April 9, 2014

US beef prices have reached all-time highs and are expected to stay in the high range, after the nation's cattle herds fell to levels last seen in 1951, reported the Los Angeles Times.

Soaring beef prices are blamed on years of drought throughout the western and southern US. The dry weather has driven up the price of feed such as corn and hay to record highs, forcing many ranchers to sell off their cattle, creating a brief glut of beef cows for slaughter that has now dipped.

The nation's cattle population has fallen to 87.7 million, the lowest since 1951, when there were 82.1 million on hand, according to the US Department of Agriculture. Beef prices will take some time to ease as calves require more than two years to gain enough weight for slaughter, and not every rancher will still have a herd to breed from after so much liquidation.

Richard Volpe, an economist for the USDA said, "Beef prices should remain at near-record highs this year and into 2015."

In fact, the USDA forecasts all food inflation to be between 2.5% and 3.5% this year. Indeed, the rising prices sent ripples down the beef supply chain from ranchers to restaurant. In the retail sector, the price of "all-fresh" USDA choice-grade beef jumped to a record US$5.28 a pound in February, up from US$4.91 the same time a year ago. The same grade of beef costs US$3.97 as recently as 2008.

Moreover, small businesses are struggling to secure enough red meat. Slaughterhouses, also known as packers, are more likely to reserve their reduced supplies for big customers like McDonald's, whose demand is forcing the value of other cuts of meats to go up.

However, the biggest fast-food chains aren't immune to the price pressure either. Experts say US$1 value menus in the US could soon be a thing of the past. Yum Brands Inc., which owns Taco Bell, said in December that it expects 4% price inflation for beef and other meats in 2014, though the company did not indicate whether the costs would be passed on to consumers.