Grillers beware: Drought driving beef prices up
July 3, 2013
If you've experienced sticker shock shopping for ground beef or steak recently, be prepared for an entire summer of high beef prices.
Multi-year droughts in states that produce most of the country's beef cattle have driven up costs to historic highs. Last year, ranchers culled deep into their herds — some even liquidated all their cattle — which pushed the U.S. cattle herd to its lowest point since the 1950s.
Dry conditions this summer could cause the herd to dwindle even further. That means beef prices may continue on a steady climb, just in time for grilling season.
At Edwards Meats in Wheat Ridge, Colo., near Denver, workers divvy up the bright red ground beef into trays, sliding one into a glass display case. A laminated price tag is the final touch.
Recently, the number on that slip of paper has been getting higher.
"In the last three weeks it has really jumped," said owner Darin Edwards. "Most of our prices have gone up at least a dollar a pound or more."
Price increases are commonplace when people start firing up their backyard grills, but Edwards said this year is different. Prices for certain cuts of beef have jumped to all-time highs.
"Sometimes you throw a couple big, thick T-bone steaks up on the scale and it's 30, 40 bucks and they're like, 'Yeah, I can't afford those,' " Edwards said. And it's not just T-bones; it's the same story for New York strips, tenderloins and ribeyes.
Even with the higher prices. Edwards is absorbing some of the cost. That's not something he can keep up for long.
"Hopefully it does come back down," Edwards said. "If it doesn't come back down in the next couple of weeks, we'll have to adjust our prices accordingly. We just kinda bite the bullet for a little bit."
The price increase is caused by a mix of economic and environmental factors, which are on display across the pastures of Last Chance, Colo., a two hour drive from Edwards' meat market.
Here's the reason for the price increase: There just isn't enough feed.
Because of the drought, which has been battering much of Midwest cattle country for more than a year, there's a smaller supply of hay and dense grasses. Ranchers are having a tough time finding feed and when they do it's more expensive.
During the winter, Last Chance rancher Gerald Schreiber paid more than double what he usually does for hay. He usually maintains a herd of 250 cattle, but last year he prematurely sold more than 30 of his animals, unable to justify the high feed prices.
With hindsight, he said he should've culled even deeper. A combination of drought, wildfire and wind transformed Schreiber's pastures into a blanket of invasive, noxious weeds.
The fields haven't recovered.
"This is pretty unpredictable country," Schreiber said. "We deal with drought a lot. You got to get the rose-colored glasses off."
Recent research shows more than half of the country's beef cattle are in states where the pasture can't support large herds.
"A rancher has to make a decision," said Elaine Johnson, a market analyst with cattlehedging.com. "Do I buy expensive hay and try to hang on for another year? Or do I just liquidate my cows? Tighter and tighter supplies means higher and higher prices."
Those higher prices mean more people could choose to forgo burgers and steaks this summer.
Sales of beef have been down so far this year, while less expensive options, like pork, are up.
Johnson said consumers can expect to pay more for beef as long as dry conditions persist across the high plains.
"When you have a drought like this and have liquidated numbers significantly, it typically means that supplies are going to be reduced for two, three, four years, and it's one of the reasons why we've seen such a big increase in beef prices," Johnson said.
Most economists agree and expect prices to stay high the rest of the year. Until ranchers can build up their herds, the family barbecue will put a bigger dent in the pocketbook. ❖