, lowering supply and increasing prices.[11] Any long-term, significant increase in feedstuffs prices has the potential to seriously increase beef prices.

Rising Global Demand Pushes Up Beef Prices

In 2007, beef consumption rose at an annual rate of 5% in developing countries.[12] From 1990 to 2007, per capita consumption of meat doubled in China - 1.3 billion people ate twice as much meat as they did before.[13] As global demand increases, prices are pushed up and meat becomes more expensive.

Cattle Supply is Dependent on Weather Conditions

Farmers depend on forage - grass and wheat - to feed cows during the summer and fall. During droughts, not enough forage grows to feed the cattle and farmers are forced to dip into their winter hay reserves to feed their herds. In order to make sure they have enough hay for the winter, farmers send surplus cattle to market, increasing supply in the short term, but reducing breeding stock and decreasing supply in the long term.

Import Bans Decrease Supply and Increase Prices

When health scares, such as cases of mad cow disease, cause the United States to ban cattle imports from other countries, US supply shrinks and beef prices increase. For example, the 2003 ban of Canadian cattle imports decreased US supply by 8% and contributed to a 30% rise in cattle prices.[14]

Beef Industry Market Share

Tyson Foods (TSN) is the largest US producer of beef with 25% of the US market.

Cargill Meat Solutions is the second largest US beef producer with 21% of the US market.

Swift Foods, which is owned by Brazilian meat producer JBS S.A. (SAO:JBSS3), is the third largest US beef producer with 18.5% of the US market.

National Beef is the fourth largest US beef producer with 10.5% of the US market.

Note: Market share data from NWA Online

References

  1. U.S. Beef and Cattle Industry: Background Statistics and Information
  2. Drought loss expected to reach $30M for six-county region; feds could issue disaster declaration
  3. [1] Corn Prices Near Record High, But What About Food Costs?
  4. [2] Tyson Foods: Overview
  5. [3] Beef Losses Prompt Cutbacks
  6. [4] Beef Losses Prompt Cutbacks
  7. http://www.breakthechain.org/exclusives/mcbeef.html
  8. Chicago Business, "Kraft, Sara Lee face rising beef and pork prices"
  9. [5] U.S. Beef and Cattle Industry: Background Statistics and Information
  10. [6] National Corn Growers Association Futures Quotes
  11. [7]|"USDA Bets on Soy, but Farmers Like Corn"
  12. [8] More wealth, more meat. How China's rise spells trouble
  13. [9] Meat demand in Asia fuels higher food prices
  14. [10]The price of beef becomes hard to swallow
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