Beef Prices Nearing Record Levels
Ranchers are shrinking cattle herds because of drought and high costs, cutting down the nation’s supply of beef. That threatens to push prices for steaks and burgers to records.
Hamburgers and steaks, already near record-level prices, are set to get more expensive.
The culprit is a rapidly shrinking supply of cattle. Years of persistent drought conditions, which make cattle more expensive to raise, pandemic disruptions and widespread cost increases have prompted ranchers to sell off livestock, bringing the number of cattle in the U.S. to its lowest level in nearly a decade. U.S. beef production is on track to drop by more than 2 billion pounds in 2024, the biggest annual decline since 1979, according to Agriculture Department data.
With costs rising for nearly every aspect of raising cattle, ranchers say they are running out of reasons to replace the livestock they send to slaughter, let alone enlarge their herds. “We’re spending $1 million to make $4,000,” said Ryan Stromberger, a rancher in southwest Nebraska just outside the city of Ogallala who also has two feedlots.
With less beef available, consumers shouldn’t expect lower grocery bills for now. Prices for ground beef, up more than 20% since 2020, could hit record highs this summer during peak grilling season and an estimated average retail price of $5.33 a pound this year, according to analysts at agricultural lender Rabobank. Prices could add at least 15 to 25 cents in 2024, the analysts said.
Last year, the supply of beef rebounded as industry staffing levels began to improve. Meat companies offered workers higher pay and other benefits while automating more parts of their plants.
Cattle prices improved for ranchers, but by then inflation pushed up prices for fuel, feed and equipment. Severe drought in many key cattle-producing states, such as Nebraska, Oklahoma and Texas, parched grazing pastures, requiring spending on supplemental feed such as alfalfa and hay—which are up more than 20% on average from the prior year, ranchers and beef industry officials said.
Thinner herds
As costs on the farm rise, some ranchers are choosing to shrink their herds. It’s a weighty bet, because when the landscape reverses, it’s a slow process to rebuild: It takes roughly 18 to 22 months to grow beef cattle to market weight, compared with chickens, which are ready to be slaughtered in six weeks, and hogs, in about six months.
The total U.S. cattle supply, which includes dairy cattle, this year is at about 89.3 million, down 3% from 2022, according to the USDA’s annual cattle report released in January. The number of cows that are used for breeding beef cattle is at its lowest level in six decades.
Beef production is expected to fall more than 5% from last year, the first year-over-year drop since 2015, according to the USDA’s forecast.
A single animal can cost ranchers about $700 or more in operating costs until it’s sold to a feedlot—where each brought in just $12 of profit on average in 2022, according to the USDA.
Lisa Roberts, a rancher with more than 200 mother cows between her ranch in Shiner, Texas, and another one 30 miles away, said the wells and the creek near her properties, the primary water sources for her livestock, haven’t gone dry yet but many of her neighbors haven’t been as fortunate. The lines at the sale barn for ranchers selling off their herds last summer were as long as she has seen in years. “Some people got tired of the hassle and got out of the business,” she said. “For the average cattle raiser, it’s a break-even business.”
Source: WSJ.com