010342 Retail Beef Prices Soaring

Washington - Retail beef prices are soaring -- reaching a record $3.21 a pound for USDA-choice cuts in January -- because of a harsh Plains winter that has been tough on cattle.

Prices are likely to dip by the summer, but then rebound because of tight cattle supplies. Producers are only starting to rebuild herds that they thinned because of drought and low prices in the late 1990s.

The winter has been so cold and damp that cattle are taking several months longer than usual to fatten up. In bad weather, cattle in feedlots don't eat as much and use up energy staying warm.

“We have basically had one of the harshest winters that we have seen in a very long time,” said Chuck Levitt, a meat analyst with Chicago-based Alaron Trading Corp. “The last time we had a winter this severe across the major cattle feeding areas was in 1993.”

The previous record for retail prices was in September, at $3.13 a pound. In the late 1990s, they were averaging about $2.80.

Live cattle are selling for 82 cents a pound, up from 78 cents last month and about 68 cents in February 2000.

“We've definitely seen the beef prices go up big time,” said Rickey Figueroa, executive chef of Atlanta's Chops Steakhouse.

The price the upscale restaurant is paying for beef tenderloin has gone from $15 to $20 a pound in recent weeks. So far, the restaurant isn't changing its menu prices, in hopes of negotiating better deals with another supplier, Figueroa said.

Americans have rediscovered a taste for beef at the same time that U.S. meat exports are up and many producers have been sending all of their calves to slaughter, rather than holding females back for breeding.

Experts say it's too early to assess the impact on U.S. prices and supplies from outbreaks of mad-cow and foot-and-mouth diseases in Europe.

Beef sales plummeted in the European Union after an upsurge of mad cow cases in several countries last year. Since October, beef prices in Europe have fallen by about 27%.

The European Union doesn't buy most U.S. beef because the cattle are treated with growth hormones.

In the United States, “The prices are up because the stock of cattle in the country is way down,” said Mark McLaughlin, who ranches near Sweetwater, Texas, in a region that has been through several years of drought. “I bet in this area of Texas we've gotten down to 30%” of normal herd sizes.

McLaughlin sent 450 calves to feedlots this winter so they could be fattened for slaughter. That's about half the cattle he was selling a few years ago when his herds were larger. Last fall, however, he kept some female calves so he could start rebuilding his herd over the next two years to take advantage of the higher prices.

U.S. cattle supplies are down 1% this year and 6% from a peak in 1996.

Beef consumption, meanwhile, reached 99.5 pounds per person last year, up from 98.7 per person the year before and 95.6 pounds in 1997. U.S. beef sales to Japan and other export markets rose 11% in 1999 and another 4% last year.

“Demand is holding up very strongly,” said Agriculture Department analyst Ron Gustafson.

Retail prices will likely moderate as the weather warms and more cattle head to slaughter, but then cattle supplies will tighten over the next two years as ranchers retain their female calves, rather than send them for slaughter, he said.

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