Cattle prices sizzle; beef may soon follow

By Tom Lutey
 Billings Gazette, Mont.
 At Bob Hanson's feedlot, supply and demand, the grease that keeps the economy rolling, is known as askin' and gettin'.
And lately, with cattle prices at a two-year high, the askin' has been pretty good.
  "I have six buyers constantly calling me now. Last year I had two and only one would give me a bid," said Hanson, who raises cattle near White Sulphur Springs. "There's askin' and gettin' and sometimes the gettin' is pretty tough."
   Beef is becoming a bright spot again in agriculture. Prices for live cattle have been creeping up since early November and hit their highest point in 15 months last week. Prices for feeder cattle less than 700 pounds locally range from $102 to $131 per hundredweight.
    Grocery store prices for beef are lagging behind, but still steadily increasing.
   Industry insiders say recession-minded shoppers, who turned to cheaper protein sources as the economy soured, are buying beef again. Foreign markets are improving. At the same time, there are also fewer cattle being prepared for slaughter, according to the U.S. Department of Agriculture. The USDA reported last week that the number of cattle in feedlots fell to a seven-year low in January.
"There's been some strengthening in beef exports. That's really a good sign," said Gary Brester, Montana State University agriculture economist. "In the bigger picture, our total cattle inventory is down by almost a million."
   Ranchers should consider locking in a fall price through the futures market now, Brester said. Futures for November, when the majority of Montana's feeder cattle head to market are trading for $102 to $106 per hundredweight. The price is a good sign of where speculators think beef demand will be by year's end.
     The number of cattle available for feedlots locally has declined in the past few years, said Rob Cook, of Public Auction Yards in Billings. When prices were hot for other commodities, like wheat, a few years ago, producers who raised crops and cattle followed the money.
  "It's basically supply and demand. There's an awful lot of demand for feeder cattle and fat cattle. Fat cattle prices are in the 90s right now," Cook said.
  Anecdotally, Hanson, the current president of the Montana Farm Bureau Federation, said he noticed that restaurant demand for beef seemed to be increasing when he was in Billings last week for the Montana Agri-Trade Exposition show.
   And, compared to last year, traffic at higher-end restaurants serving beef seemed brisk.
   The restaurant business, a key market for beef, has struggled the past two years as recession-scarred consumers stayed home for dinner. Publicly traded restaurants, like Ruth's Chris Steakhouse, reported sales losses of more than 11 percent in 2009. Even midpriced restaurants, like Red Robin, reported sales slumps of more than 10 percent at locations open at least a year.
   At The Rex restaurant in downtown Billings, weekend traaffic has been steady for several months, but weekday traffic has flattened, said owner Gene Burgad.
  The Rex is all about steak, and Burgad has cut menu prices to reflect what his own beef costs have been in the past year.
  Ribeye steaks were recently reduced $3 on the menu to $32.95. But the restaurant also installed a smoker, which boosted its selection of menu items priced below $14, a menu range expected to grow in popularity with price-conscious customers.
  "Summer will tell the tale, I think," Burgad said. "Once we open the patio and go from a 200-seat restaurant to a 450-seat restaurant."
  Retail prices for beef are fairly flat. Ground beef prices have jumped 23 cents a pound since November, according to a USDA pricing report released Tuesday. Some steak cuts are still declining in price, indicating soft demand.
  At the Meat and Poultry Palace, retail prices for steak haven't followed the pricing trend for live cattle, said owner Gary Pollock. Prices for those more expensive cuts probably won't increase until the weather improves and barbecues start firing up.
   "Where we're seeing an upward trend in price now is basically grinding meat, your cheaper cuts, because that's what people are buying right now," Pollack said. "It's winter time, and the trend is in that direction; roasts and hamburger are probably up a quarter."