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Kay’s Cuts: Hot dogs and dreadful drought

Steve Kay, 07/04/2015

Steve Kay 1 (2)A monthly column prepared exclusively for Beef Central by US beef industry commentator, Steve Kay, publisher of US Cattle Buyers Weekly.

 

 

 

 

 

 

 

 

THOSE of you who have visited New York City’s iconic Empire State Building might know that it stands 1,250 feet tall. You wouldn’t know though that baseball fans in America each year scoff down enough hot dogs to reach as high as 7,827 Empire State Buildings.

Hot dogs are the quintessential ballpark food, and the National Hot Dog and Sausage Council estimates that baseball fans will consume more than 18.5 million hot dogs and nearly 4.2 million sausages during the 2015 Major League season, which has just begun.

Both items are eaten year-round, of course, but the baseball season is a crucial profit centre for manufacturers and the wider meat industry.

Baseball fans don’t just eat hot dogs or sausages though. San Francisco’s lovely AT&T Park on the bay has an excellent carvery just up from where I sit and watch the SF Giants play.

The carvery offers a brisket, roast or corned beef sandwich. All are delicious and are a reminder just how important beef sales even in ball-parks are to the beef industry, and that people love eating beef. Even at US$10 (A$13) a sandwich, a long line of people is usually in front of the carvery.

Beef sales, though, will lose out to other meats this season and the rest of the year because of price. That’s been the theme since last September and is being accentuated almost every week, as I noted in last month’s column.

US wholesale beef prices continue to be historically high relative to pork. On April 6, the price spread between the USDA Choice grade beef cutout and the fresh pork cutout was US$191.87 per cwt.

The contrast at retail is just as great, with retail beef prices in February hitting a new record high. USDA’s All Fresh series averaged $6.03 per pound (A$17.45/kg), up from US$5.99/lb in January and up 14.4pc from February last year. In contrast, pork prices averaged US$3.94/lb, up 5.6pc from last year, while chicken prices averaged US$1.98/lb, up 1.5pc.

As much as Americans love beef, it’s impossible for them to ignore these much cheaper options, and they won’t.

Pork will get even cheaper as there are a lot more hogs to come to market than last year.

The first quarter saw US beef production down an estimated 5pc on last year while pork production was up 4.9pc. Beef’s sales struggles meant that by the end of last week, total cattle slaughter was 566,000 head or 7.3pc below the same period last year. In contrast, hog slaughter was up 1.297 million head or 4.5pc.

The plethora of cheap pork on the market is a boon for hot dog manufacturers and others.

In contrast, beef processing companies can’t get enough for the beef to offset extremely high prices for grainfed cattle. They paid $167 per cwt for cattle last week, which was just over $4 shy of the record $171.38/cwt set the week of November 29 last year.

That’s why the start of the grilling season is so important. The entire beef industry, not just packers, hope that warm spring weather will encourage people to fire-up their grills earlier than normal.

One positive is that Easter was early and is now behind the market. Retailers will focus on featuring beef all the way to the Memorial Day holiday weekend at the end of May. Pork and chicken might at last take a back seat to beef in their ads. But beef will not be featured as aggressively as in past years.

 

California’s drought enters fourth year

Meanwhile, California is in full drought crisis mode, with Governor Jerry Brown issuing a mandatory 25pc cut in water use. A massive 80pc of the water used by humans in California goes to agriculture. But this sector has already been forced to cut production so the mandatory cut doesn’t apply to it.

The drought though, now in its fourth year, shows no signs of breaking. The state’s farmers and growers fallowed 500,000 acres of land last year and are likely to add another 200,000 acres this year.

Most of the acres will be in the state’s Central Valley, which has 17pc of the irrigated land in the US and produces a quarter of the nation’s food.

The near-historic drought will continue to make it difficult for the state’s ranchers to keep their beef cow herds intact. Remarkably, the state’s beef cow numbers on January 1 were exactly the same as the year before – 600,000 head. Producers did an outstanding job in preserving precious pasture and water by selling calves early and moving their herds around.

Those calves went out of state to feedlots. Most of the pressure last year – and it will be worse this year – was on cattle in grassfed programs. Grass-fed beef’s popularity is on the rise in California, partly because some consumers think it is more ‘sustainable’.

The reality though is that it takes 226 more days for grass-finished cattle to reach market weight than grain-finished cattle. Compared to grassfed beef, grainfed beef (under American production systems) uses 76pc less water.

Drought, therefore, will force more consumers to eat grainfed beef, or turn to even more pork and chicken.

 

 

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  1. Terry Pointing, 08/04/2015

    With the A$ down by 20% and cattle up 20% that’s the dollar taken into the equation,referring to Kay’s comments where the hell is the rest of my money from the rise in demand ,especially US grassfed. Somewhere in this equation I suspect that someone else has their hand in my pocket. If I was into shares, which is only marginally more scary and demand goes up or down I get the fruits or consequences,but can’t abide by the drivel that fewer operators mean I’m going to be better off. I wish someone would give me credit for being only marginally educated.

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