High stakes for beef producers in state
LANSING — A decade ago, it was common for people in Michigan to pull a couple of juicy steaks off the grill and enjoy dinner outside with a glass of wine and good company.
This year is a different story. As the recession set in, consumers began shying away from expensive steaks, purchasing lower-priced meats, such as ground beef.
“Steaks have been hard to sell the past three or four months. Very hard,” said Robin Leonard, owner of the organic Garden Patch Farm in Pinckney. “Those who were buying steaks are going for the lower cuts now.”
Purdue University agricultural economist Chris Hurt said livestock producers were hit with a “double whammy” in 2008: the recession and high feed costs.
“We’re going to see another year of struggle for the livestock industry,” he said.
Hurt said feed prices will decrease in 2009, but the recession will continue to dampen demand.
Michigan had about 1,060,000 head of cattle at the start of 2007 and about 1,070,000 at the start of 2008, according to the National Agricultural Statistics Service. There were also about 375,000 calves at the start of each year.
In 2008, the 10 counties with the most cattle were Huron, Sanilac, Allegan, Clinton, Ottawa, Ionia, Gratiot, Kent, Lenawee and Isabella.
Michigan Cattleman’s Association Allegan County representative Carl VanderKolk said he hasn’t seen any dramatic changes in beef sales, but more expensive steaks sales have declined slightly.
“The sales for prime cuts are down a little bit,” he said. “There’s more demand for lower priced cuts and ground beef.”
Michigan State University agricultural economics Professor Glynn Tonsor predicts another year of “red ink” for the beef and pork industry.
“For both the beef and pork industries, 2008 was a historically unprofitable year,” he said.
Feed costs, particularly corn and soybean meal, rose last year. Without corresponding rises in animal and meat prices, producers suffered financial losses.
As an example, Tonsor said total costs of producing a market hog sold in December 2008 was about $150 per head, compared to about $110 for a hog sold in December 2007. Similarly, a cattle feedlot operator incurred production costs of about $1,150 per steer sold in December 2007, but $1,300 for one sold last December.
It’s not been easy for producers to respond quickly to changes in demand. “Feeding animals is a multi-month process, initiated months and years prior to the sale of market livestock, making it difficult for producers to quickly alter their output supplies,” Tonsor said.
Moreover, Tonsor said, producers depend on feed grains and are exposed to weather risks. The price and availability of common feeds such as corn and soybean meal depend upon weather.
Tonsor said that research shows consumers’ income is directly related to the kind of beef and pork they buy, and “beef is more sensitive.”
Sellers can expect higher ground beef and poultry sales in 2009, he said.
However, VanderKolk said the decline in demand for steak and beef might not be so dramatic in the coming year.
“Steak is still healthy and still a good value for the money,” he said. “When people go out, they still want a steak for dinner. It tastes the best.”
Leonard said amidst the recession and low beef sales, sales of poultry and vegetables from Garden Patch Farm have been relatively steady, and some regular customers are switching from high-cut steaks to cheaper meats.
“What can I say?” she said. “It hurts.”