A Shrinking Meat Supply
As Agweb informs us, fears shrinking meat supplies have sent both the prices for cattle and hogs into the stratosphere recently:
“Cattle futures rose to a record as ranchers struggle to boost the U.S. herd from a 63-year low, and hogs climbed to a 34-month high after a virus that kills piglets spread, spurring concerns that meat supplies will shrink.
Beef output in the U.S., the world’s top producer, will fall 5.3 percent this year to 24.35 billion pounds, the lowest since 1994, the Department of Agriculture has forecast. At the start of this year, the cattle herd fell to 87.7 million head, the lowest since 1951, following drought and high feed costs. Porcine epidemic virus has killed more than 4 million pigs, according to an industry group.
This month, the USDA lowered its 2014 forecast for red-meat production and boosted the outlook for cattle and hog costs. Higher meat prices will raise expenses for retailers, while grocery shoppers will pay as much as 3.5 percent more for meat this year, compared with a 1.2 percent increase in 2013, the government projects.
“Total beef production is going to be down, and that’s one of the few commodities that we’re projected to see the supplies tighten this next year,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “In hogs and the cattle, the supplies are expected to continue to stay tight all the way into the spring. Funds are piling into the long side.”
There can be no doubt of course that concerns about tighter supplies have strongly supported the recent rally in prices. And yet, this is certainly not the first time that parts of the food industry were plagued with supply concerns. Events like those described above, such as droughts and illnesses befalling herds happen quite frequently. So we are left to wonder whether prices would have also attained the truly dizzying heights recently recorded in the absence of money printing by the central bank. We would suggest the answer to this question is clearly no.
