Prices for beef have hit record highs recently, and it looks as though that trend is here to stay. The lengthy drought in many parts of the U.S. has led to the smallest cattle herd in decades, and that has led to a dramatic increase in prices for everything from roasts to steaks to burgers, the St. Paul Pioneer Press reports.
The average retail price for a pound of fresh beef in January hit a new record high of $5.04, according to the U.S. Department of Agriculture; it's gone up more than 50 cents over the last two years. A pound of ground beef is approaching $3.50 per pound, according to beef price data released late last month.
What’s more, experts say the cost of beef is just going to keep going up. The USDA’s Economic Research Service projects that beef prices will rise faster than almost anything else this year, MarketWatch reports. Don Close, a cattle economist with Rabo AgriFinance, says he thinks prices this year could rise 7-8 percent, and roughly the same amount in 2015.
Pretty soon you'll be paying for hamburger what you used to pay for steak.
The drought in the major cattle-producing states such as Texas, Oklahoma, Kansas, Nebraska and California is largely to blame, according to most experts.
The lack of rain has dried out the grass and pastureland that most cattle eat. Without grass, the animals have to be fed something else. And the price of other feed such as corn has also gone up because of the drought, according to the Pioneer Press.
"Hay prices are just going through the roof," said Kevin Kester, a fifth-generation rancher whose operation covers 22,000 acres in central California.
Cattle producers have been selling off their animals because they can't afford to feed them.
In Texas and Oklahoma, "There's a million-plus head of cattle that aren't there anymore," said John Freitag, executive director of the Wisconsin Beef Council. "Some guys just decided it was easier to plant corn than it was to raise or feed cattle."
As a result of the sell-off, the U.S. currently has about 88 million head of cattle, which is the smallest number since 1951.
Other factors are at play as well, Marketplace reports.
“The story’s pretty simple, and it begins back in 2007, 2008,” Ricky Volpe, research economist at the U.S. Department of Agriculture, told Marketplace. “In both those years, we saw basically every macroeconomic factor that influences food prices start working in the same direction to start driving up food price inflation.”
Those factors include rising costs for fuel and feed, and increased demand for beef in developing countries.
That said, cattle herds are beginning to grow again. But it'll still be some three years before new calves are ready for slaughter.
Grocery store chains are well aware of the situation. James Hyland, vice president of Milwaukee-based grocer Roundy's Inc., which operates Rainbow Foods stores in the Twin Cities, says his company is watching the market very closely.
"If beef prices become a sticker shock to the customer, there will be a transfer to other proteins like chicken or pork," he said, and that will further complicate the market, according to the Pioneer Press.
"It can become a difficult balancing act," Hyland said.
In fact, the demand for chicken has taken off in the last year, and, as Marketplace reports, poultry prices are rising, too.