How Rising Beef Prices will Impact the Economy and You

Bull in Field

In early January, I shared with you my concern about rising beef prices. Well, during the last several weeks, other observers have begun to express the same concern. I’ve seen countless articles echoing what I shared with you. It’s no wonder, since the U.S. Department of Agriculture reported the average retail price per pound for fresh beef in January was $5.04, the highest price ever on records that date back to 1987.

Time magazine ran the story “Beef: It’s What’s No Longer Affordable for Dinner” earlier this month, in which it pointed out that at the start of 2014, U.S. ranchers had 87.99 million head of cattle, the lowest total since 1951. The cause? Long periods of drought in California and Texas. The same piece went on to point out, just as I indicated to you in January, that rising beef prices will be hitting both you and restaurants during the next few years.

That situation tells me that before too long, we’ll either be seeing a round of price increases at companies like McDonald’s (MCD), Ruth’s Hospitality (RUTH), Red Robin Gourmet Burgers (RRGB), Del Frisco’s (DFRG) and others, or their profits and earnings will be hit. Of course, higher prices are likely to hit the revenue line. Either way, it’s not a good time for beef-heavy restaurant companies.

Add in another wrinkle — rising overseas demand for U.S. beef as emerging-market diets shift from rice and grain to protein-based food. “The growth of the middle class in developing countries probably has more to do with the increase in demand and related prices than anything else,” said Jeff Sindelar, an associate professor who studies the meat industry at the University of Wisconsin-Madison. That shift is adding more pressure on top of shrinking herds.

Exclusive  Is the United States the Global Economy's Comeback Kid?

Unfortunately, this reality is one of those instances where the cure — in the form of a larger supply of cows — is certain to create even more pain for consumers, at least in the short term. That’s because herd growth only happens when producers set aside more calves for breeding instead of selling them for slaughter. Essentially, the beef supply has to get smaller before it can get bigger.

Analysts expect that it will be several years before America’s cattle herds increase substantially in size. Until then, we should get used to the idea that beef prices will keep soaring, perhaps at a rate of 7-8% per year.

According to Ron Plain, an agricultural economist with the University of Missouri-Columbia, 2017 is a reasonable target in which we could see an expansion in the U.S. beef supply… if things go as planned. According to Plain, “If this summer turns hot and dry, it could push everything back another year. If it doesn’t rain, there’s not much you can do about it.”

My question to you is: did you heed my warning, and are you profiting from this growing pain point?

I can tell you that subscribers to my investment newsletter PowerTrend Profits are benefitting. I recommended that they add Pilgrim’s Pride Corp. (PPC) to their holdings back in early January, and the shares are up double-digit percentages. That compares to the return of the S&P 500 and Dow Jones Industrial Average, which are up 1.28 percent and down 1.48 percent, respectively, so far in 2014.

Exclusive  My Brief Thoughts on Gross Output, Cybersecurity, Private Equity and Education

I’m already eyeing new opportunities to share with subscribers to PowerTrend Profitscome join them and see what I recommend next.

Exploding Demand for Big Data & Analytics at Financial Services & Healthcare Companies
If you are like me, from time to time you hear a bunch of terms thrown about. So far in 2014, I’m hearing the words “big data,” “analytics” and “the Internet of Things” mentioned, and I bet you are, too. Big data and analytics are helping a number of companies make faster, smarter decisions about how to run their businesses.

Joining me to talk about this trend is Sheila Dalton, founder of Big Data company Gray Matter Analytics, a consulting firm that specializes in Big Data and analytics for the financial services and healthcare industries. I had a great conversation with Sheila because she tells it like it is; she even shares which companies she thinks are doing it right and which ones are going about it all wrong. Wait until you hear it; I bet you’ll be more than surprised.

Listen to my One-on-One PowerTalk Conversation with
Sheila Dalton of Gray Matter Analytics.

In case you missed it, I encourage you to read my PowerTrend Brief from last week about how you can profit from the evolution of competing companies. I also invite you to comment in the space provided below.

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE


img
previous article

Following yesterday's Federal Reserve minutes which led investors to worry about a rise in interest rates, stocks rose today manufacturing data triggered optimism about the economy.

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen publishes 4 different investment newsletter advisories, including the award-winning Forecasts & Strategies, which has beaten the market over the last 15 years.

Product Details

  • Forecasts & Strategies
  • Skousen High Income Alert
  • Fast Money Alert
  • Five Star Trader
About Mark Skousen

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays. Bryan's four newsletter and trading services include:

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Instant Income Trader
About Bryan Perry

Nicholas Vardy

A Stanford and Harvard Law graduate, Nicholas Vardy scours over 40 different global markets every day to uncover new profit opportunities for subscribers. His 3 advisories and trading services include:

Product Details

  • The Alpha Investor Letter
  • Bull Market Alert
  • Alpha Algorithm
About Nicholas Vardy

Doug Fabian

A 30-year Wall Street veteran and famed market timer, Doug Fabian is one the nation's foremost experts on ETFs (Exchange Traded Funds). His two ETF-focused advisories include:

Product Details

  • Successful ETF Investing
  • ETF Trader's Edge
About Doug Fabian

Bob Carlson

In Bob's monthly newsletter, Retirement Watch, he provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

ABOUT BOB CARLSON

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research. Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

Product Details

ABOUT DIVIDENDINVESTOR.COM