Higher Beef Prices Are Not Going Away Anytime Soon

Persistent high feed prices and ongoing drought in the Southern Plains and Midwest have significantly reduced America’s beef cow herd size over the last several years. This has led to a lower supply of market ready beef and higher prices in all aspects of the industry, especially at the retail and food service levels.

According to data from USDA’s Agricultural Marketing Service (AMS), price comparisons for most beef carcasses along with beef wholesale cuts are 20-30% higher compared to 2022.  The only way for the beef prices to return to normalized levels would be to increase the breeding herd significantly. Given length of gestation of beef cattle and reproduction rate, no increases in herd size should be expected for at least the next three years.

Any business that utilizes beef products, including your local restaurant, healthcare facility, grocery store or butcher shop will experience significant margin compression because of higher raw material costs for the foreseeable future. It will be essential for these business models to either raise prices to offset raw material cost increases, find lower cost alternatives within the available supply of beef, or switch to a lower cost protein source.

Fortunately for beef lovers, we have a lot of variety and flexibility when it comes to merchandising the beef carcass. For instance, a restaurant may change their menu from ribeye steaks to New York strip steaks. According to USDA AMS, this simple change would equate to 30-40% lower raw material cost for those comparable items. Further, it may be time to investigate portion control options such as pre-made patties compared to bulk ground beef to help maintain cost per serving and lost yield.  One other option for restaurants and food service operators may be to buy higher fat grinds that typically sell at a lower price point.