1987 was the last time that beef cost as much as it does in 2014. The red meat is the latest victim of a leveling of the world’s consumer economy, with lower-income countries increasing their consumption in line with their expansion. Economic growth in countries like China, coupled with supply constraints in the United States, has pushed beef prices up, and left many consumers wondering about their grocery bills.
Droughts in the United States in the last two years have cut the size of the country’s cattle-herd to 1951 levels. 2013 was the seventh straight year of contraction in the size of the herd in the United States, and customers are finally feeling the pinch. 1951’s cattle may not have produced the amount of beef that 2013’s did, but the marker is an ominous one for steak lovers going forward.
China needs more meat
China’s effect on global demand is difficult to comprehend. The country’s massive economic expansion has led to the creation of a new middle class. The richer, more socially-mobile, Chinese populace demand products that their parents could never afford to buy. In the mid 2000s the world economy felt the strain of Chinese demand on industrial products and raw materials; as the East-Asian giant lurches toward a consumer-based economy, strain is being felt on agricultural products.
Barring catastrophe, this trend is not going to turn around any time soon. Total beef consumption in the country was around 6.5 million tons in 2010. That number is expected to hit close to 8 million tons in 2020. China’s economic growth is going to raise the prices for consumer demands across the board, unless world supply ticks up at the same rate.
Weather troubles decimate beef supply
What might change, however, is the supply of beef in the United States. With the upturn in beef prices more producers should jump into the market alleviating the supply pressures in North America. for now, however, pressures are hitting consumers in the grocery store, and at the Restaurant. Some establishments have even begun offering smaller steaks in order to spur consumption.
The United States is expected to produce 11.03 million tonnes this year, more than 5% below last year’s production numbers. Beef prices hit $5.28 per pound in February, and there is no end in sight given the slowdown in production in the United States. Problems with the weather, and an unpredictable future given the ravages of global warming, make supply in the future difficult to forecast.
Droughts come and go, but the rise of consumption in Asia appears to be here to stay. A commodity like beef isn’t easily manipulated to conform to changing demand, and prices are likely to remain high, at least in the short term. Consumers will likely forego some beef purchases for the health of their wallets, and it might just impact the health of their hearts at the same time.