Why is Beef So Expensive in 2021?

Beef prices have reached record highs in 2021, leaving many consumers bewildered as to why their favorite red meat is suddenly becoming unaffordable As a beef lover myself, I decided to dig into the factors causing the price surge this year.

A Perfect Storm of Factors

It turns out a ‘perfect storm’ of conditions has come together to create a supply-demand imbalance in the beef market and drive prices skywards.

The main factors are

• Herd declines due to drought and high feed costs
• COVID impacts on processing capacity
• Strong consumer demand as restaurants reopen

Let’s look at each of these in more detail:

Herd Declines

The US cattle herd has been declining since 2014 and is now at its lowest level since 1951. Several years of drought, especially in cattle country like Texas, Oklahoma and parts of the Midwest, has meant less grass for grazing and hay for winter feed. As a result, many farmers culled their herds more aggressively. High prices for corn and soybean feed kept costs high and further incentivized smaller herds. Simply put, the cost of caring for cattle has risen substantially.

COVID Impacts

When COVID-19 struck in 2020, beef supply chains were upended. Slaughterhouse capacities were cut as workers fell ill, causing a major backlog of ready cattle with nowhere to go. Some meatpacking plants even shut down temporarily. Farmers were forced to cull herds and saw no choice but to send breeding cows to slaughter. This reduced the ability to rebuild herds when conditions improved.

Strong Demand

As restaurant dining shutdown in 2020, consumer demand for beef increased as people cooked more at home. Grocery stores struggled to keep beef in stock. Then, as dining rooms reopened in 2021, demand from restaurants came roaring back even while supplies were still tight. More competition for a limited supply of cattle drove prices even higher.

The Power of Supply and Demand

It’s basic economics – when supply falls and demand rises at the same time, prices will spike. And that’s exactly what happened with beef in 2021.

Supplies tightened due to drought and COVID capacity cuts. Meanwhile, consumers and restaurants happily spent on beef despite rising prices. So prices climbed higher to balance supply and demand.

Prices Expected to Keep Increasing

Most experts believe prices will keep rising through at least the end of 2022. Supplies remain tight as herds will take years to rebuild. Strong consumer demand continues as well.

Barring a recession cratering demand or a sudden end to drought conditions spurring herd growth, prices will likely stay elevated for some time.

Which Beef Cuts Became More Expensive?

The price increases have not been even across all beef products. Here are some of the largest price increases in 2021 based on USDA data:

• Ground beef up 20%
• Sirloin steak up 25%
• Ribeye steak up 15%
• Brisket up 22%
• Round roast up 19%

So steak lovers are definitely feeling the pinch in their wallets. Ground beef for burgers and tacos is noticeably pricier too.

Why Do Beef Prices Increase Seasonally?

Beef prices often rise heading into the summer grilling season as demand increases. But the seasonal spikes in 2021 are larger than normal.

Here are some of the reasons why:

• Retail grocery demand remains strong in summer as people entertain at home.
• Restaurants increase beef purchases considerably.
• High energy prices increase costs for transporting and storing beef.
• Less cattle are sent to market while pastures are lush.

So expect to see higher than average seasonal spikes in beef prices over the next couple summers.

When Will Beef Prices Decline Again?

The million dollar question is when will profiles finally moderate and offer consumers a break?

Beef prices could start to decline when:

• Herd numbers rise substantially allowing supply to catch up with demand. However, this takes years due to slow cattle reproduction cycles.
• Consumer demand drops off due to recession or changing preferences. However, there are no signs of this yet.
• Weather improves allowing herds to expand more quickly. But drought conditions persist.

The most optimistic estimate is late 2023 to early 2024 before any meaningful price declines materialize. The key will be herd rebuilding taking pressure off tight supplies. But quick rebounds are unlikely given challenging weather and cost conditions.

So consumers should brace for continued high beef prices for at least the next 18-24 months.

How to Save Money on Beef

While we wait for market forces to lower beef prices, here are some tips to minimize the damage to your wallet:

• Substitute less expensive proteins like chicken, pork or beans in some meals.
• Seek out cheaper beef cuts like chuck, sirloin, or brisket to use in stews, tacos, etc.
• Buy larger quantities when on sale and freeze excess in portion sizes. Just don’t hoard!
• Purchase locally from a farmer, butcher shop, or meat market if possible.
• Join a cowpool or beef share to buy direct from a farm.
• Choose ground beef with a lower fat content to get more for your dollar.
• Go meatless for one meal per week. Experiment with tasty vegetarian recipes.
• Use leftovers creatively – like taco beef on a salad or rice bowl the next day.

While higher beef prices are unfortunately here to stay for a while, a bit of clever planning at grocery time can help offset the worst impacts on your food budget.

The Outlook for Beef Prices