Consumers can expect to pay more for beef at the supermarket, as prices are expected to increase heading into 2023 because of rising feed costs and intensifying drought conditions in key producing areas, which are resulting in tighter supplies.
In August, beef and veal prices climbed by 2.5 percent year-over-year, according to the Bureau of Labor Statistics (BLS). Within that category, uncooked ground beef and uncooked beef roasts surged at an annualized pace of 7.8 percent and 3.3 percent, respectively. Steak prices have declined by 3 percent from a year ago.
Year to date, live cattle futures have advanced by more than 5 percent to $1.47 per pound on the Chicago Mercantile Exchange (CME). Prices are expected to post a third-quarter gain of about 10 percent.
Despite growing expectations that beef prices will come down because of slower demand growth from recession fears and consumers shifting their behaviors at the dinner table, some industry experts think there’s more room for growth. In fact, businesses and shoppers can anticipate spending more on beef costs, according to Jayson Lusk, a food and agricultural economist and professor at the Department of Agricultural Economics at Purdue University.
Cow and heifer slaughter rates have been robust this year. Because slaughter numbers in the Southern Plains have risen by about 30 percent year-to-date compared to 2021, beef production has been impressive in 2022. Data from the U.S. Department of Agriculture (USDA) show that more beef cows were slaughtered in July than during any other month since record-keeping on the statistic started in 1986.
Butcher George Vourvahakis holds up a tray of Australian rump steaks at his store in the Melbourne suburb of Yarraville, Australia, on May 12, 2020. William West /AFP via Getty Images
In some cases, farmers without enough feed or water have shipped their cattle to slaughter prematurely. The liquidation of supply has offered consumers discounts at the supermarket butcher.
Industry observers say that this is unsustainable because there are fewer cows and fewer replacement heifers to produce cows. The long-term implication is that the market will experience tighter supplies.
“Fewer calves in 2022 and 2023 means there will be fewer cattle and ultimately less beef in 2024 and 2025,” Lusk wrote. “The decisions being made today to sell cows and heifers will have impacts on retail beef prices two to four years from now.”
Put simply, droughts and elevated feed prices in the current economic landscape will diminish beef supply in the U.S. marketplace in the coming years.
During a second-quarter earnings call, the restaurant chain Texas Roadhouse acknowledged some relief from escalating beef prices but stated that pressures are expected in the fourth quarter.
“We still believe that commodity inflation is cyclical, and commodity costs are cyclical. So while we are feeling some significant inflation right now, that cycle will turn at some point,” Texas Roadhouse Chief Financial Officer Tonya Robinson said. “That philosophy hasn’t changed. That just means we may take it on the chin a little more during that short-term cycle and count on guests being loyal and coming back to us.”
Can Chicken and Turkey Save Beef?
The latest trend in the food sector is that budget-conscious consumers are trading down to chicken from beef. Poultry is generally more affordable, although the price gap may be temporary. Chicken and egg prices have spiked by 16.6 percent and 39.8 percent, respectively, year-over-year.
The national average price for a fresh whole chicken is $1.879 per pound, while a dozen large Grade A eggs costs $3.116, according to official BLS data.
The industry has been hit by increasing consumption and an Avian flu outbreak earlier this year.
Suppliers have had challenges keeping up with demand. Egg output was down by 2 percent year-over-year in August (pdf), while chicken production slipped by 1.8 percent year-over-year in July. However, the positive development is that cases of highly pathogenic avian influenza (HPAI) have subsided, according to a new report from CoBank’s Knowledge Exchange. But the chief concern is that “the risk of another outbreak this fall remains elevated and the stakes for poultry producers couldn’t be higher.”
Some restaurants are incorporating more chicken into their menus. It’s estimated that chicken now accounts for 60 percent of Chipotle’s entrees and represents fewer than 20 percent of its food costs. Other restaurants, including Wingstop, are shifting to chicken thighs or darker poultry meat because these items are cheaper than breasts and tenders.
With Thanksgiving only two months away, households are already planning their turkey dinners. However, like chicken, turkey is reeling from higher prices, the bird flu, lackluster production, and inflationary pressures, according to the American Farm Bureau.
“Turkey prices are currently at record levels, resulting from the combination of tighter supplies caused by HPAI, higher demand, inflation, and increased demands on U.S. food systems,” the group wrote. “While there should be enough turkeys to go around for Thanksgiving, pressure will keep prices high with supplies forecasted lower and demand forecasted higher for 2023.”
The national average price for a frozen Grade A whole young hen that weighs eight to 16 pounds was $1.72 per pound this month, up 20 percent from last year.
Andrew Moran
Author
Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."
