Holy cow, Batman! Seen the price of beef lately?

When The Motley Monk eats beef---which isn't all that often---he sure likes his beef...rare.  For example, he had an excellent filet with a merlot reduction last night at a sumptuous dinner hosted for the economist, Dr. Walter E. Williams.

Sumptuous!

With that meal in mind, The Motley Monk read an Associated Press report this morning stating that the price of beef could climb as much as 10% in 2012 and 2013.  Worse yet, the increase could be higher if international demand increases.

The price of beef has been steadily increasing, even though the Obama administration says there is no "discernable" inflation.  To wit: the average retail cost of a pound of hamburger rose from $2.38 in December 2010 to $2.92 in December 11 (that's a 23% increase).

The problem?

No, it's not former-President George W. Bush's fault, although the source of the problem is very close to his home.

The problem is the smallest U.S. cattle herd since the 1950s.

The herd had declined in Jannuary 2012 to 90.8M cattle, 2% less than January 2011.  That's the lowest inventory since 1952, when there were 88.1 cattle.

Where's the beef?

In Texas, which is the nation's leading cattle producer, drought has dried up pastures, leaving ranchers having to their cattle or pay top-dollar for feed.  With 1.4M fewer cattle in Texas in January 2012 compared with January 2011, this accounts for ~74% of the decrease in the number of cattle nationally.

The Motley Monk would note that this is a classic supply and demand issue.  With less beef being produced (which should make the PETA people very happy), beef prices will go up (which will make beef consumers very unhappy).

Behind all of this, however, is what has been forcing ranchers to sell more cattle in recent years, namely, increased costs for feed, fuel, and other expenses to bring beef to market.  In particular, feed costs have skyrocketed as the Obama administration demanded that more corn be raised to produce ethanol and to meet a growing export market.

Here's the beef!

Expansion and contraction...the stuff of economics.  However, in this instance, the market is not free in that the Obama administration is fiddling with it by issuing regulations and mandates.  And beef lovers have be paying handsomely for it over the past two years and will be paying even more handsomely for it over the next three years.

Just track the price of a McDonalds quarter pounder with cheese meal during the past two years?  Given current trends, it could cost $9 in 2013!

How's all of that "hope and change" feeling these days?


Let the discussion begin...


To read the Associated Press report, click on the following link:
http://cnsnews.com/news/article/beef-prices-expected-climb-next-2-years