Meat prices set to skyrocket
A dwindling supply of corn has caused farmers to cut herd sizes. Meat prices are responding.
Got a big freezer? Might be time to stock up on meat.
Bloomberg reports that U.S. meat prices may hit record highs this summer, now that farmers have cut their herd sizes to the smallest in decades.
Already, prices are climbing. Wholesale pork saw a 25% increase last week to nearly 91 cents a pound. Beef is up to $1.69 a pound -- the highest price in nearly two years. In March, chicken had the biggest gain in 20 months.
Prices are pushing up because of the classic combination of not enough supply and growing demand. The economy is marching upward, offering new jobs and more money.
But at the same time, the price of corn has doubled since former President George W. Bush set targets for higher ethanol usage, Bloomberg reports. More corn than ever is being used to make ethanol, leaving farmers in a bind when it comes to feeding their animals. Thus the smaller herd sizes.
Meat-industry analysts say the summer grilling season is going to push demand even further, and meat prices could hit record highs over the next three months.
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Keep in mind that these are wholesale prices, not the marked-up prices you see at the grocery store.
Who are the winners and losers here? Clear winners are livestock producers such as Smithfield Foods (SFD). The company has already estimated that its hog-rearing unit will be profitable for the first time in years, Bloomberg reports.
In the loser category are grocery stores, which may end up taking some hits to try to keep meat prices competitive. Some of them might eat the price increases to keep meat sales steady.
Another winner might be the American consumer. Researchers have said for years that we eat too much meat, and that doing so increases the risk of cancer and other ailments. Cutting back on meat, for many of us at least, isn't that bad of an idea.
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Investors expect the report to show some weakness, and are cautious ahead of the long holiday weekend.
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