Summer barbeques just got a whole lot pricier as the biggest monthly price spike for meat in over a decade rocks grocery store shelves…
If you’re looking to make a few bucks this summer, one investment you may want to look at is the Dow Jones-UBS Livestock Subindex Total Return ETN (NYSEARCA:COW).
Dry weather and higher-priced grain feedstock are wreaking havoc on ranchers, especially those operating in Texas – America’s cattle heartland.
In fact, the USDA has been tracking the size of our nation’s cattle herd since 1973, and they’ve never seen it this bad.
Cow numbers have declined to a 63-year low — even lower than the previous modern-day record of 99.4 million heads of cattle set in 2011.
According to some industry experts, beef prices are on the rise and will be for some time.
Kevin Good, a senior analyst at cattle research firm CattleFax, says that “higher prices will continue through 2015 or 2016.”
Already, fast-food chains like Chipotle Mexican Grill (NYSE:CMG) and Sonic Corp (NASDAQ:SONC) are rolling out price increases to their menus in a bid to offset higher food costs.
But it’s not just eating out that’s going to impact consumers, they’ll be seeing more expensive grocery store bills as well.
Good believes that ground beef may see especially steep price hikes. He estimates that while steak prices could climb 5% – 10% in 2014, ground beef could climb even steeper, possibly 10% – 15%.
Despite the fact that cattle herd numbers are expected to improve over the remainder of the year, the price inflation is likely to remain due to the lengthy time that it takes for cattle to be ready for slaughter.
For instance, a calf born in the spring of 2013 would be bred in 2014, and might have a calf by 2015 — but the calf wouldn’t come to market until 2016. That means that the herd growth won’t translate into a lot of new supply for at least a couple years. That’s not all…
If droughts and a low headcount wasn’t enough, beef demand overseas is also increasing…further pinching American consumers.
In 2013, the US exported more than $6 billion worth of beef, making it the most valuable meat export in over a decade.
The popularity of US beef products have grown exponentially in China, where demand has skyrocketed by 350% between 2003 and 2013.
This may be great news for chicken breeders should consumers begin to shift in their meat consumption habits in order to save a few bucks. However, the same can’t be said for pork producers.
Swine prices have also spiked due to the recent proliferation of the deadly Porcine Epidemic Diarrhea (PED) virus that has wiped out millions of pigs across 29 US states in the past year.
Once a farm is infected, it’s nearly impossible to save the piglets. If a pig gets so much as just a 1/4 teaspoon of infected pig feces in its mouth, it will dehydrate and die.
Pork production could be down by as much as 10%, according to an article by Syracuse News.
While little can be done about your bank account taking a hit at the supermarket or restaurant, there’s certainly a way to potentially recoup those losses and even come out ahead.
Top Stock To Buy Today:
To capitalize on the Big Meat Inflation, investors may want to look at one particular exchange-traded note (ETN) known as the Dow Jones-UBS Livestock Subindex Total Return ETN (NYSEARCA:COW).
COW tracks the performance of future contracts on livestock, which is comprised of 58% live cattle and 42% lean hogs.
In essence, when meat prices rise, so should COW.
We saw COW rally in the first quarter mostly on the momentum of the pork epidemic. Now that the summer months are fast approaching, we could see the climb continue with beef’s surge.