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Published March 07, 2013, 03:11 PM

Steak: The new lobster?

Beef industry wonders if some consumers will balk at paying high prices.

By: Jonathan Knutson, Agweek

High corn prices, spring blizzards and lack of subsoil moisture aren’t the only things that concern area cattle producers right now.

Many in the cattle industry wonder if beef, especially higher-value cuts, is becoming too expensive for consumers.

“We don’t want to turn steak into lobster,” says Cory Eich, a Canova, S.D., cattle producer and president of his state’s Cattlemen’s Association.

A recent article in USA Today, which looked at how consumer demand is affected by high beef prices, drew national attention to the cattle industry’s concerns.

On average, retail beef prices are about $1 per pound higher today than in 2007, in part because the number of cattle in the United States is at the lowest level in six decades, according to the article.

Tight supplies of any product typically drive up its price, says Tim Petry, North Dakota State University Extension Service livestock economist.

When beef supplies are tight, as they are now, the market pushes up prices to ration its use. When there’s too much beef, the market pushes down prices to encourage people to buy more, thus reducing or eliminating the surplus, Petry says.

“That’s economics.”

Though beef prices continue to rise this spring, the size of the increase is slowing, says Trevor Amen, director of market intelligence for the National Cattlemen’s Beef Association in Denver.

“The expectation i, beef prices are not going to increase at a faster rate than other proteins and overall food inflation,” he says.

During the recession, some Americans “traded down” (switched to less expensive types of beef) or “traded out,” switching at least temporarily to other meats, he says.

Nonetheless, there are encouraging signs that demand for beef is rebounding, he says.

“Americans love beef,” Amen says. “They continue to pay higher prices for that high-quality product.”

Beef is sold at many different price levels, he says.

“The great thing about beef, there’s a lot of variety. There’s really an option for everybody’s budget,” he says.

The beef checkoff is helping to promote demand in a number of ways, including making it easier for consumers to buy beef in bulk at lower prices, Amen says.

The checkoff is a producer-funded marketing and research program designed to increase demand for beef.

Many factors in play

What Petry calls “a whole laundry list” of factors is combining to make beef less affordable or less attractive, or both, to some consumers so far this year.

Some of the factors are temporary. Others may not be. The list includes:

•Rising fuel prices.

•The 2 percent increase in payroll taxes, which leaves wag -earners with less take-home pay.

•A delay in issuing federal tax forms that pushes back the date many taxpayers can receive their refunds.

•Several major religious holidays, which affect the meat that some people eat, fall unusually on the calendar this year.

•Storms on the East Coast disrupted normal commerce there.

•U.S. budget problems raise concern about America’s economic future.

“By themselves, some of these things are not huge. When you put them together, they seem to restrict what consumers will spend” on higher-value cuts of beef, Petry says.

Improvement in the U.S. economy would strengthen demand for beef and ease concerns about its affordability, he says.

“More people working would help us out,” Petry says.

But he doubts concerns about beef’s affordability will end anytime soon.

“I don’t think it will be a quick fix,” he says.

Joe Martin, executive director of the Minnesota State Cattlemen’s Association, says high prices are “a good problem to have as a producer. But you balance that out. If we don’t have consumers able to afford our prices, it’s not a sustainable future.”

Errol Rice, executive vice president of the Montana Stockgrowers Association, says the issue is challenging and that he doesn’t have any simple solutions.

“We want to stay proactive and keep beef on the center plate for American consumers,” he says.