Higher food prices seem a certain result of the drought that has parched about one-third of the U.S. How high prices might go, which proteins will see the sharpest gains and when operators and consumers will feel the impact are the key questions, and there are disagreements and conflicting forecasts. Should burger-concept operators be concerned, panicky or just patient?
Committed to both insight and brevity, BurgerBusiness.com asked Christopher A. Hurt, professor of agricultural economics at Purdue University, West Lafayette, Ind., to provide an in-a-nutshell assessment of the damage so far and to predict the impact on prices. Conditions could change, but at this point his forecast isn’t encouraging, especially for burger and steak concepts.
Pork prices at the wholesale level would not be expected to rise (because of the drought) until late next spring. This is because most of the sows in gestation today will be farrowed, with the pigs finished. That means the supply of pork is pretty well established for 10 months out (4 months gestation and 6 months grow-out). That means pork supplies will not drop sharply until early summer 2013, and then wholesale prices really start up. Some of that may be anticipated, which means spring 2013 could be the point where prices start up.
For beef, the calves that were born this spring will come to market late in 2013 and early 2014, so this means beef prices will be going up in 2014 and 2015.
The earliest the pork and beef sectors might begin to expand would be the fall of 2013, with higher hog and cattle prices and much lower feed prices (a GOOD size crop in 2013??). For hogs, it takes one year from the time the outlook turns favorable until producers can begin to increase the pork supply, so that means the earliest wholesale prices might generally come down is the fall of 2014.
Sorry on the beef side: It will be a long time before we will see cheaper wholesale beef. If a heifer is retained late in 2013 (when profit prospects may return) then gestation is 9 months and grow out is 1½ years. That means it will be 2016 before there is any chance of increasing U.S. beef supply. So expect to see record high wholesale beef in 2012, with that record broken in 2013, and again in 2014, and once again in 2015.
In addition to short supplies in the U.S., rising world incomes have meant exports of U.S. meat products have been increasing. If that trend continues, per capita supplies of meats will drop to about 185 to 190 pounds in the next two years. That is down from about 220 pounds in 2007, to 198 pounds this year.
Chicken and turkey have the opportunity to attempt to “secure” more consumers as they can increase poultry supplies much more quickly than pork and beef.