Tue August 26, 2014
High Prices Aren't Scaring Consumers Away From The Meat Counter
Originally published on Tue August 26, 2014 5:41 pm
You may have noticed when grilling steaks or hot dogs this summer that they cost more than they did last year. According to the U.S. Department of Agriculture, pork and beef prices are up more than 11 percent since last summer.
Supply and demand determine price, and the pork supply comes from places like Riley Lewis' hog farm near Forest City, Iowa.
Here 1,000 acres of corn surround the barns, and a grain silo from 1948 is dwarfed by modern storage bins. When Lewis enters the barn, pigs trot over to greet him. Last December, a nasty, new pig virus sickened animals here. Even worse, porcine epidemic diarrhea virus, or PEDv, swept through nursery barns on farms where Lewis buys his piglets.
"We do buy our pigs from Illinois, and they come in at 12 to 13 pounds," says Lewis. "They did have a little shot of it that went through, and our numbers right now are down."
Across the country, the virus killed several million piglets, adding up to a lot fewer hogs at market. So tighter supply means Lewis gets paid more per pound, per hog.
"It's been remarkable what the price has done," says Lewis. "The last couple of years, hog farmers dug a real deep equity hole. And so it's really nice to have that hole start to get filled up."
He's referring partly to the cost of feed — a major expense here on the farm. After record high corn prices in 2012, feed has now gotten cheaper, and Lewis can raise bigger hogs.
It's a different story with cattle, which take much longer to bring to market. When feed prices skyrocketed two years ago, many ranchers sold off more cattle than they might have otherwise.
That extra beef is long gone, and ongoing drought in the Plains states means herds aren't growing fast enough to meet demand.
But what about shoppers?
John Green, the National Pork Board's director of strategic marketing, says stores are actually trying to protect consumers from even steeper prices.
"Produce and meat are the two big things that pull people into a store," says Green. "And so, changing those prices, especially raising those prices, is one of the last things that a retailer really wants to do."
So even as grocers watch the price of cattle and hogs climb, they need to keep you coming in.
"Some retailers just took that on the chin and had to be competitive in their marketplace," he notes. "Others tried to make some money where they could, to recoup that back. But by and large, they try to keep those prices stable."
They try lots of things to keep down retail prices, even buying some cuts frozen. Still, there's a limit. And when it's reached, prices rise.
But Iowa State University livestock economist Lee Schulz says climbing prices don't always scare away customers. "We've really seen higher and higher prices being pushed on to consumers," says Schulz. "But overall, we've seen very robust demand for beef."
And so far, it's the same with pork: We keep buying it even though it costs more. Shoppers who can may spend more to eat the same amount of meat. Others will spend just the same, but get less.
And that can mean being more selective about which meat products we buy. Green says bacon remains a strong seller.
"A little bit of bacon provides a tremendous amount of flavor and satisfaction. So you don't have to eat 8 ounces of bacon," he says. "A strip or two at breakfast, on a breakfast sandwich, on a salad, all the different ways that bacon is now being used on — a topping for a burger — is really what's kind of driving it."
And Green doesn't see any end in sight for Americans' fascination with bacon. With a record corn crop projected this fall, feed prices are likely to continue falling. And that could bring down meat prices.
Mayer reports for Iowa Public Radio and Harvest Public Media, a reporting collaboration that focuses on agriculture and food production.