Voget Meats in Hubbard, Oregon, has managed to stay in business for decades selling both fresh meat and sausages, smoked and cured meats to a middle-class clientele. But the sharp increase in prices has meant his customers are trading down.
“People are getting away from steaks and choosing more affordable options like hamburgers, or chicken, ” said Eric Pedersen, the manager.
It is a story being repeated throughout the United States as beef prices have soared as widespread droughts reduced the number of cattle to a 73-year-low and the high cost of cattle feed has forced prices even higher. It is likely to take several years until herds are rebuilt and prices stabilize or come down.
“I expect the beef supply to keep falling for at least the next two years, and that means some people will eat less beef,” said Derrell Peel Professor of Agricultural Economics at Oklahoma State University
According to the Jan. 1 inventory report issued by the U.S. Department of Agriculture’s National Agricultural Statistics Service, there were 87.2 million heads of calves and cows, out of which 28.2 million were beef cows, a decrease of 2% from last year. This is a record low that we have not seen since WWII.
Beef prices rose significantly in the aftermath of the COVID-19 pandemic and reached a record high in Nov 2023, and while they slowed down slightly they are trending up and experts are expecting new record highs soon. The current average price of ground beef, which is the cheapest type of beef, is $5.23 per pound from the $5.35 recorded in Nov 2023. The average price of a chuck roast is $7.51 per pound right now, down from $7.61 in Nov 2023.
Buck Bickel co-owner of Reicherts Distributing a restaurant meat supplier in Centralia, Washington that has been in business for 30 years. He said ground beef prices increased by only one dollar compared to 10 years ago, while other cuts have doubled in price during the same time, he said.
The main reason for the decrease in cattle inventory is droughts, and while droughts hit the US all the time, this is the first time in a very long time that they are this severe and this widespread and hit many cattle-raising states simultaneously.
Bernt Nelson Economist at the American Farm Bureau Federation said that we had three years, 2020 to 2023, back to back with high droughts in the areas where the highest concentration of cattle exist, in the Midwest and southern plains.
Beef goes into hundreds of different products and when its prices rise, other dependent products rise in price as well, affecting the entire economy.
Derrell Peel Professor of Agricultural Economics at Oklahoma State University said beef is a complex product. For example, the US imports a lot of beef to support the ground beef industry, mostly to make hamburgers. It is usually a mix of imported lean beef mixed with domestic leftover fat, which is a by-product of prime cuts in domestic beef. So a change in sourcing one part will affect the other.
The high cost of input also contributes to the high beef prices we are seeing right now.
Peel said different cattle sectors use different feed. Beef cows are fed hay the longest but usually are fed vast amounts of corn right before slaughter. Hay is fairly expensive and came down from a record high recently. And while corn is cheaper right now there is no guarantee it will stay that way for long.
American global beef exports are shrinking right now because of the smaller cattle supply.
In 2023 14% of US beef was exported and the top five export partners were Japan, South Korea, China, Taiwan, and Canada.
Nelson said that beef exports in March shrunk by about 10% compared to a year ago. Our beef is more expensive because we have a strong dollar right now and that is not helping our expert market, he said.
To meet the strong domestic demand for beef, imports have increased.
In 2023 12.5% of beef sold in the US was imported and the top five import partners were Canada, Australia, Mexico, New Zealand, and Brazil.
Nelson said that Imports were also up by about 10.5% so far this year, which is a big deal because most of the beef comes from Australia, and it is mostly inexpensive.
But Australia is very remote and it takes way longer for products to be shipped.
“We used to import Australian beef, it a good quality beef if fresh, but it took too long to be shipped to the US and arrived half-stale, so we stopped using it due to quality issues,” said Bickel.
Peel said the high prices right now and the low number of cattle is going to signal to the industry to ramp up production and in the meanwhile we can import beef from elsewhere. But, our largest beef partners, Canada and Mexico, are suffering their own droughts right now, he added. Beef farming is naturally slow, which means it will take several years to rectify, and we will import from outside North America to fill in that shortage, according to Peel. But droughts are still here and might last longer. Peel was pessimistic.
“I expect the beef supply to keep falling for at least the next two years, and that means some people will eat less beef,” Peel said.
Cattle farming is a slow-to-rectify industry and at the same time is volatile because it is affected by inflation and high input costs like gas, and feed.
Nelson said that there are a lot of barriers for farmers to increase their herd. Raising cows for beef takes about 18 to 24 months to have the cows ready for slaughter, which is way longer than other meat animals, like pigs and chickens.
Cows have one calf per gestation period of nine months, while pigs average about 7.5 piglets per gestation period of 3 months. Chickens lay hundreds of eggs, one per day, and they need 21 days to hatch into chicks.
This means that it takes cow farmers way longer to react to business demand and adapt to issues in raising cows, like pasture and cow feed, Nelson said. Farmers have to react to inflation and higher input costs, but that process is naturally slow set by the slow lifecycle of cows. Nelson added that higher beef prices do not necessarily mean cattle farmers are making more profit because input prices are also rising. Farmers are being squeezed and their profits are shrinking, he said.
The steady increase in beef prices is causing a reevaluation of what is considered a good part of the carcass.
Bickle said the beef business has changed a lot in recent years. For example, a flank steak, which used to be a cheaper steak geared towards Hispanic customers, is now more expensive and everybody’s steak. Today that applies also to other cheaper steaks like tri-tip cut, flat-iron steak, and sirloin steak, all of which went up considerably.
But, while the rise in beef prices affects everyone, not everyone suffers equally.
Karen Moore is a manager at Broadway 10 Bar & Chophouse an upscale chophouse in Oklahoma City, Oklahoma. The chophouse cuts its beef in-house and uses locally sourced beef from an American supplier. At the chophouse, a 10 oz sirloin steak is priced at $49 and it is one of the cheaper steaks there. A 38 oz tableside Tomahawk ribeye steak is $175 and they also feature Japanese wague sometimes. They update their menu twice a year to keep up with price changes and their business is in great shape financially and is trending up.
“We are a fine dining restaurant and so our clientele is expecting to have a larger check because they are getting a better quality product and service,” Moore said.
Jason Iseni is the owner of Red Apple Diner in Kansas City, Missouri. He said he has been in business for seven years and his business is about 20% down this year compared to before. His customers are complaining about prices, despite being cheap already. One of the most expensive items on his menu is a 10 oz sirloin steak priced at $19.95 but he doesn’t sell that many steaks or burgers, despite being the only diner in the area that carries beef options on the menu. Most of what he sells are omelets and egg dishes and he doesn’t think his business is going to survive.
“I had to cut off cooks and a dishwasher to survive and we are barely making any money during the weekdays,” Iseni said.