Higher feed costs may mean higher meat prices in 2013

Consumers expected to switch to cheaper meat sources as prices rise

Higher animal feed costs due to the U.S. drought that ruined crops and continues to cause challenges for farmers could mean high global meat prices into 2013 as producers struggle to regain profits, according to a Reuters report.

So far, farmers have tried to control costs by scaling back production — pig producers, for example, slaughtered their breeding sows, temporarily increasing the amount of meat on the market but creating a drop that won’t be felt until 2013. ”If you take a breeding pig out of the system now it takes around nine months before there is any impact on the level of slaughtering because of the lifespan of a pig,” said Stephen Howarth, analyst for Britain’s Agriculture and Horticulture Development BoardBritish Pig Executive. Retail prices for pork and beef in the U.S. are stable at the moment, but according to analysts retailers will eventually be forced to pass on rising costs to consumers when supplies get tighter. ”Because there is no immediate drop-off in production, you don’t tend to get much of a price reaction in the short term,” said Howarth. “It can feed through into a bigger price reaction further down the line.”

As prices rise, say experts, consumers are expected to switch to cheaper meats. ”For 2013, we may see a little bit more substitution by consumers away from beef and towards chicken and pork because we’ll see record high price levels across most categories, especially for beef,” said Jim Robb, director of the Livestock Information Center in Colorado.

The Livestock Marketing Information Center has forecast 2013 U.S. beef production at 24.8 billion pounds, the lowest since 2005, and 23.6 billion for 2014, its lowest since 1993. Livestock economist Chris Hurt of the University of Purdue said the U.S. hog industry should begin to see a reduction in pork supply about May or June 2013, and Howarth said European Union pork production should decline by at least 2 percent in 2013.