What's the Beef? Food-Inflation Fears

Wall Street Journal•
• COMMODITIES
• AUGUST 25, 2010
What's the Beef? Food-Inflation Fears
•
By LIAM PLEVEN
Cattle prices are soaring toward records, pushing up the cost of beef in grocery stores and adding to the risk of a broader wave of food inflation.
The gains are being fueled by rising appetites globally and a dwindling U.S. herd. Purchases of U.S. beef around the world have surged as emerging economies become more prosperous. At the same time, ranchers hit in recent years by drought and the financial crisis have cut the number of cattle to the lowest level in decades.
The rally has driven up the futures market for cattle by 11% since early July to reach the brink of the $1-a-pound mark, just shy of the $1.04 record set in 2008. Prices dipped 0.3% Tuesday, to settle at 99.475 cents a pound, after rising for the previous 11 trading sessions.
Consumers already are paying more, with the retail price of choice beef up 4% in July from December, according to U.S. Department of Agriculture data. Further increases may be in the offing; last week alone wholesale prices climbed 3.2%.
While some observers said the August rally may be short-lived, they also said the fundamentals of a cattle shortage and rising demand mean prices will remain high over the longer term.
Nations in Asia and elsewhere are buying more U.S. beef. Meantime, it will take at least two or three years to substantially increase the U.S. herd, taking into account the months of gestation and then calf growth. The U.S. is crucial because it is the biggest beef producer in the world.