MORRIS – The western half of the U.S. is parched, facing one of the worst dry spells in U.S. history, and nearly 2,000 miles away, Morris butcher and business owner Tom Dobbels is feeling the heat.
The owner of Sages Meats was forced to increase his price of ground chuck by nearly 30 cents because of a spike in cattle prices this month.
“I tried to ride it through as long as I could, but I can’t lose money,” Dobbels said. “This is the highest the prices have ever been.”
Dobbels is right: the five-area steer price reached its highest point Jan. 22 at $148 per 100 pounds, according to the United States Department of Agriculture.
“We saw prices begin to move up in the fourth quarter [of 2013],” said Shayle Shagam, livestock analyst for the USDA. “Then we saw the really sharp increases in January.”
The price jump is because of a combination of factors, but the weather is certainly to blame.
Eleven states – including major cattle producers Texas, Oklahoma and California – were recently declared disaster areas. The suffocating drought in the west coupled with the deep freeze in the Midwest has shrunk the overall cattle inventory to its lowest point in 63 years. The USDA released the first cattle inventory report of the year last week detailing the decline.
“We are looking at a very, very small cattle inventory,” Shagam said. “But the herd has actually been shrinking since about 2007.”
As of Jan. 31, there were 87.7 million head of cattle in the U.S., which is about 2 million head lower than last January’s herd, according to the USDA.
Shagam said drought – which has plagued the western U.S. for the last three years – forced several livestock owners to send their cattle to slaughter earlier because they did not have grass for them to graze.
Ranchers also sent more of their calves to feedlots during the last few years, which is hurting this year’s supply.
“The supply going into feedlots in 2014 will be smaller than it was last year,” Shagam said. “Fewer animals going in means fewer animals coming out and a tighter supply of beef in general.”
Icy roads in the Midwest also contributed to the price jump as the flow of beef from feedlots to packers has been disrupted. Shagam said meat packers often pass on the added transportation costs to business owners, like Dobbels.
“The packers can pretty much charge whatever they want as far as meat because we got to have it,” Dobbels said. “That drives up the price on my end.”
Consumers buying beef at the supermarket will not see a steep increase in the price of beef just yet, but should expect prices this year to be higher than 2013.
“We are looking at increasingly tight beef supplies moving forward,” Shagam said. “We’re expecting beef prices in 2014 to average more than they did in 2013.”
Dobbels said he expects major retailers and supermarkets to keep their prices relatively the same, even though it means taking a hit financially, just to keep customers coming through the door.
“They can afford to take that hit because they have other products,” Dobbels said. “I can’t.”
For some cattle farmers, like Mark Wills of Mazon who has 20 head of cattle, the price increase could be a bit of good news when they go to sell their livestock this fall.
“It’s good news for me to get that kind of price,” Wills said