The Consumer Has Power
Published: 07 March 2011
Over the last couple of weeks I have written about the prices of livestock, or rather the record prices of livestock.
Again this past week, fed steer prices rose to $111 per hundredweight, while dressed steers averaged close to $180. Feeder steers were up from the previous week, and cattle on feed were up both from the past year and past month. Slaughter of cattle was down from the previous week, but up slightly from a year ago, and slaughter weights and dressed weights were a little down from the previous week. These weights are expected to drop some more as spring hits, as a reflection of the tough winter the feedlots have experienced.
That is the producer and feeder side of the beef chain. Now for the packers and on down to the meat counter and ultimately the consumer’s plate. Wholesale beef prices went up slightly from a week ago, but experienced a jump of 13.6 percent from a year ago. Another plus for the packers is that the prices they receive for hide and offal are up 31.7 percent from a year ago.
We know we have tight supplies of meat worldwide. Here at home in the States we have a strong domestic demand, and we also have a really strong demand from our export markets. We all realize that the prices the producers receive for meat, and the prices the consumers will pay, will stay high, and most likely will go higher. As of today, the producer and feeder should be making money, the packer is losing about $29 a head and the consumer is paying more for meat than they ever have.
All food prices have been going up for many months, and will continue to do so, as freezing temperatures in the southern states that grow our vegetables and fruit, and even Mexico, have been hit hard this winter. Oil and energy costs are also affecting everyone on the food chain, and the turmoil in the Middle Eastern countries is sure not helping. Current unemployment is still high, and most people are looking for cheaper protein like chicken, but even a chicken has to eat seven-dollar-per-bushel corn, so the poultry industry is also feeling the hurt.
All retail meat prices have risen the most in the last seven years, but that is really food inflation. Wal-Mart and the other large food stores are still making money from food items, but analysts say it’s been tough going for the smaller chains.
Marketing people are facing a challenge these days, as the American consumer is increasing the demand for “healthy” foods, and they’re willing to pay more for those products, so we’re bound to see more natural or organic food labels on food.
A number of companies like Kraft have been downsizing their packages while keeping prices the same, so we’re paying more for less. Coffee companies are using lesser quality beans to save money, and on and on it goes.
The good part is that our worldwide economic growth is rising, faster than here in the U.S., so more people can now afford to pay more for food, and are willing to.