Why Have Beef Prices Gone Up? A Look at the Forces Driving Costs to Record Highs

Beef has become an increasingly expensive ingredient for American dinners and cookouts. Prices for popular cuts like ground beef and sirloin steak have been climbing for years and recently soared to new record highs.

The Current Situation

• Ground beef cost an average of $5.80 per pound in April 2022, an all-time high according to government data going back to the 1980s.

• Sirloin steak averaged $12.33 per pound, also setting a fresh record.

• Overall, beef and veal prices were 8.5% higher in April 2022 versus April 2021.

• This steep rise in beef prices far outpaced food inflation overall which reached 2.8% in April year-over-year.

So what’s behind these eye-popping price tags at the grocery store meat counter? As with many economic issues, the reasons are complex, but boil down to basic supply and demand.

Why Prices Are High

Tight Supplies

The primary driver of today’s high beef prices is declining cattle supplies. The total U.S. cattle inventory fell to 86.7 million head in 2022. That’s the smallest size since 1951, according to U.S. Department of Agriculture data.

• The number of beef cows specifically has dropped to 27.9 million, down 1% year-over-year.

With fewer cows to produce calves and ultimately become beef, supplies are very tight. But demand has remained strong, as consumers still have a hearty appetite for beef. This imbalance between limited supply and steady demand pushes prices up.

So why has the nation’s cattle herd shrunk so drastically?

• Years of drought forced cattle farmers to downsize their herds. When pastureland dries up, feeding and maintaining livestock becomes much more expensive.

• High grain prices have also made caring for cattle costlier. The price of corn, a key component of cattle feed, doubled from 2020 to 2022.

• High interest rates have increased input costs. Many cattle farmers rely on operating loans with variable interest rates. As the Federal Reserve hiked interest rates to fight inflation, those loan payments grew more expensive too.

Faced with these rising expenses, many farmers opted to cull their herds over the last decade. And some decided to leave the business altogether. This led to today’s smaller cattle population.

Strong Demand

While cattle supplies tightened, demand for beef never wavered. Beef remains one of the most popular proteins among American consumers.

Per capita beef consumption is projected to reach 57.7 pounds in 2022, on par with the past decade. Interest in plant-based alternatives hasn’t curbed demand for actual animal protein.

This consistent demand clashes with the declining availability, resulting in the imbalance that sends prices upward. Demand typically rises over the summer grilling season too, likely exacerbating price hikes in coming months.

Tariffs

New tariffs present an additional headwind that could drive beef prices even higher. The U.S. imports lean beef from several countries to mix with fattier domestic beef for products like ground beef. Tariffs raise the cost of imported beef, leaving retailers with little choice but to pass those higher expenses on to consumers.

The U.S. also exports high-end beef cuts to other countries. Tariffs make American beef more expensive abroad, threatening those export markets. Lost export sales would further strain domestic beef supplies.

So new import taxes implemented in 2022 create uncertainty on both sides of beef trade flows, disrupting global supply chains. The resulting fluctuations and shortages add more pressure on beef prices.

When Will Prices Fall?

Beef prices are not expected to drop significantly anytime soon. Turning the tide depends on increasing cattle supplies, but that process is slow.

Here are some keys to getting costs down over time:

• Cattle producers expanding herds – But this requires expensive investments at a challenging time, between high inflation, interest rates, and uncertainty from trade wars. Even once new calves are born, it takes 18-24 months for them to grow large enough to be sold as beef.

• Improved pasture and range conditions – Drought relief would lower costs to feed and maintain cattle. But conditions remain dry in many cattle-producing areas out West.

• Lower feed costs – Prices need to moderate for corn and other cattle feed components. But the Russia-Ukraine war continues to disrupt crop supplies globally.

• Cooling consumer demand – If surging prices finally curb demand, that would ease the supply/demand imbalance. But there are no signs yet of people abandoning beef for cheaper proteins.

Barring a drastic drop in consumption, supplies will need years to rebuild. So while prices may stop setting records month after month, beef will remain expensive compared to historical norms for some time.

Impact on Consumers

With beef prices up 8.5% year-over-year in April, consumers are paying dearly for staples like ground beef for tacos and burgers on the grill. While people haven’t abandoned beef altogether, they may trade down to cheaper cuts or types of meat.

Lower-income consumers with less flexibility in their budgets feel the sting most sharply. The rising cost of beef and other proteins contributes to elevated grocery bills that strain many household finances.

The Consumer Price Index shows food prices up 10% overall in April versus a year ago. So Americans are paying more for everything from fruit and vegetables to cereal and baked goods too.

On the bright side, supply chain improvements have started to alleviate some inflationary pressures across industries. Hopefully as disruptions continue easing, prices for beef and other goods will follow suit. But in the meantime, consumers must find ways to keep family budgets in check despite pricier steaks and ground chuck on the menu.

Beef prices have been setting new records in 2022, squeezing household budgets. Tighter cattle supplies combined with steady consumer demand have created conditions ideal for high prices. Years of drought and other factors shrunk the size of the U.S. cattle herd. With fewer cows going to market, beef availability declined. Yet interest in beef never waned, fueling an imbalance in supply and demand that will take years to resolve. Tariffs and high inflation exacerbate the problem. Unfortunately for barbecue fans, relief isn’t expected anytime soon. But consumers can employ savvy shopping strategies to keep summer grilling more affordable.