Is the End of McDonald’s Dollar Menu Near?

Speculations that beef and pork production in the U.S. could drop by as much as 5 percent may set record high prices in 2012, according to a report issued by Rabobank International.

Citing the rising cost of animal feed, impact from droughts, particularly in the Southwest, increasing worldwide demand for U.S. beef, decreased U.S. consumer demand and shrinking herd sizes along with rising energy costs, Rabobank’s report says that producers are scaling down their production for the U.S. market.

Corn, which is the main ingredient in livestock feed, saw prices increases of more than 25 percent in the last year with project yields for 2012 dropping to their lowest levels in more than six years by some U.S government speculations.

The broiler chicken industry has been experiencing record losses with more declines imminent, cites the report. Pork could have more modest declines.

After U.S. beef shipments increased nearly 30 percent in the first seven months of 2011, prices of cattle sold to slaughterhouses may hit a record high in 2012 at $1.16 per pound versus $1.13 per pound in 2011, marking significant challenges for U.S. manufacturers—particularly fast-food chains that rely on dollar menu items. The foodservice industry especially fast food chains are being encouraged to “buy early”—which could mean significant price increases for those who don’t secure sources early.

The price increases and decreased supply may be why many of the larger fast-food chains are now petitioning the government to allow the use of food stamps in their restaurants.

Keep in touch with Jill on Twitter @jillettinger

Image: jasonlam