Why Was Beef So Expensive in 2017?

Beef prices reached record highs in 2017, leaving many consumers wondering why their favorite red meat was suddenly so expensive. A combination of factors contributed to the spike in beef costs that year.

A Series of Droughts Reduced Cattle Numbers

The U.S. cattle herd shrank dramatically from 2014 to 2017 due to severe drought conditions in cattle producing regions. Prolonged dry weather in the Southern Plains led to poor pasture conditions, forcing cattle ranchers to cull more animals and send them to feedlots early. The Midwest and West also experienced drought during this time.

As a result, the total U.S. cattle inventory dropped to 89.1 million head in 2017, the lowest level since 1951. With fewer cattle available, the beef supply tightened, putting upward pressure on prices.

High Corn Prices Increased Feed Costs

From 2012 to 2013, widespread drought and high temperatures devastated corn production in the U.S. Corn yields were 27 percent lower than the previous year. With corn supplies limited, prices surged, reaching over $8 per bushel in 2012.

Since corn makes up the bulk of cattle feed rations, higher corn prices translated into higher feed costs for cattle feeders. Feed can account for 60-70 percent of the cost of raising cattle to slaughter weights. Facing squeezed margins, feedlots reduced capacity, contributing to the tightening beef supply.

Strong Export Demand Kept Supplies Limited in the U.S.

Even as domestic beef production declined from 2014 to 2017, U.S. beef exports steadily increased. By 2017, the U.S. was exporting around 10 percent of its beef production, compared to just 5 percent in 2010.

Much of this demand came from Asia, especially Japan, South Korea and Hong Kong. A growing middle class and preference for high-quality American beef fueled import growth. With more U.S. beef being shipped overseas, less was left on the domestic market, further reducing supply.

Consumer Preferences Shifted Towards Steaks

During 2014-2016, consumer preferences shifted notably towards middle meats like ribeyes, T-bones and strip steaks. Retail data showed much stronger demand growth for these cuts compared to ground beef and roasts.

However, supplies of high-value middle meats are inherently limited. Each carcass only provides so many steaks. With consumers bidding more aggressively for these cuts, it caused their prices to rise exponentially compared to ground beef.

Retail Beef Prices Reached New Highs

By July 2017, the average retail price for fresh beef reached $5.83 per pound, a new record high. The choice beef price peaked at $6.10 per pound mid-year, while ground beef averaged $4.01 per pound.

On a monthly basis, retail beef prices increased year-over-year every month in 2017. For the July 4th grilling season, boneless ribeye averaged $10.99 per pound, 44 percent higher than the previous year.

Wholesale Beef Values Peaked in June

Supporting the climb in retail beef prices, wholesale beef values surged in the first half of 2017. The choice beef cutout peaked at $250.86 per cwt in June, driven by strong demand for middle meats.

Select cutout values topped at $224.54 per cwt in May. The spreads between choice and select grades also reached extreme levels in June, indicative of high demand outpacing available supplies.

Herd Expansion Provided Some Relief Late in 2017

With calf prices at record levels from 2014-2016, ranchers had significant incentive to retain female stock and rebuild herds. The resulting expansion slowly began increasing available supplies of fed cattle late in 2017.

Both slaughter numbers and carcass weights started trending higher on a year-over-year basis in the second half of 2017. This provided some relief on prices, though not enough to dramatically lower retail beef values.

Consumers Paid Nearly Twice as Much as Producers

One factor adding to consumer frustration was that while retail beef prices reached unprecedented values in 2017, live cattle prices received by ranchers did not keep pace.

From January to December 2017, the choice beef cutout climbed 25 percent. However, Nebraska direct fed steer prices increased only 10 percent over that same period. This meant the retail markup was almost double the raw material cost increase realized by producers.

Prices Surpassed Previous Highs from 2014-2016

The historically high beef prices paid by consumers in 2017 came on the heels of another period of unprecedented values from 2014-2016. That three-year run of $6 choice retail beef also resulted from tight cattle supplies and strong demand.

Prior to 2014, retail beef prices had never exceeded $5.50 per pound for any sustained period. So the 2017 highs extending above $6 per pound marked a dramatic change in the beef price landscape.

