Will we soon see a shortage and sky-rocketing prices in beef in the United States? According to various reports, amid high commodities prices (specifically, corn and wheat that is used to feed cattle), U.S. farmers are not able to afford to feed cows and are sending them to slaughter. Reports also indicate that while beef consumption is up, the U.S. currently has the lowest cattle herd in over 50 years.
Traditionally, corn is generally the primary feed for cattle. When shortages in corn occur and/or the price of corn increases, farmers often switch to wheat. However, during the past six months, the prices of both corn and wheat have soared and, as of January 2011, are at an all time 6-month high.
Corn Prices Rise 62%
In July 2010, the monthly price of corn was $163.92 (U.S. No. 2 yellow corn, freight on board Gulf of Mexico, per metric ton). In January 2011, that price was $265.29. That is nearly a 62% increase in the price per metric ton just in the last 6 months. As of yesterday (February 18, 2011) the price was $302.26.
Wheat Prices Rise 67%
In July 2010, the monthly price of wheat was $195.82 (No. 1 hard red winter ordinary protein wheat, freight on board Gulf of Mexico, per metric ton). In January 2011, that price was $326.54. That is nearly a 67% increase in the price per metric ton in just the past 6 months. As of yesterday (February 18, 2011) the price was $341.62.
Reasons for Rise in Grains Commodity Prices
There are many reasons for the increase in the grains commodity prices, including the following:
Weather conditions Negatively Affecting Production -such as the recent floods in eastern Australia, the severe droughts seen in Russia in 2010 and, more recently, drought fears in China – the world’s largest wheat grower.
Increase in Demand and Consumption – consumption continues to increase as the world’s population grows, and as the diet of the people of emerging and newly wealthy nations improves.
Use of Food (Grains) for Bio-Fuel – the use of food crops for purposes of producing bio-fuel instead of for human consumption has resulted in less grain crops being available for food. This is particularly true for corn.
Effect on Cattle Feed Prices
As the prices for grains (corn and wheat) have risen for the reasons above, so has the cost of feeding cattle that is raised for beef production. It has recently been reported that because of the increase in the price of grains commodity, U.S. farmers cannot afford to feed cattle and so are sending them to slaughter earlier and in greater numbers than they would have otherwise.
While both the demand for and actual consumption of beef has been increased and continues to grow (particularly in emerging and newly wealthy nations such as China whose beef consumption is reportedly up 240% during the past 10 years), the cattle herd in the United States is at an all-time 58 year low. And, with more cattle now being sent to slaughter, it would follow that we can expect to see beef shortages and price increases in the near future.