Why Is Beef So Expensive Right Now?

Beef prices have skyrocketed in the last few years, leaving many consumers wondering why their favorite red meat has become so costly. As barbecue season starts up, people are feeling the sting of high beef prices at the grocery store From ground beef to steak, the price of beef is breaking records.

So what’s causing the spike in beef prices? There are a few key reasons behind the high costs:

Cattle Herd at Lowest Level Since 1951

One major factor driving up beef prices is that the supply of cattle in the U.S. has fallen significantly. According to the U.S. Department of Agriculture the U.S. cattle inventory is the smallest it has been since 1951. There are simply fewer cows available to produce beef.

Many cattle farmers reduced the size of their herds or left the industry altogether in recent years. From 2018 to 2022, the number of cattle and calves in the U.S. declined by over 5 million head. Drought conditions in cattle-producing regions forced ranchers to downsize. The high cost of cattle feed also squeezed profit margins, encouraging producers to cut herd sizes.

With fewer cows to produce beef, tight supplies are pushing prices up. It takes years to rebuild herds, so supplies are expected to remain low for some time.

Strong Consumer Demand

While cattle supplies dropped, consumer demand for beef stayed strong. Beef consumption has increased slightly over the past decade despite rising prices. Americans still crave burgers and steak.

Robust demand coupled with low supply equals higher prices. Beef prices typically peak in the summer grilling season when demand is highest. There are no signs demand will weaken significantly anytime soon.

High Production Costs

Producing beef has become increasingly expensive in recent years. The costs of inputs like fuel, animal feed, equipment, and labor have climbed considerably with high inflation. Cattle feed prices jumped over 20% from 2020 to 2022.

Persistent drought in cattle country has increased costs for ranchers. They’ve had to purchase supplemental feed due to poor pasture conditions. The high prices for replacement cattle have also deterred herd expansion.

Rising interest rates add further pressure. Many cattle producers rely on operating loans with variable interest rates. As rates climb, their loan payments become more expensive.

Impact of Tariffs

New tariffs on beef imports are poised to drive prices even higher. The U.S. imports about 2 billion pounds of beef annually, mostly from Canada, Australia, New Zealand, and Mexico. Fresh beef faces a new 10% tariff under recent trade actions.

Imported beef helps offset tight domestic supplies. Tariffs will raise the cost of imported beef, forcing vendors to charge consumers more. If beef imports fall substantially due to tariffs, it will further constrain U.S. beef supplies.

When Will Prices Drop?

Given tight cattle inventories and strong demand, beef prices are likely to remain elevated for some time. Here are a few factors that could potentially bring prices down:

• Herd Expansion – If ranchers start rebuilding herds, beef supplies could gradually increase and lower prices. But this process takes years due to the cattle reproduction cycle.

• Weakening Demand – If consumers balk at record beef prices and purchase less, it could reduce demand and bring prices down. There’s no evidence this is happening so far.

• End of Drought – Improved pasture and range conditions could lower cattle production costs and increase beef supplies. But drought relief may be years away.

• Lower Inflation – If overall inflation eases, it could reduce pressure on beef production costs and consumer budgets. But inflation is projected to remain high for 2022.

• Removal of Tariffs – Eliminating new beef tariffs could lower retail beef prices by improving import volumes. But it’s unclear when tariffs might be removed.

Barring any big shifts in supply or demand factors, expect beef prices to keep trending far above historical levels for the foreseeable future.

How to Save Money on Beef

With beef prices breaking records this summer, consumers will need savvy shopping strategies to control costs. Here are some tips for saving money on beef:

• Substitute cheaper proteins – Swap out some beef for lower-cost proteins like chicken, pork, eggs, beans, or tofu.

• Choose economical cuts – Opt for cheaper beef cuts like chuck roast, brisket, flank steak, and ground beef. Avoid pricy cuts like ribeye and tenderloin.

• Buy family packs – Purchase beef in bulk family packs when possible. The price per pound is usually lower compared to individual packages. Freeze what you don’t use right away.

• Look for markdowns – Check for markdowns on beef nearing its sell-by date. Cook soon or freeze it.

• Use beef sparingly – Stretch beef recipes by adding extra vegetables, starches, sauces and seasonings. Use less beef per serving.

• Make casseroles and stews – Braise inexpensive beef chuck or round in casseroles, stews, and chilis. The slow cooking makes it tender.

• Buy bone-in cuts – Opt for bone-in cuts when you can. The bone makes the meat weigh more for a lower per pound price.

• Join a warehouse club – Shop at Costco, Sam’s Club or BJ’s Wholesale Club to find lower bulk beef prices. Split packs with a friend if needed.

• Buy grass-fed occasionally – Splurge on premium grass-fed or organic beef only occasionally. Stick to conventional beef for everyday meals.

With smart substitutions and savvy shopping, you can still enjoy great beef flavors without breaking the bank. A few simple changes can help offset the sting of high beef prices.

Outlook for Beef Prices in 2022

Most experts warn that beef prices will remain painfully high for the duration of 2022. The price outlook depends on a few key factors:

Cattle Supplies

• U.S. beef cow herd expected to keep declining
• Calf crop and cattle imports to trend lower
• Beef production to drop another 2% in 2022

Consumer Demand

• Beef demand could weaken if recession hits
• But overall demand likely to remain historically strong

Production Costs

• Cattle feed, fuel, labor costs to stay high with inflation
• Persistent drought will keep pasture conditions poor

Tariffs

• New 10% tax on fresh beef imports from 6 countries
• Could constrain import volumes and reduce supply

Given these dynamics, forecasters say retail beef prices could increase another 5-8% over the course of 2022. That would easily surpass the previous annual record set back in 2015.

Consumers hoping for a return to lower beef prices will probably need to keep waiting until at least 2023 or 2024. The next couple years will likely bring more record-high prices at the meat counter.

Long-Term Factors Influencing Beef Prices

While current market conditions largely dictate beef prices in the near term, there are some bigger picture trends that will influence costs over the long run:

• Domestic vs. Foreign Demand – Long-term demand from foreign markets like China and Japan will impact U.S. beef exports and prices.

• Feed Costs – Drought frequency in cattle states and global grain production will determine cattle feed costs.

• Herd Expansion – Rebuilding of U.S. cow herds depends on forage conditions and cattle prices.

• Labor Availability – Tight farm labor markets will continue pressuring cattle producer costs.

• Consumer Preferences – If diets shift away from beef toward other proteins, it could reduce demand.

• Climate Change – Extreme weather could make cattle farming more difficult and costly.

• Regulations – Stricter environmental rules on cattle producers may increase beef production expenses.

• Farm Consolidation – The cattle industry has become more concentrated among a small number of large operators.

• Technology – Automation and production efficiencies may help lower farming costs over time.

These long-term trends will dictate whether historically high beef prices become the new normal. A complex mix of factors drive beef costs over the long haul.

There is no quick fix to bring beef prices down. It will take years to rebuild tight cattle inventories. Consumer budgets will remain squeezed until conditions improve. Using beef sparingly, substituting other proteins, and choosing economical cuts are the best ways to deal with sky-high prices for now. Beef lovers will need patience and shrewd shopping skills to navigate today’s expensive beef market.

Average Retail Food and Energy Prices, U.S. and Midwest Region