Beef Prices Are At Record Highs. What's Going On?

Main Factors Contributing to High Beef Prices

• Drought: Reduces water availability, impacting cattle farming.
• High Grain Prices: Increases the cost of cattle feed.
• Rising Interest Rates: Make it more expensive to maintain or start cattle farming.
• Reduced Herd Sizes: Many farmers reduced herd sizes due to high operational costs.

Current Beef Prices

• Sirloin Steak:
  • December average: $11.67 per pound.
  • Slight decrease from November's $12.01 per pound.
• Ground Beef:
  • December average: $5.61 per pound.
  • Down from September's $5.67 per pound.

Historical Price Trends

• Prices have been tracked since the 1980s.
• Significant increases noted since the first summer of the COVID-19 pandemic.
• Sirloin Steak: Up 38% since 2019.
• Ground Beef: Up 45% since 2019.

Consumer Price Index (CPI) Insights

• Overall Food Prices: Increased by 2.5% in December (year-over-year).
• Beef and Veal Prices: Increased by 4.9% in December (year-over-year).

Future of Beef Prices

• Demand: Strong and peaks in summer, particularly around July 4th.
• Supply: Tightening due to decreased cattle inventory and fewer births of new cattle.
• Potential Changes: Consumer shift to cheaper meat alternatives is uncertain.
• Production Challenges: High interest rates make it costly to expand herds or enter the beef industry.

Expert Opinions

• Bernt Nelson (Economist, American Farm Bureau Association): Highlights consumer demand trends and economic factors affecting farmers.
• Cattle Inventory: Smallest since 1951, impacting supply and contributing to high prices.

Summary

• Beef prices are driven by a combination of supply shortages, strong demand, and economic factors affecting cattle farming.
• Prices are expected to remain high unless there's a significant shift in supply or demand dynamics.