High cost of beef crimps demand

Escalating beef prices have corporate giants McDonald’s and Tyson Foods backtracking in recent days.

And with the summer grilling season just days away, consumers wanting steaks and premium burgers will definitely pay a higher price at their meat market for those cuts, according to industry experts.

The U.S. Department of Agriculture said Friday (May 10) the price of wholesale beef hit an all-time high of $201.68 per 100 pounds. These record prices have forced fast food
titan McDonald’s to rethink its menu strategy.

McDonald’s said it will phase out its Angus burgers to focus on more value menu offerings, namely chicken. The Angus burgers costing between $4 and $5 were one of the more pricier items on McDonald’s menu.

The nation’s larger beef packer, Tyson Foods, said this past week that demand for its premium Angus cuts of meat were down in recent months as prices moved beyond consumers’ tolerance levels at home and abroad.

Tyson said it sold 3.9% less beef in the quarter that ended March 31 compared with a year ago. Its beef prices went up 6.5% over that same period, the company said. "Consumers," Tyson said in its quarterly report, "opted for the relative value of chicken."

McDonald's and other food service operators are trying to offset the higher cost of beef by promoting chicken-based products, something

Wholesale chicken prices have risen sharply in the past year as well. Georgia dock prices indicate boneless chicken breasts were priced at $1.65 per pound a year ago.

This week the wholesale breast price was $2.14. This cut retails for roughly $3 per pound fresh, which is still 66% cheaper than the all-beef retail price of $5 per pound this week.

Exports are an important part of beef industry economics as the U.S. cattle industry produces an excess supply of beef for its own population. Packers like Tyson get a premium price for beef products in other countries and much of the food service hamburger meat products consumed in the United States is imported from Mexico. Without premium export markets, packers are forced to scale back slaughter, which also decreases plant efficiencies.

Last week, the U.S. Meat Export Federation said March export volume for beef was down 7% from the prior year as 83.612 metric tons were shipped with a value of $440 million.

For the first quarter of this year beef export volumes slid 4%, but higher prices equated to $1.3 billion in value, up 5% from last year’s pace.

Tyson said export markets had been timid overall in the first quarter, led by a complete shut down in trade with Russia dating back to early February.

First quarter beef exports to Russia were down 87% from a year ago which totaled about $2.3 million in lost trade, according to USMEF.

Beef exports to former No. 1 market Mexico continue to struggle, with first-quarter results down 27% in volume, roughly $177.1 million in value. Mexico ranks second in export volume to Canada and third in value behind Canada and Japan.