031054 Growing Appetite Drives Up Beef Prices

The Dallas Morning News - Steak at $3.74 a pound? It just might be the fault of a dead diet doctor and a diseased cow from Canada's Prairie provinces.

Americans are on a beef binge, eating steaks, chops, prime rib and ground beef (although not hamburgers) at a pace not seen since the 1980s.

But they're paying record prices for it. Demand is outstripping supply, leading the cost to soar -- $3.74 a pound in August, up about 40 cents from the year before and 26 cents more than the previous record in June 2001. And that's where the dead guy and sick cow come in.

Credit Dr. Robert Atkins, who died in April, for boosting demand. His popular Atkins Diet Revolution promises quick weight loss to diners who shun carbohydrate-rich foods in favor of beef and other meats and fats.

The supply problems can be traced to Alberta. A single case of mad cow disease there led the U.S. Agriculture Department in May to ban cattle imports from Canada, which supplies up to 10% of America's beef.

That's great news for cattle ranchers, but worrisome to steakhouse owners.

"We couldn't be happier," said Terry Stokes, chief executive of the National Cattlemen's Beef Association in Denver. "It's nice to know that consumers want us at the center of their plate."

An expensive plate at that.

"We are all in a state of panic, especially us high-end restaurants," said Gene Street, the longtime Dallas restaurateur who bought the steak-specialty III Forks restaurant in Dallas three years ago. "The good thing about it, from a competitive standpoint, is that we are all in the same boat."

Texas, home to 14 million calves and head of cattle as of Jan. 1 (vs. 22 million humans), is by far the nation's leading beef state and set to profit from the recent spike in demand and price.

"From a rancher's perspective, we certainly like seeing the increased demand and we will see some profit," said Tom Woodward, manager of Broseco Ranch, a cow-calf operation near Mount Pleasant, Texas. "The consumer, though, may not like paying the higher prices."

The rising cost of beef hasn't dampened consumers' appetite for it, however.

Last year, Americans ate slightly more than 64 pounds of beef per capita, up from 63 pounds in 2001 and the highest total since 1989. Industry experts project beef consumption will grow to more than 65 pounds per person this year.

Beef consumption had been on a steady decline in the late 1980s and early '90s. But it's increased every year except one since 1997, when it cost $2.80 a pound.

Beef prices dropped to $2.77 a pound in 1998 but have risen each subsequent year.

"I don't see that price getting any lower," said Jim Robb, director of the Livestock Marketing Information Center in suburban Denver. "In fact, it could continue to get higher by the year's end."

That worries many area restaurants that serve hamburgers, fajitas and prime cuts of filet mignon.

Tracey Evers, executive director of the Greater Dallas Restaurant Association, said restaurants resist passing on market price increases to their diners. "The consumer doesn't put up with major hikes," she said.

III Forks isn't planning on raising its prices anytime soon, Street said.

Demand for the restaurant's signature 10-ounce baseball cut filet ($27.95 with potatoes and two vegetables) continues to increase, he said. And on any given night, the restaurant will sell 400 to 500 prime cuts of filet mignon.

The increased cost, however, is forcing III Forks executive chef Chris W. Vogeli to be more creative in the kitchen.

"As a chef, you find yourself challenged trying to utilize every last cut of beef," said Vogeli, who will serve more than 11,000 pounds of prime beef this month. "We have to treat beef like gold now. At the price we pay, we don't want any of it to go to waste."

The nation's cattle also is in decline after peaking in 1996.

The nation's cattle herd also is in decline after peaking in 1996 with 103.5 million head of cattle. In its Jan. 1 inventory, the U.S. Department of Agriculture counted 96.1 million head.

Drought in the Midwest is the main culprit in the cattle count drop, said Ernie Davis, a livestock marketing economist and agriculture economics professor at Texas A&M University.

In order to maintain the nation's cattle supply and fill the stomachs of beef eaters worldwide, producers are sending cattle to market sooner than normal, at lighter weights.

Typically, cattle are sold for slaughter when they weigh 1,150 to 1,250 pounds, Davis said. Today, cattle are being sold 30 to 50 pounds lighter.

"The scary thing is, this is the time of the year when we are supposed to be filling back up the feed yards. Instead we are moving cattle pretty fast," Davis said. "Cattle ranchers are making money right now."

In early October, slaughter steers averaged $90 per 100 pounds. That compares with $85.38 per 100 pounds -- the previous high -- 10 years ago.

"I don't think any of us are complaining right now, we're just wondering how long this is going to last," said Pete Bonds, who owns and operates a cow-calf operation in Fort Worth, Texas. "The high beef prices are nice, but I think the marketing has a lot to do with it."

The beef industry spends a lot of time, energy and money on education and the promotion of new products, said Russell Woodward, retail and food service marketing manager at the Texas Beef Council.

With 19 cuts of beef that meet the USDA's labeling guidelines for lean or extra lean, beef continues to be the No. 1 food source for protein, vitamin B12 and zinc, he said.

And then there's the Atkins diet. It's been around for more than 30 years, but its high fat content caused nutritionists to warn of its health dangers.

Recent scientific studies, however, have cast doubt on those concerns, and the Atkins diet has zoomed in popularity. Dr. Atkins' last book outlining his diet is still No. 13 on the Publishers Weekly best-seller list.

"All the craze about the Atkins diet isn't hurting beef demand one bit," Russell Woodward said. "I think people are looking for meal choices that are satisfying their needs and beef is just a popular option right now."

For Gene and Barbara McMullen, the Atkins diet plays no role in their decision. They're just longtime beef connoisseurs.

"We eat more beef than any other meat," said McMullen, 68, who dined with her husband at III Forks Wednesday night. "It's good for you, and honestly, it tastes good."

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