Prices Relative to Other Proteins Reached Extreme Levels

Not only were beef prices high in an absolute sense, but they also escalated significantly compared to poultry and pork values. The beef-to-broiler retail price ratio matched a record level in July 2017.

The beef to pork retail price ratio also exceeded 5-to-1, dramatically higher than historical levels prior to 2015. With more relative value, beef lost market share to cheaper proteins that provided relief to consumer budgets.

Food Inflation Worsened for Lower Income Households

For consumers on tight budgets, the spike in retail beef prices meant significantly higher food costs. Analysis showed beef inflation worsened food insecurity issues, especially for households in the bottom income quintiles.

With beef taking up a relatively larger portion of their food expenditures, these families struggled with the rising beef prices. Many opted for more chicken and pork to save money as the price gap between beef and other meats expanded.

Consumers Changed Eating Habits Due to High Prices

Faced with expensive beef, many consumers changed their shopping and eating habits in 2017. Surveys showed a decline in beef eating frequency, as consumers limited their purchases or dropped proteins from meals altogether.

There was also a shift towards purchasing cheaper beef cuts, like chuck roasts and ground beef, over high-valued steaks. Retail data confirmed ground beef volumes outperformed middle meats as consumers responded to the price disparity between cuts.

Foodservice Operators Dealt with Record Beef Costs

Restaurants also struggled with soaring beef costs in 2017. Operators reported the highest beef prices on record, squeezing profit margins for steaks and burgers on menus.

Some fast food chains even raised prices mid-year on signature beef items to protect margins. Others looked to discounting chicken sandwiches and pork promotions to provide value options versus high-priced beef.

Price Inflation Frustrated Cattle Producers Too

Surging retail beef prices didn’t translate into equally high cattle prices for ranchers. Live cattle values lagged far behind the upside in beef, squeezing margins for cattle feeders.

This resulted in red ink for feedyards, despite the highest calf and feeder cattle prices on record going to cow-calf producers. The mismatch in margins frustrated cattlemen and demonstrated flaws in the vertically aligned beef production chain.

Market Dynamics Normalized in 2018

The upside for beef finally peaked in 2017 after a multi-year run of tight supplies and booming demand. While no one welcomed high prices, the market dynamics did spur cattle herd expansion after years of liquidation.

That expansion provided much-needed relief for consumers in 2018. Prices moderated as beef production increased, taking pressure off consumers’ wallets while still maintaining positive margins for producers.

Key Takeaways

  • Multiple factors combined to drive beef prices to unprecedented highs in 2017
  • Tighter cattle supplies after herd liquidation left less beef available
  • Strong overseas demand reduced beef supply left in the domestic market
  • A shift in consumer demand towards high-priced steaks exacerbated supply issues
  • Retail beef prices exceeded $6/lb for the first time, while wholesale values also hit new records
  • Live cattle prices lagged well behind the upside in beef values
  • Relative to poultry and pork, beef prices reached extreme record levels
  • Food inflation from high beef prices impacted lower income consumers the most
  • Diners changed habits – eating less beef and shifting to cheaper proteins and cuts
  • High beef costs squeezed margins for cattle producers and foodservice operators
  • The upside in the beef market finally peaked in 2017, leading to relief for consumers in 2018

Why Wagyu Beef Is So Expensive | So Expensive


Why is beef suddenly so expensive?

COVID-19 disrupted the beef supply chain and triggered panic buying among consumers anticipating a shortage. This resulted in unusually high demand and subsequent price hikes for beef.

What is a major reason beef prices skyrocketed?

Retail beef prices in the U.S. are at record highs, pushing up prices of beef-based products from burgers to steaks and steak tartare. That’s largely thanks to a shrinking cattle supply, as well as higher input costs, market watchers told CNBC. And they don’t expect it to ease any time soon.

Why is beef so expensive 2024?

Unlike what happened with eggs, the latest limited supply isn’t being caused by illness among cattle. Instead, experts from the Farm Bureau point to drought conditions and the rising costs of supplies to maintain herds. Both have led to farmers reducing their herd sizes, Nelson explains.

What was the price of beef in 2018?

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Apr 2018

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