In what may be a good indication of the nascent economic recovery, this year’s Fourth of July barbecue is shaping up to be the most expensive ever.
Days before America’s favorite grilling holiday, the price of retail ground beef has sailed to an all-time high of nearly $4 per pound, according to the Bureau of Labor Statistics; sirloin steak, another popular, but more expensive, cut, is setting its own record at about $7.60.
The price spikes come as U.S. unemployment numbers are improving, the economy is growing and consumer confidence is such that even a beef-cattle shortage that has nosed up retail costs hasn’t meaningfully hurt demand.
“I think that we have kind of underestimated the U.S. economy,” said Joe Hofmeyer, a market analyst at Inver Grove Heights, Minnesota-based CHS Hedging, a unit of farming cooperative CHS, which advises farmers and other commodity producers on how to curb their exposure to changing agricultural prices. “We now have unemployment that’s the lowest prior to the recession, and that’s allowing us to have a consumer that can take this on.”
That notion, Hofmeyer added, is “the only way I can explain” the continued demand for beef, which is typically the most expensive protein source on the market, in the face of record prices.
Analysts say that the demand for beef usually tapers off by summertime, with consumers switching from the costlier cuts of steak they favor earlier in the year to cheaper ground beef, and even to red meat alternatives like chicken and pork. But that hasn’t been the case at the beginning of this July, by which point most supermarkets have already stocked up on Independence Day fare.
Flush demand is playing out in the futures contract markets too, where some agricultural commodities have been on a tear.
Coffee futures were up about 54 percent through July 1, driven by drought conditions in Brazil, an important producer, and a fungus plaguing certain Central American growers. In response to rising current prices, supermarket suppliers like J.M. Smucker recently raised packaged-coffee prices.
Lean hogs, which have been buffeted by a devastating pig virus, are up 53 percent thanks to limited supplies—a scenario that may be contributing to the robust beef demand playing out now as feeder cattle, a key beef-contract market, have rallied 29 percent.
Futures market prices are now motivating cattle farmers and ranchers to find ways to amp up supplies, say market watchers—even though there’s typically a lag of at least 18 months between the decision to breed calves and their readiness for slaughter. That means that as the market prepares for the third quarter, there could be an even slimmer supply of beef available.
“The cow-calf person is sitting in the catbird seat,” said Don Roose, president of agricultural research and risk management firm U.S. Commodities in West Des Moines, Iowa. “Because he is the one who has the calf that actually turns into beef.”