Why are US beef prices soaring?

Beef prices are skyrocketing.
Beef prices are skyrocketing.
Image: REUTERS/Beck Diefenbach
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Food in the US is getting more expensive, and that’s largely being driven by rising beef prices. In the past year, the consumer price index for food rose 0.9%, while the index for beef rose 17.6%, according to the Bureau of Labor Statistics.

So what’s happening? At the height of the pandemic, covid-19 outbreaks forced meatpacking facilities to shut down, reducing beef production. But they never recovered entirely, said Michael Swanson, the chief agriculture economist at Wells Fargo. Part of that, he said, has to do with labor shortages that have slowed down production, from the food workers processing the beef to the truck drivers transporting it. The ongoing supply chain challenges such as rising freight rates are also affecting meat production along with the broader global economy. Rising corn and soy prices, which make the feed for livestock more expensive, also factor into the soaring beef prices.

“Anytime you see price increases like that, it’s never one thing, it’s always a stack of things,” said Peter Bolstorff, an executive at the Association for Supply Chain Management. “[When] these prices go up that fast…usually it’s because you’ve got demand shocks and supply shocks stacking on themselves at the same time.”

But beef prices were already on the rise before the pandemic. Ongoing droughts throughout western US have led farmers to pull back on livestock. Poor crops in the past couple of years also pushed feed costs for livestock up sharply last year, according to Swanson.

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There is also renewed concern that a few giant meatpacking companies are taking advantage of rising meat prices. Meatpacking companies’ profits soared during the pandemic—for instance, Tyson Foods reported a net income of $753 million in the third quarter of 2021, up from $526 million the same period last year.

The US Agriculture and Justice departments said they are investigating whether the big four meatpacking companies—Tyson Foods, JBS, National Beef, and Cargill, which control 85% of the beef market, collectively—are fixing or manipulating prices. In June, the Justice department reportedly demanded information from the companies over antitrust concerns and is talking with state attorney generals about the investigation, Bloomberg reported. Over the years, the companies have reportedly paid out millions of dollars in fines and settlements for manipulating prices, and have denied any wrongdoing. With prices rising, farmers say that they are missing out on profits; the Biden administration said last month it wants to push for price transparency for the big meatpackers.

The Meat Institute, a trade organization, said the Biden administration is wrong about the concentration in the meat and poultry industry causing prices to rise and instead places the increasing prices on labor shortages that are slowing production and making goods scarce.

How long will meat prices remain high?

The demand for meat remains strong in part due to excess household savings, according to analysts. But that is forcing retailers to raise prices to ration the limited supply, said Swanson. The climbing prices are also leading restaurants to change up their ingredients to soften the blow of rising costs.

Meat prices are likely to remain high until corn and soybean prices drop, which won’t be until 2023, he said.

Other drivers of high prices may persist longer. Cattle herds will take time to recover, and higher wages may be permanent, said Sal Guatieri, senior economist at BMO Capital Markets, a Toronto-based investment firm. For instance, wages at supermarkets surpassed $15 an hour in August. “So some of those wage pressures will persist for a while, perhaps even after the pandemic has passed,” he said.