Why Are Beef Prices So High in 2021? Exploring the Factors Behind Rising Costs

Consumers have felt the sting of high beef prices in 2021, with costs hovering near record levels. The average retail price for fresh beef has climbed to $7.38 per pound as of October. This represents an increase of 20.1% compared to last year. With ground beef and steak prices up 15% and 24% respectively, many shoppers are wondering – why is beef so expensive right now?

Several key factors unique to 2021 have driven the spike in beef prices. Understanding the reasons behind today’s high costs can help consumers adapt their grocery budgets during this time of inflation.

Herd Size at Historic Lows

The primary driver behind astronomical beef prices is constrained supply. As of January 1, 2021, the U.S. cattle inventory totaled 94.4 million head. This represents the lowest cattle population since 2016 and the second smallest since the 1950s.

With fewer heads to harvest, beef production has declined. The USDA estimates that commercial beef production will total 27.2 billion pounds in 2021, down 2% from 2020 levels. Less supply amid steady consumer demand equals higher prices.

Drought Conditions Reduce Cattle Numbers

So why has the national cattle herd shrunk? Widespread drought conditions have wreaked havoc, especially in the Southwest. Ranchers struggling with higher feed costs have reduced herd sizes. Others are culling cattle early due to parched pastures.

The most recent U.S. Drought Monitor report shows over 55% of the Western U.S. gripped by drought. Lack of grazing area and water access has placed significant strain on cattle farmers. Herd liquidation will likely continue as the drought persists.

Americans Eat More Beef Post-Pandemic

2020 saw plummeting demand for beef early in the pandemic. With restaurants closed and panic buying, available supply initially outpaced demand. However, staying home more reignited consumer interest in beef.

USDA data shows that Americans consumed 57.2 lbs of beef per capita in 2020, up from 57 lbs in 2019. This increase in appetite for burgers, roasts and steaks has further tightened available supplies in 2021. Beef exports have also risen, amplifying domestic pricing pressure.

Higher Corn Costs Raise Cattle Feed Prices

Feed represents over 75% of the cost of raising cattle to slaughter. With corn as the primary component in most beef cattle diets, high corn prices filter down to higher retail beef values.

Unfortunately, according to AFBF Economist Veronica Nigh, corn prices have surged over 30% due to strong demand and constrained supply. Drought has lowered yields, increasing prices for this essential cattle feed component. Higher feed costs drive added production expenses.

Transportation and Processing Limitations

From farm to table, getting beef to consumers involves trucking, rail, and processing infrastructure. Strained transportation and labor shortages have introduced inefficiencies that packers and retailers pass along.

According to Cassandra Fish, a meat industry expert, strained processing capacity compared to pre-pandemic levels continues hampering beef supply. A 15% decrease in industry-wide processing keeps abundant live cattle from transitioning into sellable beef.

Increased Consumer Spending Power

Finally, increased wages, savings and government stimulus checks have boosted disposable income for some Americans during COVID-19. Many consumers have greater spending power to absorb – or at least less resistance to – retail beef price inflation.

Grocery suppliers recognize this uptick in food budgets for part of the population. In turn, they can push through higher pricing.

Outlook for High Beef Prices

The perfect storm of supply chain disruptions, extreme weather, and rebounding demand paint a mixed picture for beef prices. The good news? Price growth shows signs of slowing after significant hikes earlier in 2021.

However, prices will remain elevated above historic averages for some time. Any relief from high beef costs depends on the abatement of drought conditions. Barring that, cattle farmers face continued strain. The USDA predicts that beef production will not significantly recover until at least 2023.

In the meantime, consumers can employ meat-saving tips like choosing economical cuts, adding beans or lentils to ground beef, and exploring chicken or pork as lower-cost proteins. While not an easy pill to swallow, making thoughtful adjustments provides the best avenue for weathering this inflationary environment.