Beef-Buying Koreans Fuel Record Meat Rally in U.S. Groceries

Food shoppers in South Korea, Mexico and Japan are fueling a surge in U.S. beef prices just as demand is set to reach a seasonal peak this month and retailers including Sam’s Club promote the meat in stores.

Retail beef rose to a record $4.453 a pound in April, up 11 percent from a year earlier, after all-time highs the previous four months, the U.S. Department of Agriculture said today. Supplies have tightened as South Korea tripled imports of U.S. beef in the first quarter from a year earlier, and Japan’s purchases rose 63 percent, data show.

Costs are gaining at a time when consumers usually boost purchases by 25 percent from April 1 to the end of May, when warmer weather encourages grilling outdoors, the National Cattlemen’s Beef Association said, citing data from FreshLook Marketing Group LLC. The three-day weekend that includes the Memorial Day holiday on May 30 this year is usually the busiest for sales, the Livestock Marketing Information Center estimates.

“We’re probably going to have records in each of the first six months of 2011,” said Ron Plain, a livestock economist at the University of Missouri in Columbia who has been studying the industry for three decades. “It’s a tight meat supply and especially tight beef supply, and so we’ve got record prices.”

Meat prices are forecast to rise faster than overall U.S. food costs, which the USDA says may jump as much as 4 percent this year, the most since 2008. Global food costs rose in April for the ninth time in 10 months, including an all-time high in February, according to the United Nations.

Tightening Supply

Per-capita supplies of U.S. beef may drop 4.1 percent in 2012, after the domestic cattle herd on Jan. 1 was the smallest for that date since 1958, USDA data show.

U.S. exporters shipped 633.3 million pounds (287.3 million kilograms) of beef in the first three months of 2011, up 32 percent from the same period a year ago, the latest government data show.

South Korea is the biggest buyer, after the nation’s worst outbreak of foot-and-mouth disease curbed meat supplies, according to the USDA. Mexico ranks second, followed by Japan, which boosted purchases after a nuclear disaster sparked concern that domestic food supplies were unsafe.

“We’ve had the tight supply situation, and we’ve had very strong export demand, which has further supported the price side,” said Erica Rosa, an economist at the Livestock Marketing Information Center in Denver.

Cattle Futures

Cattle futures reached a record $1.21625 a pound on April 4, and prices are up 17 percent in the past year. Cattle for August delivery fell 0.8 percent to settle at $1.1055 today on the Chicago Mercantile Exchange. On April 5, wholesale beef sold by meat processors reached $1.9196 a pound, the highest since at least 2004.

Rising costs may discourage purchases of higher-priced cuts in favor of ground beef or other meats, including chicken or pork, said Trevor Amen, marketing manager at the National Cattlemen’s Beef Association in Denver. U.S. shoppers may pay as much as 8 percent more for beef this year, while poultry may increase 3.5 percent, the government has forecast.

“Consumers tend to, within the beef category, trade down to the mid-price to lower-priced items, and ground demand has been very strong,” Amen said. “They’re either trading down or they’re trading out to other commodities. What we see retailers doing is featuring less beef and featuring more of those lower- priced items, and chicken, pork and maybe even produce, to remain competitive.”

Consumers May Balk

There are signs that consumers are balking at the higher prices. Retail sales of beef fell 4.2 percent in the 52 weeks ended March 27, as average prices jumped 7.4 percent, Amen said, citing sales data compiled by Hoffman Estates, Illinois-based FreshLook.

To help spur sales, retailers can offer smaller portions to reduce the cost per package, or reduce prices for bulk purchases and include labels instructing consumers how to cut the meat into steaks and roasts, according to the NCBA.

Grocers including Sam’s Club, a unit of Bentonville, Arkansas-based Wal-Mart Stores Inc. (WMT), the world’s largest retailer, have increased promotions of cheaper bulk purchases as meat rose during the past year, said Abel Pulido, who is responsible for beef buying for all Sam’s Clubs in the U.S. that have fresh-meat departments.

“As the economy is tight, there is some savings out there,” Pulido said. “You just have to be willing and know that you’re buying more weight at a lower price per pound.”

At Sam’s, a pack of four tenderloin steaks, a high-value cut of meat, sells for about $10.88 to $11.88 a pound, while an eight-to-12-steak package costs $8.88 to $9.88 a pound. A case of the meat, typically 70 pounds to 75 pounds and targeted at buyers for restaurants, the price is $8.50 to $8.70 a pound.

The USDA’s average beef price is a composite that includes choice beef, other beef and hamburger values. In today’s report, the department lowered its estimate of the average price for March to $4.44.

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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