Pricey Beef Puts Heat on U.S. Grilling Season

Retail beef prices are widely expected to set new records in coming weeks after wholesale prices, or the amount meatpackers charge sellers for beef, hit an all-time peak this past week. After achieving new highs for three weeks, choice-grade beef, the most common variety in the U.S., jumped to $2.1137 a pound Thursday, according to the U.S. Department of Agriculture. That level broke a decade-old record for wholesale prices set in 2003, when a case of mad-cow disease in Canada led to a spike in export demand for U.S. beef. Wholesale prices retreated slightly Friday afternoon, falling to $2.0887 a pound, confirming some market-watchers' suspicions that retailers may be unwilling to swallow the record-high beef costs. The fat beef prices are the result of years of drought in major cattle-producing states, a trend that has shrunk the nation's cattle herd to its smallest level in six decades. Higher beef prices are pinching food budgets for consumers already wrestling with a rise in gasoline prices, the expiration of the federal payroll-tax holiday and stubbornly high unemployment. They're also expected to drive consumers to other meats after the holiday weekend, one of the biggest beef-sales periods of the year. That could threaten high beef profit margins for meatpackers like Tyson Foods Inc. TSN -0.04% and Cargill Inc. and also pose a challenge for restaurants and grocery stores. Last year, Americans spent $288.40 per person on beef, a 4.2% increase from $276.80 a year earlier as retail prices rose, according to Jim Robb, director of the Livestock Marketing Information Center in Denver. U.S. beef sales reached $90.6 billion last year, up from $86.4 billion in 2011, he says. Yet volume is in decline. Consumers have been fickle about beef this year. In the first quarter, beef sales volumes fell 1.7% from a year earlier at 18,000 grocery stores, supermarkets and other retail outlets tracked by market-research firm Nielsen Co. In contrast, pork volumes rose 3.1% and chicken volumes were flat...more