Market conditions causing spike in beef prices
Consumers can expect higher beef prices at grocery stores despite a recent dip after the typical seasonal peak around Memorial Day, according to a Texas A&M AgriLife Extension Service expert.
David Anderson, Ph.D., AgriLife Extension economist, Bryan-College Station, said retail beef prices remain above the five-year average, as supply and demand factors continue to contribute to higher-than-normal prices.
Retail beef prices are lower than this time last year at the height of the pandemic, when panic buying and packing plant closures drove prices upward, Anderson said.
He said choice retail beef prices were $6.96 per pound compared to $7.59 per pound a year ago during the pandemic. While prices are lower than a year ago, they have been on the rise this year. Choice average beef prices have increased from $6.41 to $6.96 per pound since the first of the year.
The recent price changes for beef are consistent with historic seasonal peaks and valleys, but prices remain above the five-year average of $5.82 per pound. Anderson said he expects market conditions to keep prices up.
Cuts like rib-eye steaks skyrocketed this spring through Memorial Day weekend, which typically marks the kickoff to grilling season and the annual seasonal peak for retail beef prices, Anderson said. Rib-eye cuts were $13.18 per pound wholesale heading into the holiday and settled at $10.36 per pound this week.
“We’re seeing tighter supplies across the board on all proteins as there continues to be strong demand here at home and booming exports,” he said. “Beef cuts calmed down a little after the typical season price spike around Memorial Day, but it looks like higher prices at grocery stores are here for the foreseeable future.”
Extraordinary demand for retail beef
Anderson said the economic recovery continues to drive strong demand for beef. Restaurant demand for beef has put increasing pressure on supplies – especially higher-value cuts like rib-eye and tenderloin – as people look for opportunities to dine out.
Demand for beef at grocery stores has not waned as restaurant capacities rise, he said.
“There is extraordinary demand right now,” Anderson said. “We’re coming out of the pandemic, and people want to get out, and restaurants are meeting that pent up demand. But purchases at grocery stores hasn’t slacked off, even with the reopening. The combination is fueling higher retail prices as a result.”
But higher costs to produce beef and move it through the supply chain to grocers and restaurants are also feeding higher costs for consumers, he said. The same market factors are affecting other proteins like chicken and pork.
Feed, fuel and labor costs are all higher on the supply end as lower unemployment and economic growth push demand higher, Anderson said.
“I would argue that the problem is still a lingering bottleneck in terms of a shrinking herd, packing capacity, trucking capacity to move product around the country, and all the moving parts that get us from the farm to the plate,” he said. “Part of that is the turmoil we’ve experienced during the pandemic and the volatility it introduced to the market. I think this is the latest round of volatility that we’re working through after a year and a half.”
Calf prices, high production costs
At the supply end of the chain, beef producers have seen calf prices rise some, especially in certain weight classes, but prices remain below the five-year average.
Anderson said high feed prices — mainly corn and soybean meal — have stymied price gains at local sale barns across the state. Feedlots are willing to pay more per pound for higher weight calves — 700-800 pounds — that do not require as much feed to finish out, while calves 400-600 pounds or lower are not fetching top dollar.
“Gains from grass cost less than corn right now, and so feedlots are willing to pay a little bit more for heavier calves,” he said.
The fact that most cow-calf operations have better grazing conditions than a month ago has also settled the market some as well, Anderson said. Producers were culling their herds deep and selling calves early when they were looking toward severe drought and a hotter, drier summer forecasted ahead.
“A couple months ago, there were no buyers and a lot of sellers, and prices went down,” he said. “Now there’s more grass, so nobody is under pressure to sell and there are more buyers looking to restock or take advantage of good grazing.”
The rainfall that reduced drought levels across Texas likely steadied the market a bit for producers. But Anderson said contraction of the Texas beef cattle herd was expected to continue due to feed costs, continued threat of drought and the fall seasonal dip in demand that triggers reduced beef production.
“We are producing a lot of beef, but we could see less production year over year,” he said. “I think we’ll continue to see retail prices come down from peaks overall, but not below last year or even 2019. Consumers will get some relief, but it’s hard to say that we’ll see overall prices decline.”