The impact of higher beef prices: What’s really happening?

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Much attention is being paid to the higher cost of beef, yet sales data and market research show demand for beef remains strong. Beef continues to be a cornerstone of the retail meat case, it’s featured on almost every restaurant menu, and Americans continue to purchase beef, even at higher prices.   

Overall food prices are estimated to increase between 2.5 to 3.5% in 2014. Meats, poultry and fish, specifically, are forecasted to increase 3 to 4% this year. If you compare current beef prices to the same time period a year ago, the price is up about 13 cents more per serving. 

Americans are beginning to see higher food prices when shopping and dining out. But the rising cost of beef is not deterring Americans from buying beef at the store or enjoying a beef meal at their favorite restaurant. Overall, 90% of Americans say they are still enjoying beef on a monthly basis, and more than 70% say they find steak prices acceptable at the grocery store and in restaurants. The demand for beef is strong and we are seeing this demand in the form of higher prices. 

So the question is this — how are higher beef prices affecting retail and foodservice operators and consumers and how are they responding, and what is the outlook for beef? 

How are Americans responding to higher prices?

Americans are continuing to purchase and enjoy beef, and they’re willing to pay more for it. A recent food demand survey conducted by Oklahoma State University showed consumers were willing to pay $6.35 per pound for a steak and only $4.63 for a chicken breast and $3.51 for a pork chop at the store. 

Americans, specifically older millennial parents, are placing more importance on the value of food quality, taste and meal experience than the price of their food. Millennials are willing to pay more for high-quality foods like beef because it delivers on taste and quality like no other protein. 

How are higher prices affecting retail operators?

When it comes to retail, dollar sales are king, and beef sales are vitally important to a healthy meat department. Beef is – and should continue to be – a focal point of every grocer’s meat department merchandising and marketing efforts. Not only does beef net more sales, pound for pound, than pork or chicken, it also makes up 8 percent of total supermarket sales and accounts for 49.5 percent of dollars sold in meat-case sales. 

Beef drives traffic to stores and the meat case during the grilling season. And Americans say they’re twice as likely to visit a grocery store that is promoting beef for grilling, over a store that promotes any other protein. 

How are higher prices affecting foodservice operators?

Beef’s performance in foodservice is remarkably solid despite operators’ higher food costs. In fact, beef volume increased by 79 million pounds in the past year, to a total of 8 billion pounds. As the economy strengthens, Americans are going out to eat more often. Overall foodservice industry sales increased 3.2% to $682.3 billion in 2013 – and beef is their protein of choice. 

Restaurant-goers who order steak report a higher satisfaction with their meal, they spend more and they are very likely to continue visiting a restaurant. Research shows that Americans spend more at a restaurant when they order a steak as an entrée, resulting in a higher check (27% higher than ham/pork and 53% higher than chicken). Additionally, steak drives the sales of other menu items, like side salads, alcohol and desserts. Operators know this; nearly all (97%) of restaurant operators feature beef on the menu. 

And since the recession, foodservice operators are constantly evolving their menu to manage their food costs, while at the same time continuing to menu their mainstay steaks like sirloin, top loin and ribeye. 

One way foodservice operators can weather higher prices is by promoting a variety of beef cut options, learning how to fabricate cuts most effectively, and stressing beef’s flexibility through new culinary ideas, preparation and serving tips. To assist operators in this effort, the Beef Checkoff provides tools and resources that educate operators on making the most of the beef they’re buying, menuing new beef dishes and understanding the current trends that drive millennials to purchase beef. Many of these resources can be found at BeefFoodservice.com. 

The Outlook

A tight cattle supply, primarily due to the prolonged drought impacting many cattle-producing states, is just one of the factors impacting higher beef prices. According to Dr. Joseph Glauber, Chief Economist, U.S. Department of Agriculture, to combat low domestic cattle herd sizes, producers are working toward rebuilding their herds. However, due to “high feed cost and drought, we have not seen the expansion that we might have thought possible given the high price of cattle. Typically when there are higher prices for cattle, the domestic herd expands. Expansion takes time,” explains Dr. Glauber. 

America’s beef community has faced detrimental challenges to increase cattle and beef supplies, particularly from the longest drought in our most productive U.S. cattle markets. Unlike some proteins, raising high quality beef takes time, as does our ability to quickly shift to meet growing demand. While it can take up to three years before beef is available for consumption, cattle farmers and ranchers are slowly beginning to rebuild their herds to meet consumer demand. 

