Shivering cattle signal higher McDonald’s beef cost

South Pole

Frigid air covered much of the U.S. last week, with the morning temperature in Chicago on Jan. 7 lower than at the South Pole, while the Minnesota towns of Embarrass and Brimson were the coldest in the contiguous U.S. with readings of minus 35, the Weather Prediction Center in College Park, Maryland, reported.

Animals have a harder time generating enough heat to stay warm during cold weather, said Dustin Oedekoven, South Dakota’s state veterinarian. If cattle use energy for heat, that takes away from the calories used to put on weight.

Limited Impact

The impact of last week’s freeze may be limited because extra feed use is standard for livestock operations during winter months, and “overall, it’s not a detriment,” said Harry Knobbe, who farms and feeds cattle in West Point, Nebraska. Cattlemen across the Midwest prepare by bringing animals to winter pastures where there are more natural or man-made shelters from the wind, with some closer to barns, which makes it easier to feed the extra rations.

As temperatures warm back up, animals will get their appetite back and gain weight faster, said Arlan Suderman, a senior market analyst in Wichita, Kansas, for Water Street Solutions Inc.

While herds are shrinking, so is U.S. beef demand. Per-capita consumption of the meat may shrink to 53.6 pounds this year, the lowest since at least 1970, the government has projected. Higher grocery bills may be prompting consumers to choose cheaper alternatives, said Dick Quiter, an account executive at McFarland Commodities LLC in Chicago.

Retail ground-beef averaged $3.477 a pound in November, after climbing in September to $3.502, the highest since at least 1984, the latest data from the Bureau of Labor Statistics show. Whole chickens fetched $1.518 a pound in November, while pork chops sold for $3.681 a pound. Per-capita chicken demand may jump 2.8% to 83.7 pounds this year as pork consumption rises 0.2% to 47 pounds, the USDA predicts.

“It’s still a bargain to buy pork and chicken compared to beef,” Quiter said. “I just can’t imagine that we can keep these kinds of prices for long at that kind of a disparity.”

Fewer Cattle

The number of cattle in American feedlots was the second-lowest on record on Dec. 1, government data showed. While corn (CBOT:CH14) dropped 49% since reaching a record $8.49 a bushel in August 2012, prices are still 25% higher than the average of the past two decades. Use of the grain in livestock feed will jump 22% this year, the USDA forecasts.

Even as domestic beef demand drops, global consumption this year will be the highest since 2008 as higher incomes allow people in emerging economies to afford more protein, according to the USDA. U.S. exports totaled 2.36 billion pounds in the 11 months through Nov. 30, up 4.4% from the same period a year earlier, according to the latest government data. Japan, Canada and Mexico were the biggest buyers.

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