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Higher Beef Prices don't Translate to Higher Producer Price

by Mike Austin

If you just went by what beef is pricing at either the grocery store or restaurant you would think that the beef producer is having a pretty good year. However, you would be wrong. Those higher prices have helped to offset costs, but input costs are still challenging their profit margin.

Over the past two to three years cattle inventories have been depleted by liquidations due to the impact of drought. This year there had been hope to bring those numbers back. But as you just heard, high feed costs and poor pasture lands have limited any growth in inventory. Add to that the devastating impact of that early October blizzard in South Dakota and cattle numbers remain tight.

Next year may be a different story, but near term, few segments of the cattle industry are making any reasonable returns. The higher retail prices have also caused some pain at the check-out counter and as a result some consumer are looking to other protein alternatives to beef. This soft market demand hasn't been limited to just domestic markets either. Mexico, formerly a big buyer of U.S. beef continues to back off on purchases, pointing to the devaluation of the peso, higher beef prices and the availability of other less expensive protein options.

Because of our dairy industry and those animals ultimate trip into the beef market, beef interest in the state are concerned over consumer price resistance and how that negatively will  impact our states' growing beef market. Many people don't realize the impact of beef on the states ag economy. Even though this is the dairy state and beef farms are much smaller, Wisconsin actually has more beef operations than dairy.

So again, next time you're at the butcher shop or meat case, don't be fooled by the price. It's not providing a big pay day for beef producers.