Conclusion Much attention is being paid to the higher cost of beef, yet sales data and market research show demand for beef remains strong. Beef continues to be a cornerstone of the retail meat case, it’s featured on almost every restaurant menu, and Americans continue to purchase beef, even at higher prices. Despite tighter cattle supply and the increasing cost of food across the board, beef demand is the highest it’s been in years (Source: written by Mackenzie Jordan, Beef Issues Quarterly, June 2014). 

For more information about cattle production, visit www.uaex.edu or www.arkansas-livestock.com or contact your county extension office.

Source: Arkansas Livestock Extension


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Carroll    
Alabama  |  August, 02, 2014 at 05:39 AM

Personally, my wife and I are buying a lot LESS beef, not because we can't afford it, but because we simply refuse to pay these ever inflated prices. As long as people continue to buy, regardless of price, those prices will continue to increase. If we leave it sitting on grocer's shelves, they will eventually lower prices to attract people back to it. In the meantime, we'll stick to chicken.

Ken    
Arkansas  |  August, 02, 2014 at 12:17 PM

The "beef price problem" isn't as much due to high demand as to the limited supply. The 2013 population of cows and calves in my home state (Arkansas) was the lowest since the 1960's. Texas is experiencing a decade long drought which has led many ranchers to sell off their herds due to the expense of feeding cows in the absence of adequate grazing. Now that the price of beef is at record high levels, there is an all out attempt by ranchers to quickly re-grow their herds. This further exacerbates the beef shortage problem by shifting many of the heifers away from the meat counter, & back to the farm to become replacement cows. This shortfall situation will probably take 2 or 3 years to work through, but the prices should come back down as the beef population rises in response to higher prices.

pineapple    
August, 02, 2014 at 08:02 AM

Corn is being diverted to make ethanol for gasoline additive. Corn is a feed stock for beef. Ethanol-in-gasoline is a boondoggle that lowers gasoline mileage and causes beef and other food prices to increase. Furthermore, it does not impact so-called global warming.

RMF    
Oregon  |  August, 02, 2014 at 02:10 PM

ethanol in fuel is a fraud and it raises the price and ruins engines. Who ever thought this one up should be in prison as an enemy of the people.

Sandy    
August, 04, 2014 at 11:24 AM

Every time I am at the store I see people pondering over the meat section and not really getting much, myself included. Who can afford these astronomical prices? When you have a family to feed, it is actually disgusting. We are consuming about 1/2 less meat than we used too. We are only eating two meals a day as well. Sometimes, my husband and I only eat one meal a day and couple small snacks. It's either eat, or pay the bills and pay for the children to go to public school. I don't think middle to lower-middle class citizens are going to make it much longer. Homes are going to be lost and it's going to be way worse than we ever thought it could be, just wait and see.

JAMES    
Ontario  |  August, 06, 2014 at 02:55 PM

Welcome to what rest of the world pays for their food Sandy. (as a percentage of their income) I bet you have an iphone? and a computer? and maybe a tv or two, and cable and video games for the kids, perhaps a cpl cars in the driveway? It never ceases to amaze me that the North American consumer simply expects that their food should be provided to him for next to nothing, while at the same time putting thousands of dollars a year into the phone company's, the cable company's, the car companies, walmart's ect ect ect pockets. Beef Prices are high sandy, because your food was brought to your table by folks who struggled to make a reasonable profit for all their work doing it for years. So many of them got out. And guess what? supply and demand still works. Prices adjust. They will get back in as prices have improved, but it wil not be a fast process. It took years to reach this point in the beef industry, and it will be a long time unwinding the damange that was done. But this mentality of expecting food to be just given to everyone while the producers struggle to make a living doing it - well that time has passed. Welcome to the real price of food.

JAMES    
Ontario  |  August, 06, 2014 at 02:55 PM

Welcome to what rest of the world pays for their food Sandy. (as a percentage of their income) I bet you have an iphone? and a computer? and maybe a tv or two, and cable and video games for the kids, perhaps a cpl cars in the driveway? It never ceases to amaze me that the North American consumer simply expects that their food should be provided to him for next to nothing, while at the same time putting thousands of dollars a year into the phone company's, the cable company's, the car companies, walmart's ect ect ect pockets. Beef Prices are high sandy, because your food was brought to your table by folks who struggled to make a reasonable profit for all their work doing it for years. So many of them got out. And guess what? supply and demand still works. Prices adjust. They will get back in as prices have improved, but it wil not be a fast process. It took years to reach this point in the beef industry, and it will be a long time unwinding the damange that was done. But this mentality of expecting food to be just given to everyone while the producers struggle to make a living doing it - well that time has passed. Welcome to the real price of food.


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