News Release Distributed 07/03/14

BATON ROUGE, La. – Tighter supplies of cattle and hogs combined with improved domestic demand are keeping prices high, said LSU AgCenter economist Ross Pruitt.

Beef herds declined in 13 of the past 15 years due to drought, unprofitability and other factors, but cattle inventories are showing signs of growth over the next few years, Pruitt said. The result of those declines can be seen in retail markets where prices of ground beef, in particular, are inching up as more cows are kept for breeding rather than sent to market.

“Cow slaughter has declined 12 percent so far this year, which is supportive of ground beef prices, while total cattle slaughter is only down 5 percent,” Pruitt said.

The historic prices for live cattle favor Louisiana cattle producers, he said. Calves in the 500-pound range are bringing approximately $200 per hundred pounds.

“We’re breaking history at this point,” Pruitt said of meat prices. And those include more than only beef.

Chicken production is slightly lower than last year, which is somewhat surprising as it was expected to be higher this year, Pruitt said.

“We’ve seen some issues with the national breeding flock,” he said. That means fewer birds in production. In addition, avian influenza in Mexico over the past few years has created a strong demand for replacement hens in that country, which limited U.S. chicken producers’ ability to expand because hens were sent south.

“From a consumer standpoint, retail prices have been moving higher so far this year,” Pruitt said. Lower or flat year-to-date production in beef, pork and chicken is providing support for the price increases at the retail level.

The changes are most evident in grocery stores because most prices in restaurants are negotiated for several months in advance, so price changes are less dramatic.

The national hog herd has been affected by porcine epidemic diarrhea virus, or PED.

The disease was first identified in April 2013. Although not a threat to humans, the virus causes mortality in young pigs, reducing the number of hogs that eventually come to market.

The disease is more prevalent in winter, so fewer pigs make it to market in the following summer. “An expected 2 to 3 percent increase in pork production likely won’t happen,” Pruitt said.

Retail prices for all meat are expected to rise slowly the rest of the year, with typical seasonal adjustments along the way.

“We can expect to see chicken availability to increase a little, but beef and pork are likely to remain below year-ago levels for the remainder of the year,” Pruitt said.

Beef and pork exports also were greater than a year ago so far this year, which provides additional support for the higher prices that producers are currently experiencing.

“Retail meat prices could weaken a little if consumers are hesitant to pay higher prices for beef and pork and switch to relatively cheaper chicken,” Pruitt said. “However, supplies of beef and pork are going to be tight for most of the year and limit how much lower meat and livestock prices can actually go.”