More Expensive Meat in 2012: The Rising Cost of Beef

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A rancher on the verge of bankruptcy. A state on the verge of another devastating drought. A nation on the verge of a depleted beef supply. These are the stories told in this week's cover feature, Meat Market, which examines the many reasons -- from the hoof up -- that you'll be paying more for your meat in 2012.

The long and short of it is this: Cattle are incredibly inefficient animals. For every 20 pounds of feed you give them, they produce only one pound of flesh. That's 20 pounds of feed -- which could be corn, alfalfa or other such crops -- that could be used to feed human beings. And you have to own a lot of land in order to have a profitable ranch: A regular cow-calf operation requires three acres of land for each cow and her calf.

You can see, then, why the drought of 2011 was so devastating for Texas ranchers. Not only were their fields burned up -- and without fields in which to graze, you can't support cattle -- other crops were too. That means hay, cubes and all other types of feed were suddenly rendered in short supply. Prices soon skyrocketed and ranchers began to liquidate their herds as quickly as possible.

Ranchers liquidated for two reasons: Chiefly, because no rancher wants to leave his animals to die of starvation and thirst. But equally importantly, the ranchers wanted to cut their losses as early on as possible. Selling the cows and calves before they starved meant that the ranchers would get a better price, as livestock are sold at auction by weight.

But by the time this winter swung around and a few blessed rains began to fall in Texas once again, most ranchers had depleted their stock of cattle. With no more cattle left to sell and another drought headed our way this year, many ranchers are on the verge of losing everything.

The low cattle supply means even more bad news for consumers: The price of beef is about to skyrocket, just as the price of hay did in 2011. It's simple supply and demand.

Making matters worse is the growing international demand for U.S. beef, especially from markets that can and will pay more than Americans are able to. Nearly 50 percent of U.S.-raised beef is already sent to international markets in Europe and Asia. In combination with the drought, this means an even smaller supply for domestic use.

So enjoy that $1 Big Mac and $30 cuts of tenderloin while you still can. Beef is on the rise this year, and not in a good way.

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