WEST LAFAYETTE, Ind. — Record prices for meat and animal industries means a change is coming to the marketplace, says Dr. Chris Hurt, agricultural economist for Purdue University extension.

Retail prices for beef and pork are up by 40 percent from seven years ago, while the animal sector also is reaping record profits in 2014, he said. As a result, annual meat consumption in the U.S. has dropped by a whopping 20 pounds per person.

For the first time in seven years, animal industries have a good economic outlook for multiple years, Hurt added. Record prices have resulted from lower feed prices and a short supply of meat, he explained.

"The big picture is that there has been a lot of stuff going on with grain. Livestock and grain are intertwined with each other. We are unwinding that as the grain prices are falling every day," he said.

"If the years from 2007 to 2013 could be described as the Grain Era, in which crop-sector incomes had an extraordinary run, the coming period may be described as the Animal Era, when producers of animal products have strong returns."

With corn prices already low and soybean meal projected to drop by $100 per ton by late October, livestock and poultry owners are making record profits this year, Hurt said. "Greater profitability will result in expanding production."

When grain prices suddenly increased in 2007, farmers and ranchers had to adjust by trimming their herds and flocks. Now that they have done so, demand is outstripping supply. "This is an era – an extended period – when there is a lot of opportunity to have growth in the (animal) sector for multiple years, based on three parts: a recovering per-capita consumption of meat, reduced herds and flocks and a reset of feed prices," Hurt said.

He expects land recently converted to cash crops in the central and western Great Plains will return to animal production. He said some cash crop growers may decide to add animal production to their farms, reversing a trend toward specialization in either.

Expanding animal production will mean more feed, which will in turn help growers. "The strongest market for our corn and soybean meal is our animal sector. Growers need to cheer livestock facilities on, as there will be more mouths to feed our grain," Hurt said.

Another startling trend is the sharp decrease in the amount of meat in U.S. diets. The domestic consumption of meat is down by 20 pounds per person compared to 2007.

According to current USDA estimates, this year the average person will eat 199 pounds of beef, pork, chicken and turkey, which is a 10 percent decrease from seven years ago when consumption was 219 per person. Of that 20 pounds, beef consumption was down 11 pounds, pork down 5 and chicken and turkey down by about 2 each. "Dropping 20 pounds is a lot in seven years. While there are many factors, price is the bigger part of that. Prices of meat are up 40 percent from seven years ago. That’s about 5 percent per year," Hurt said.

For example, the most recent USDA data show an increase of 12 percent in price for beef and pork in the last year – resulting in record retail prices. Currently, Hurt said pork is selling for $4.13 per pound, beef for $5.95 per pound and chicken for $1.96 per pound.

Strong exports also created a higher demand for meat, which was already in short supply because of drought and thinned flocks and herds.

Nationally, beef cow herds were reduced by 12 percent from 2007 to 2014 due to high feed and forage prices, Hurt said. Second, producers in the Southern Plains, the largest production region, liquidated 21 percent of their herds because of widespread drought.

"Another critical factor reducing U.S. consumption of meats is related to domestic and foreign incomes. Domestic incomes were under pressure in the financial crisis of late 2008-09, setting off the Great Recession from which employment and consumer incomes are just now recovering," he added.

"While U.S. consumers were under pressure, incomes in developing countries were rising. This caused U.S. meat exports to rise, pitting foreign consumers against domestic consumers for the limited U.S. meat supplies."

Hurt predicts record retail meat prices will come down as supply increases in the near future. With American incomes improving, drought lifting and feed prices lowering, he thinks Americans will begin to eat more meat; he believes per capita meat consumption will increase by 10 pounds.

When Americans were eating 219 pounds per year of meat, corn prices averaged about $2 per bushel and soybean meal $200 per ton, Hurt said; however, few people believe prices will drop that low again.

"Given current expectations for feed prices in coming years, a recovery of 10 to 12 pounds of the lost 20 seems like a reasonable estimate," Hurt said.

He explained some people believe the change in meat consumption is due to lifestyle and dietary changes, but he thinks high prices are a bigger contributor: "There is probably some truth to the lifestyle change hypothesis, but other factors are more important."