Restaurants can Expect Beef Prices to Continue to Rise

According to the U.S. Department of Agriculture, beef prices have hit an all-time high – topping the record set in 2003 at more than $2.11 per pound for choice grade beef. While this is a record in dollar value, when adjusted for inflation the number isn’t quite so startling. These prices represent a long-term sustained inflation on beef and veal prices that won’t end any time soon.

Factors Influencing Rising Beef Costs

There are a number of factors that have been contributing to the rising cost of beef over the last several years. The most obvious is the unusual weather patterns that have affected the ability of farmers and ranchers to be able to provide enough feed for their herds. Sustained drought last year made the production of corn difficult. It also caused many ranchers to sell their cattle because they couldn’t come up with enough grass or water on their land to sustain the herd.

This year the opposite problem is occurring in many parts of the Corn Belt, wherein they are getting too much rain to get the crop planted. The fact that many ranchers have been forced to significantly reduce their herd numbers, or worse, sell out completely, has also contributed to the rising cost of beef, as quite simply, there is no longer as much beef on the market as there used to be.

Given that it takes about two years for a cow to be old enough to go to market, it will take ranchers some time to be able to build their numbers up again, assuming weather and economic conditions permit the ability to do so. As a result, the cost of beef is projected to continue its rise well through 2016.

What Rising Beef Costs Means for Restaurants

A major issue for restaurants is the fact that their menu prices aren’t rising in-step with the increasing cost of beef. As a result, profit margins are much thinner than they once were. This puts restaurant owners in a tough position, given the fact that increasing your establishment’s menu prices typically doesn’t go over well with your consumer base. As a result, restaurateurs are having to get creative to make up the difference in other ways.

How Restaurants are Managing Rising Beef Costs

One obvious way to deal with the rising cost of beef is to simply rely more heavily on alternative protein sources such as chicken or pork, which are typically much cheaper than beef and veal. Aggressively promoting these menu options allows a restaurant to keep menu prices fixed while still receiving a decent profit margin.

Choosing less expensive cuts of beef is another option some restaurants are resorting to in order to close margins without increasing menu prices. Working with beef suppliers to ensure that the measurement specs for a cut of beef are as accurate as possible and looking for other ways to reduce cost such as eliminating packaging are methods that are also helping restaurants address the inflating cost of beef.

One positive in all of this is that the higher cost of beef is tempering its demand, which ultimately will help bring things back into balance. Until the time at which beef prices level out again, however, restaurants are going to have to keep looking for creative strategies to manage the rising cost of America’s favorite meat.

Get Ready to Earn Your MBA in Beef Advocacy

So are you ready to earn your MBA? That’s not a Masters of Business Administration by the way. We’re talking instead about the Masters of Beef Advocacy launched a little over a year ago to teach people in the cattle industry how to advocate for their businesses.

Offered Online for and by the Beef Industry

The program is a free series of courses which are all offered online. The courses include such classes as “Beef Safety,” “Modern Beef Production” and “Environmental Stewardship.” Offered at the Minnesota State Cattleman’s Association, the program has seen more than 2,000 people earn their MBA, with nearly a dozen new people applying for the program each day.

Not Accredited

Sadly, while the program will help you to advocate for beef, the program is unlikely to get you any kind of professional credit. It’s not offered as an accredited program and will not count toward college credit in any school in the United States. The good news however is that this MBA program doesn’t require a Master’s Thesis.

Designed for Advocacy

The program is designed basically to provide for advocacy and training in the beef and cattle industry and to teach some of the modern ideas regarding meat raising that have come into play in the past few decades. The program is also being promoted heavily on places like Facebook and Twitter. It will reportedly teach you how to talk with consumers about your favorite beef products and to explain why these products are healthy and humanely produced.

More of a Curiosity for Restaurateurs

While the program does sound somewhat interesting, frankly, we doubt it will have much appeal for people in the restaurant industry since we tend to deal with the stuff after it’s already been killed, cut and wrapped in cellophane, but still, it’s an interesting development to say the least.

Corn Prices Expected to Go Through the Roof

It’s remarkable to think about, but corn production in the United States, or the lack of corn production in this country, quite literally has an effect on almost every aspect of our lives and especially on the lives or restaurateurs.

The USDA recently announced a severe cut in the corn prospects for the corn crop, causing a severe spike in the price of futures. The price of a bushel of corn is expected to hit $6 for December deliveries.

Cutbacks in Various Meat Products

The expected shortage of corn is said to be leading to the rise of prices of poultry, beef and pork. In addition, there may be a spike in the costs of high fructose corn syrup and possibly even ethanol.  Below, we’ve detailed expected cost increases for various products:

Pork

The general consensus is that pork producers need to be paying no more than $4 per bushel for corn in order to break even when they sell live hogs. At current corn prices, it is expected that the cost of pork is going to skyrocket as producers begin trying to make up for the extra cost of the feed they need to provide for their herd.

The price of Smithfield Food for example, a major pork producer, is expected to go down in fiscal 2012 as the price of feed skyrockets.

Cattle and Poultry

Cattle and poultry prices are expected to continue to rise as well. Of course, the fact that beef and poultry prices have been steadily rising for the past few years already is just an indicator that we can expect to see even faster price increases now that the cost of feed is expected to skyrocket as well.

Export Products

The one bright spot on the horizon is exports. As the value of the dollar continues to fall relative to world currencies, exports are expected to continue to grow. The recent price increases in the cost of corn futures are expected to lead to a significant rise in the value of cattle, poultry and hog exports.

Red Meat Doesn’t Cause Colorectal Cancer New Study Claims

Fans of red meat can now rest a little easier. A new study has recently been completed by Exponent, Inc. Health Services, Inc. The study looked at the possible relationship between heavy consumption of red meat and the outbreak of colorectal cancer.

Red Meat and Cancer–One Claim Proved False

The study compared the results of 35 other studies performed over the past 30 years. They meticulously synthesized the demographic, methodological and analytic data in order to account for variables and they have concluded from this that there is no “positive association” between red meat and colorectal.

Previous studies had implied that there may be a link between heavy red meat consumption and cancer. This lead some Americans to shun the food in favor of lighter options such as chicken or fish. This has been a cause of great concern for some restaurateurs that focus on foods like steaks and hamburgers.

One Caveat of the Study

It should be noted however that the study did restrict itself to the question of a particular form of cancer rather than studying incidence of cancer more broadly. In addition, the American Heart Association still recommends keeping red meat consumption down to a minimum since it can lead to increased incidence of heart attack.

Why This Study is Still Good News for Restaurants that Serve Beef

All that being said however, the new study is good news for restaurateurs running steak houses and burger joints. They can point to this study as proof that at least some of the claims made against meat have been exaggerated. Patrons need not be quite as concerned when they go out for an evening of steak dinners or a good old fashioned hamburger.

The new study will be published in the journal “Obesity Reviews.” This journal is an official publication of the International Association for the Study of Obesity. The study was funded in part by the Beef Checkoff and by the Danish Agricultural and Food Council. The researchers stressed that while their funding may have come in part from these organizations, the companies in no way contributed to the writing or analysis of the report.