Beef prices are going up—squeezing consumers’ wallets. It is a trend both in the United States and worldwide.
An economist with the Alabama Cooperative Extension System has a good idea why beef prices continue to rise. Dr. Walt Prevatt, who is an expert in livestock economics, said it relates to the challenges of a consistent supply of beef and the increased demand for beef at home and overseas.
Reduced Beef Supply
A consistent beef supply has been difficult to maintain because of drought, reduced pastureland acres and increased costs. The drought in the Southern plains from 2010 to 2012 caused farmers to sell large numbers of livestock, including cattle. Also, the acres currently devoted to pasture are significantly reduced since acres have been converted to other uses including timber and alternative grain crops such as soybeans, wheat and corn. Finally, the inputs used for beef (land, cattle, labor, machinery and equipment, etc.) are expensive, so producers’ incentive to expand the cattle inventory is relatively low. Prevatt said all of these have contributed to a decrease in the amount of beef produced and causing an increase in price.
Improved Beef Demand
Second, the increased demand for beef by consumers at home and overseas has driven up prices. There has been an
improvement in the export demand for beef. Prevatt said that in 2015 “the dollar may strengthen and less goods will be exported.” In turn, this could slightly lower the price of domestic beef. However, there has also been an improvement in domestic beef demand.
With this improvement in demand, retail beef prices have risen between 5 and 9 percent. Prevatt, who is also an Auburn University agriculture economics professor, said that he was “quite surprised that consumers voted so strongly with their dollars, paying higher prices for beef.” Essentially, consumers are willing to pay more for the beef and domestic demand has slightly improved.
Looking toward the future, Prevatt said that for the next two to three years we should “expect herd expansion to be slow and beef production to remain low.” However, he said that feed input prices have decreased and this decrease in price should help improve herd expansion.
Unfortunately, until larger herds and higher levels of beef production occur, “retail beef prices will continue to rise modestly,” he said.
In addition to events and issues related directly to beef production, he said that different “outliers could adversely impact beef production and prices.” Prevatt gave examples ranging from higher interest rates, higher energy prices, food safety or international events.
Best advice to shoppers especially if you are on a budget, pay close attention to store sales on beef and try some lower priced beef cuts. There are an infinite number of beef recipes that allow you to continue to enjoy beef without spending a lot of money.