Feedyards suffer as hamburgers replace steaks

By Bob Burgdorfer

CHICAGO (Reuters) - Americans are eating more hamburgers and fewer steaks as the economy wallows in recession, and that has led to huge losses at U.S. feedyards that fatten the cattle for steaks.

Each week $100 million is lost as feedyards from Nebraska to Texas sell cattle at well-below production costs.

The losses have been so bad for so long that economists predict many feedyards will either close or shrink. That, they claim, will mean higher-priced beef for consumers when the economy does recover.

The United States is somewhat unique amid global beef producers in that most of its cattle are fattened in feedyards on grain and other nutrients, as opposed to grazing on lush pastures.

These grain-fed cattle produce the juicy steaks preferred by gourmands, fine-dining restaurants and cookout enthusiasts.

"The losses have been so large in the first three months of 2009 that it is going to be months and months and months until feedyards even have a chance to recover those losses. It is depressing," said Jim Robb, economist at the Livestock Marketing Information Center.

As the global economy soured, many consumers around the world shifted away from white table cloth restaurants to fast-food hamburger chains or to at-home dining.

"I think what people are missing is it is not a drop in beef demand so much, as it is what sort of beef people are eating," John Josserand, president of AzTx Cattle Co, said of the change in beef consumption. "People are eating at McDonalds instead of Outback."

The hamburger that consumers are now eating comes from beef cows or dairy cows that are raised on grass, and not steers.

RESTAURANT, SUPERMARKET DEALS

Restaurants are trying to peddle the beef via promotions and discounts, but it has been hard.

The Outback Steakhouse chain, owned by OSI Restaurant Partners LLC, said this month it will offer more-affordable menu items of 15 new entrees under $15.

Such promotions are needed to bring in consumers, said Harry Balzer, vice president of NPD Group a consulting firm.

"Going out to restaurants just because you want to use a restaurant is declining. Going out to a restaurant because you found a deal is up 6 percent," said Balzer.

Supermarkets also have been promoting beef, but food consultant Len Steiner of Steiner Consulting said sales have not been enough to reduce inventory and help cattle producers.