Beef prices are cutting meal budgets to the bone, and there’s no letup in sight.
The price of ground beef, one of the most popular meat products in the nation, has climbed to a record high as supply continues to lag behind demand.
The average price of a pound of ground beef hit $4.24 in recent weeks, according to the federal Bureau of Labor Statistics, which tracks food prices. That’s the highest amount ever for the ubiquitous product, up around 90% from five years ago.
“We are going to see higher beef prices; we don’t anticipate a lot of reprieve here,” said Brenda Boetel, an agricultural economics professor and associate dean at the University of Wisconsin-River Falls.
Although the U.S. beef cattle herd has grown in recent months, after shrinking to a size not seen in decades, that’s not been enough to keep pace with the demand for some cuts of meat and a rapid increase in demand from Asia.
Complicating matters is that it takes nearly three years to raise cattle for beef from conception to consumption, in contrast with pork and poultry, where pigs and chickens mature much quicker.
So it could be a few more years before the nation’s beef herd returns to a normal level and meat prices settle down.
“It’s the longest biological lag we have of any type of production animal. We are not going back to the same amount of beef until about 2017,” Boetel said.
Meat prices will likely continue to rise from the effects of the drought in Texas and Oklahoma, as cattle ranchers haven’t expanded their herds much because of high feed costs.
Besides ground beef: “Most retail beef prices, on average, are also at record highs even after adjusting for inflation,” the U.S. Department of Agriculture said in a recent report.
Higher cattle prices, which translate to higher meat prices, gave Wisconsin beef farmers an income boost in 2014 following a couple of lean years.
“There’s been an opportunity for just about everybody to get caught up and put a little reserve in their pocket,” said John Freitag, executive director of the Wisconsin Beef Council.
“It’s good because markets fluctuate a lot. Some years aren’t so good,” Freitag said.
‘Losing their shirts’
If there’s a down side for beef farmers, it’s the price they pay for calves has climbed to the point where it’s cut into farm profits.
Some farmers are “losing their shirts” on grain-fed animals, said John Harrington, a livestock analyst with DTN/Progressive Farmer, an agricultural information service based in Omaha, Neb.
In some cases, they’ve lost up to $200 per animal.
A calf that normally would have cost $600 now could fetch up to $1,500.
Ross Bishop, a beef cattle farmer in Washington County, said he’s bought fewer calves this year because he didn’t want to relinquish the profit he made in 2014.
“I think last year was our peak. We are going into a down cycle where it’s going to be hard to make money on cattle,” Bishop said.
Still, the meat packing industry is clamoring for ground beef.
“I have had three people (in the industry) call me in the last month saying they were out of hamburger,” Bishop said.
Pork and chicken prices will rise this year, too, although not as much as beef, according to the USDA.
Consumers will switch between pork, poultry and beef, depending on the price. That will make it harder for beef prices to continue rising at a precipitous rate, according to Boetel.
Aside from beef, the government isn’t predicting much food inflation this year.
But the forecast is based on an assumption of normal weather. Something such as a drought, or a shorter than normal growing season, could drive up food prices.
“In particular, the ongoing drought in California could have large and lasting effects on fruit, vegetable, dairy and egg prices,” the USDA said.