Bloomberg News

Cattle Rise to Record on Climbing Beef Demand Amid Tight Supply

November 04, 2011

Nov. 3 (Bloomberg) -- Cattle futures rose to a record on signs that domestic and export demand for U.S. beef is rising as supplies tighten, signaling higher costs for restaurant chains including Chipotle Mexican Grill Inc. and Texas Roadhouse Inc.

The U.S. cattle herd as of July 1 was the lowest for that date since at least 1973, and retail-beef costs reached an all- time high in August, the latest government data show. Japan may ease restrictions soon on U.S. meat imports.

Beef prices are “skyrocketing,” Julia Stewart, the chief executive officer of DineEquity Inc., the owner of the Applebee’s restaurant chain, said today on a conference call with analysts.

Cattle futures for December delivery rose 2 percent to close at $1.245 a pound at 1 p.m. on the Chicago Mercantile Exchange. After the settlement, the most-active contract climbed to a record $1.2485.

U.S. shoppers may pay as much as 9 percent more for beef this year, the government has projected. That increase is more than any other food group.

“There’s a shortage of choice-grading beef,” Troy Vetterkind, the owner of Vetterkind Cattle Brokerage in Chicago, said in a telephone interview. “There’s some holiday beef buying now, and meatpackers are having a hard time finding the cattle to grade. That’s what’s driving the market.”

On Oct. 31, wholesale choice beef reached $1.8823 a pound, the highest since April, government data show. The retail average climbed to $4.48 a pound in August.

Feed Costs

Texas Roadhouse said on Nov. 1 that that meat costs will account for 75 percent of its projected food-inflation rate of 7 percent to 9 percent next year. Chipotle, with more than 1,100 restaurants, said on Oct. 25 that higher beef prices in the third quarter were spurred mostly by rising livestock-feed expenses.

Corn, the main ingredient in feed, has climbed 12 percent in the past year, reaching a record $7.9975 a bushel in Chicago futures trading on June 10.

Cattle prices have climbed 15 percent this year, partly because of increasing export demand for U.S. beef. By April, Japan may ease its policy on limiting beef imports to cattle age 20 months or younger, U.S. Meat Export Federation Chief Executive Officer Philip Seng said today on a conference call with reporters. Japan’s health ministry said this week that restrictions imposed since 2003 to safeguard against mad cow disease should be relaxed.

Japan, the third-largest buyer of U.S. beef last year, purchased 311.3 million pounds (141,183 metric tons) of U.S. beef in the eight months ended Aug. 31, up 38 percent from a year earlier, U.S. Department of Agriculture data show.

There’s “a lot of anticipation that exports are going to increase, particularly to Japan, after they raise the maximum age on cattle from 20 months to 30,” Walt Hackney, the owner of Hackney Ag in Omaha, Nebraska, said in a telephone interview. “It’s been more anticipation than reality.”

--With assistance from Aya Takada in Tokyo. Editors: Patrick McKiernan, Daniel Enoch

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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