There is good news for us in the South and Hall County who raise cattle on cow/calf operations. Our cattle typically end up in the Midwest on feedlots, and then end up at the packer for processing.
Though this article is talking about prices further up the supply chain, local cattlemen have a good chance to reap rewards by producing quality cattle through improved genetics that help produce higher quality cuts of meat.
Beef feeders can look for continued payment of quality-grid premiums from packing plants, a University of Missouri Extension economist said.
“This only happens because they really need quality cattle,” Scott Brown, an agricultural economist who follows the beef markets said. “With high demand and short supplies of quality beef, packers are more willing to share.”
Brown’s advice for beef farmers seeking to capture quality-grid premiums: “Shoot for prime. That’s where the money is. Don’t stop at choice grade.”
Brown expects premiums for USDA prime quality grade beef to continue to rise as the economy recovers.
Demand comes from U.S. consumers, but especially from global buyers. U.S. beef producers should be excited about the continued opening of new trade agreements, such as one just confirmed with South Korea, Brown said.
Even in the recession, U.S. consumers increased their shopping for choice and prime cuts, he said. “Consumers will pay for prime. They want a quality eating experience.”
Brown said consumers pay for quality, and not just in beef.
“Who would think we’d pay over $2 a cup for a Grande Starbucks coffee? We could make a cup of coffee at home for 15 or 20 cents,” he said.
With rising demand and shrinking beef supply, consumers may face higher prices at the meat case.
“I don’t know if we will meet consumer price resistance,” Brown said. “I’m not a great believer that higher meat prices cause demand destruction. Consumers send signals about the meat they want through prices.”
Brown said an early indicator of the general economic recovery came from the restaurant index, which gauges optimism of food-service operators.
“Restaurants took a real hit in 2009, in the depth of the recession,” Brown said. “But the index grew by 1.1 percent in the February report after a strong January. Sustained growth will show consumer confidence andcreate more demand pull.”
Brown is a member of the Department of Agricultural and Applied Economics in the University of Missouri College of Agriculture, Food and Natural Resources, Columbia.
Michael Wheeler is county extension coordinator for the UGA Cooperative Extension in Hall County. You can contact him at 770-535-8293, www.hallcounty.org/extension. His column appears biweekly on Thursday’s Business page and at gainesvilletimes.com.