How the Weather is Causing Beef Prices to Go Up

The falling cattle inventory could push beef prices amid forecasts that demand may fall in 2024, and it may be thanks to the weather.

For American consumers, more than 7 percent of grocery expenses go to beef, according to a February report from the think tank Groundwork Collaborative.

But recent inventory analysis shows that cattle and calves in the U.S. are at decade lows, according to the American Farm Bureau Federation (AFBF). The drop, which has been attributed to drought, has contributed to higher beef prices.

Drought affects grazing conditions as precipitation from wet weather helps to grow the animal’s forage. Data shows that 23 percent of cattle inventory can be found in areas in the U.S. that are facing drought, according to North Dakota State University.

The decline in animal inventory has helped push up beef prices, experts say.

In December, the retail value of one pound of beef was close to $8, higher than the previous year when it stood at a little over $7, according to the U.S. Department of Agriculture (USDA).

The USDA forecasts that beef consumption on average per person will fall to about 56 pounds in 2024, a drop of nearly 2 pounds.

Bernt Nelson, an economist with the AFBF, said that while inventory has declined by 2 percent from a year ago, it is still robust and may lead to a good stock of beef available for consumers at their grocery stores and keep prices stable. But that can change if the supply of cattle deteriorates further.

“But as that supply begins to dry up, that’s when we are going to see beef supplies start to get tighter and tighter, and this could lead to the record prices that I think are going to occur in 2024 and 2025,” Nelson said on February 6.

A jump in beef prices could add to the cost of groceries that Americans have seen go up since supply chain bottlenecks during COVID sent prices soaring.

“While prices overall have risen by 19 percent in the last three years, families are now paying 25 percent more for groceries than they were before the pandemic,” according to analysts from Groundwork Collaborative.

Overall, while inflation has dropped from its four-decade highs of 9 percent in the summer of 2022, it is still above the Federal Reserve target of 2 percent. On Tuesday, the Bureau of Labor Statistics will reveal how much prices accelerated in January with some economists saying that inflation for the month will come at 2.9 percent, according to a Reuters survey, lower than last month’s 3.4 percent.

But Americans are also less worried about inflation soaring to the record levels they witnessed in 2022.

Expectations of where inflation will be a year from now sit at 3 percent, while over the next five years, Americans anticipate inflation will be at 2.5 percent, according to a survey of consumers released on Monday by The Federal Reserve Bank of New York.

For the year ahead, expectations of price changes fell for all goods tracked in the survey, the New York Fed said.

“The reading for the expected price change of gas is the lowest since December 2022, while those for food and rent were the lowest since March 2020 and December 2020, respectively,” they noted.