Stockyard prices hit record high; increaseat store expected
By Andy Ostmeyer
Globe Staff Writer
Gary Wampler remembers when the sale of 10 steers would buy a new pickup truck. It was 1970.
"I'd say today it would take 30 to buy a plain-Jane pickup," said Wampler, of Carthage, who calls himself a "small cow-calf operator." He was on hand Wednesday at the cow and bull sale at the Joplin Regional Stockyards.
It was Wampler's way of pointing out that cattle prices have been low for a long time.
But those days may have gone the way of the open range. Cattle prices, which have been climbing for months, recently spiked to new records at the Joplin stockyards.
The reasons are many, but most can agree on one thing: Expect the price of beef in grocery stores and restaurants to follow.
"That is when we really see if this is sustainable," said Steve Owens, one of the owners of the stockyards, located east of Carthage, just off Interstate 44.
Already, some stores and restaurants have taken a hit.
Shaun Cooper, manager of Babe's Drive-In on North Main Street, said he saw a price hike a couple of months ago.
"We were paying $1.19 a pound, and they raised it to $1.49 per pound," he said of his suppliers. The drive-in uses 150 pounds of ground beef every day, he said.
"We haven't passed it on yet, but it's kicking our butts," he added. He said his suppliers have promised to try and hold the line, and that they recently told him prices may be sliding back.
According to the U.S. Department of Agriculture, for the week ending Oct. 17, the wholesale price of choice boxed beef (which is what packers charge grocery stores) was around $1.95 a pound, compared with $1.10 a year ago.
But even when boxed-beef prices were $1.10 to $1.40 a pound, the average for all cuts at the grocery store was still around $3 a pound, said Owens. That meant that for every $1 of cow cost, packers and stores were adding, and making, up to $2 more.
"There have been some tremendous margins," Owens said.
Two weeks ago, feeder cattle at the stockyards went up by 20 cents to 50 cents a pound, which set records for the local business.
"It has backed down some, but they are still historically high," said Owens.
In the past three weeks, more than 21,000 cattle moved through the Joplin Regional Stockyards during its Monday feeder cattle sales, compared with 16,000 cattle for the same period a year ago.
"Everybody has just been selling, selling, selling," said Jackie Moore, a co-owner of the stockyards.
"They are selling their replacement heifers," he said, which means there will be fewer cattle in the future.
"It's going to get tighter before it gets better," Moore said of the market, "which is good. These cattle have been too cheap for a long time."
On the rise
During Monday's feeder cattle sale at the stockyards, Gary Helton, of Carl Junction, interpreted the rapid-fire speech of the auctioneer for a greenhorn.
"Started out at 85," he said, as he watched the price on a lot of cattle climb to 92 cents a pound. "It's probably about 10 to 12 cents higher than it was a year ago.
"They've had a good sale ever since the middle of August."
While the auctioneer raced forward, Helton ticked off several factors for the rising prices:
"A lot of it is that Canada deal."
"The last couple of years, they've been having to sell a lot of cattle off ... water and pasture," a reference to drought conditions in parts of the country.
"I think there is a lot more demand for beef now than there was a few years ago."
All of those reasons make sense to Jim Mintert, a professor of agricultural economics at Kansas State University in Manhattan.
"That Canada deal" was the discovery of a case of mad cow disease in Alberta that resulted in a ban on importing Canadian cattle into the United States earlier this spring. Mad cow is a brain infection that kills cows and can be fatal to people who eat infected beef.
The aggregate impact of the ban on Canadian beef - boxed as well as live cattle - was a tightening of the market between 5 percent and 7 percent, according to Mintert. He said that may not sound like a lot, but every 1 percent change in supply can results in a 2 percent change in price.
"That was the initial shock and set events in motion," he said.
Other countries, such as Japan, also halted imports of Canadian beef and turned to other markets, such as the United States and Argentina.
According to the USDA, exports from the United States were up 7 percent in July and 3 percent in August when compared with figures for the previous year.
"U.S. consumers are facing supplies in the grocery stores 15 percent smaller than last year," Mintert said. Under his formula, that's 30 cents more per pound.
That came on top of drought conditions in places such as Texas and Oklahoma over the past couple of years that had some cattlemen selling their herds for lack of good pasture and water.
Market for beef
Then there's all that positive reaction to the protein-heavy Atkins Diet, as well as other nutritional studies that found that beef isn't quite the nutritional black-hat villain it used to be.
"People finally got the idea that beef isn't just OK, it's good for you," said Steve Taylor, executive director of the Missouri Beef Industry Council.
What's more, meatpackers such as Tyson Foods and Swift and Co. have developed and are marketing ready-to-eat beef products similar to what Tyson did with chicken, with nuke-and-serve patties and nuggets.
"The category (of heat-and-serve beef products, which didn't exist a few years ago) has grown 5 to 10 percent per year for the last five years," said Taylor.
Along with precooked meatloaf and steak fajita strips, Tyson now offers a roast that can be prepared in record time, and sells for $6 to $8.
"It basically can be taken from the refrigerator to the dinner plate in six minutes," said Ed Nicholson, spokesman for Springdale, Ark.-based Tyson Foods.
Mintert, with Kansas State, said that in the past few weeks, live weight prices in Kansas have averaged 49 percent higher than year-ago prices.
Consumers haven't seen comparable increases yet at the grocery store, and some cattlemen speculate that packers such as Tyson, as well as retail outlets, are sacrificing their margins temporarily, but it won't last long.
"The reason it hasn't been passed on is that a lot of retailers fear they will lose market share," said Mintert. "It's kind of a game of chicken. What we're going to see is those prices come up in the next 30 or 60 days."
How much prices will rise at the retail level depends on consumers, he said, but look for fewer sales and specials of everything from ground beef to filet mignon.
"The emphasis is going to be on pork and poultry," Mintert said.
Larry Gay, a buyer for Swift and Co., stepped out of the Joplin Regional Stockyards auction for a few minutes Wednesday to have a smoke. Prices already are rising, he said. He said his wife had been paying $7.99 for a rib-eye that recently cost $10.99. He doesn't look for a break anytime soon in cattle prices.
"I think the prices we're seeing will be stable through the first of the year," he said.
Stockyard prices hit record high; increaseat store expected