The classic economic combination of tightly constrained supply and robust demand has driven US cattle and beef prices to unprecedented record highs, a trend showing little sign of abating.
Ground beef prices, a staple for Americans, hit a record high in August, with overall beef prices jumping 13.9% year-over-year, far surpassing the 2.9% rise in general inflation.
This crisis stems from cattle ranchers slashing their beef herds to their lowest levels in years, a result of chronic low prices, increasing operating costs, and years of drought that dried up grazing pastures.
CME Group live cattle futures prices have reacted to the scarcity, recently hitting a high of 243.58 per hundredweight.
Despite making well over $500 per head, ranchers are hesitant to rebuild herds, partly due to the memory of the 2014 price collapse, when a quick expansion led to a market crash, according to David Anderson, a livestock specialist at A&M University.
Brett Kenzy, a fourth-generation rancher, and Narciso Perez, a cattle broker, both echo this sentiment, stating there is a ‘real lack of confidence’ and that high prices are currently incentivising producers to sell high-priced heifers to pay off two decades’ worth of debt rather than breed.
This rebuilding process is inherently slow, taking up to four years to produce slaughter-ready cattle, demonstrating that ‘biology is tough to beat.’ The shortage has been exacerbated by the closure of the Mexican border to cattle imports due to a flesh-eating fly larvae species, causing a ripple effect on national prices.
Major meat processors like Cargill are also seeing profits eaten away.
Furthermore, consumer demand for higher-quality grades like upper choice and prime has shifted purchasing towards more expensive cuts.
Restaurant owners, including Leonard Botello of Truth BBQ in Houston and Jason Vincent of Chicago’s Giant, Chef’s Special, and Pizza Matta, are absorbing everything they can but are ultimately forced to nearly double prices to stay in business.
The biggest risk remains ‘demand destruction’ if consumers eventually balk at the high cost, especially with beef prices increasing far more than pork or chicken.
Ground beef prices, a staple for Americans, hit a record high in August, with overall beef prices jumping 13.9% year-over-year, far surpassing the 2.9% rise in general inflation.
This crisis stems from cattle ranchers slashing their beef herds to their lowest levels in years, a result of chronic low prices, increasing operating costs, and years of drought that dried up grazing pastures.
CME Group live cattle futures prices have reacted to the scarcity, recently hitting a high of 243.58 per hundredweight.
Despite making well over $500 per head, ranchers are hesitant to rebuild herds, partly due to the memory of the 2014 price collapse, when a quick expansion led to a market crash, according to David Anderson, a livestock specialist at A&M University.
Brett Kenzy, a fourth-generation rancher, and Narciso Perez, a cattle broker, both echo this sentiment, stating there is a ‘real lack of confidence’ and that high prices are currently incentivising producers to sell high-priced heifers to pay off two decades’ worth of debt rather than breed.
This rebuilding process is inherently slow, taking up to four years to produce slaughter-ready cattle, demonstrating that ‘biology is tough to beat.’ The shortage has been exacerbated by the closure of the Mexican border to cattle imports due to a flesh-eating fly larvae species, causing a ripple effect on national prices.
Major meat processors like Cargill are also seeing profits eaten away.
Furthermore, consumer demand for higher-quality grades like upper choice and prime has shifted purchasing towards more expensive cuts.
Restaurant owners, including Leonard Botello of Truth BBQ in Houston and Jason Vincent of Chicago’s Giant, Chef’s Special, and Pizza Matta, are absorbing everything they can but are ultimately forced to nearly double prices to stay in business.
The biggest risk remains ‘demand destruction’ if consumers eventually balk at the high cost, especially with beef prices increasing far more than pork or chicken.