Beef Prices Are At Record Highs. What’s Going On?
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Updated Oct. 15 with data from the latest consumer price index report.
Grill masters and taco Tuesday fans have had good reason to wince at the price of beef lately. Beef prices have been high for years but now they’re soaring ever-higher, with average prices for two popular cuts setting new records again in September:
Ground beef cost $5.67 per pound.
Sirloin steak reached $11.79 per pound.
The U.S. Bureau of Labor Statistics has tracked prices for these two beef products since the 1980s. That data shows prices for these two popular products remained fairly consistent until the first summer of the COVID-19 pandemic, when consumers spent more time cooking at home. Prices have not yet returned to pre-pandemic norms, and consumers have endured multiple record-setting price spikes in the years since.
Grocery price inflation overall finally seems to be calming down, according to the latest consumer price index (CPI), which showed food prices were 2.3% higher in September compared to the previous year — slower than the CPI as a whole, which went up 2.4%. But beef and veal prices were 4.2% higher on average in September compared to the same time last year.
Between June and July, the price for beef increased 1.2%, which means consumers saw a jump in beef prices at the height of summer grilling season. Looking ahead, high demand for beef combined with tighter supplies could send prices to new heights.
Why is beef so expensive?
Beef is so expensive right now because drought, high grain prices and rising interest rates have made cattle farming a costly endeavor in recent years. To deal with rising operating costs, many U.S. cattle farmers reduced the size of their herds — and some got out of the business altogether. As a result, the U.S. cattle inventory is the smallest it’s been since 1951.
Smaller cattle herds means fewer cows are available for beef. But consumers have maintained a healthy appetite for it, even amid rising prices. That combination of low supply and steady demand has pushed prices higher.
When will beef prices go down?
Generally, beef prices will go down when the supply increases or demand decreases — or both.
For now, beef prices seem poised to continue climbing. Here’s why:
For now, consumer demand is strong
Demand typically peaks in the summer, contributing to higher prices through July, especially around the Fourth of July holiday, says Bernt Nelson, an economist with the American Farm Bureau Association. “The real question will be, are we seeing some exhaustion? Will these consumers start to change over to cheaper substitutes? There’s a lot of unknowns surrounding that.”
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For what it’s worth, grocery shoppers have endured years of rising prices, and there are signals consumers are wrung out. Some consumer brands have reported sales slumps so far this year. In May, after reporting a drop in sales in its recent quarter, retail giant Target responded by announcing it will lower prices on about 5,000 staple items over the summer.
The beef supply is still tightening
While the cattle inventory is decreasing overall, the number of cattle in feedlots — a waystation in the commercial beef supply chain before cattle are sent to meat packers — has actually been higher than it was a year ago. That means there are still plenty of beef cows in the pipeline, which helps temper prices in the short term.
But that will soon change. There aren’t enough cattle being born to replace those going to market. That’s because many farmers reduced the size of their herds by sending female cows to slaughter instead of keeping them to breed more calves. Eventually, inventory will become scarce all throughout the supply chain and force prices even higher.
Reversing the trend isn’t like flipping a switch. First, farmers must decide to expand their herds. And then there’s the time factor: Once it’s born, a calf won’t be big enough to sell for beef until it’s roughly 18 months to 2 years old.
Conditions for farmers remain challenging
A variety of factors making life difficult for farmers could prevent them from taking steps to expand the U.S. beef inventory. It’s worth noting that it’s normal for the size of the U.S. cattle herd to expand and contract, depending on the broader economy, Nelson says. When it’s profitable — as in, sales are high and operational costs are low — farmers might look to expand their businesses. When the winds change, farmers adapt.
Currently, drought conditions are improving and feed costs are coming down, Nelson says. But a significant portion of U.S. farmers rely on operating loans to run their businesses, and interest rates are still high like they have been for consumers looking to buy a house or a car. “This generation has never seen interest rates this high before,” Nelson says.
That means it’s more expensive now to maintain a farm, let alone start or expand one — two avenues that would help increase the supply of beef and bring down prices at the grocery store.
