US beef prices hit record high as drought threatens cattle herds

Beef prices in the US have climbed to record highs as droughts in the south and west fuel higher feed costs and force ranchers to cut the national cattle herd size to a 61-year low.

Average prices of beef sold in US shops and supermarkets have risen to about $8 per pound, topping their previous high of $7.90 reached during the pandemic, according to data from the US Department of Agriculture (USDA). Live cattle prices in Chicago are also close to a record, at $1.79 per pound, compared with $1.50 this time last year.

But ranchers, who would normally thrive on record prices, are instead worried that the prices reflect a growing crisis: years of drought or low rainfall in prime cattle-raising land that is turning green pastures into dust fields.

Last year scientists said the western US was facing the worst dry spell seen in 1,200 years. More than a third of the lower forty-eight states are still in drought as of October 31, according to the US Drought Monitor.

“This drought is an environmental event having a significant impact on the national herd,” warned Amelia Kent, a local rancher in Louisiana. “You’re seeing cattle all being sold off heavily . . . and my immediate concern is what does our region and the country’s cattle industry look like six months from now? And 12 months from now, what do our markets look like?”

Like many other ranchers, she is learning to live with low rainfall. Cows usually start to fatten on fertile land and any shortfall is made up with hay or other feeds.

But years of drought have affected the growth of their usual foodstuffs. According to the USDA, the amount of hay stored domestically as of December 2022 was 71.9mn tons, the lowest level since 1954.

With their cows insufficiently fattened, farmers are having to transport hay from further away or send them to feedlots to bulk up their animals earlier in their lives than usual.

The extra cost for feeds have been compounded by higher global prices of grains that typically make up feed, such as soy, corn and wheat, after Russia’s invasion of Ukraine last year.

Increasingly, many ranchers fear they have herds that are too large to manage. In recent years there have been dramatic reductions in the herd size of cattle-rearing states such as Kansas and Texas, said Bill Lapp, president of Advanced Economic Solutions, a consulting firm specialising in food economics.

In Louisiana, livestock auctions are selling double the number of cattle as usual, Kent said. “A lot of our neighbours are selling . . . The cattle values in general are worth more than they’ve ever been worth before. And quite frankly they’re worth more than what we’re having to pay for hay,” she added, meaning ranchers are finding it better to sell cattle than feed them.

Analysts and ranchers worry the droughts and lower herd sizes could have long-term ramifications for the US market.

Adam Speck, senior analyst at Gro Intelligence, a commodity analytics firm, predicts many farms in the north, with better pastures, will benefit as business in the south contracts. “In five years, we will absolutely see a different distribution of cattle in the US,” he said.

Every eight to 12 years the national cattle herd tends to decline in what is known as the beef cycle. When calf prices are low and they are in plentiful supply, ranchers trim their herd size by culling heifers.

The smaller herd size then eventually pushes prices back up. At that point, ranchers have historically responded by retaining heifers for breeding and growing their herd. At the start of the year the US government counted 28.9mn beef cows in the US, the lowest number since 1962.

“When margins are good, heifers are retained and they have another calf,” Lapp said, “but when times are tough that heifer goes to a feedlot. Lately a very large share of what’s been going to the feedlot is heifers.”

Beef production is down 5.2 per cent year-on-year, said Arlan Suderman, chief commodities economist at broker StoneX. He estimates that will fall another 7 per cent next year.

Rebuilding herds is also a problem. Whereas hens lay roughly 300 eggs per year and sows can birth about 25 piglets, a heifer only has one calf a year.

“From the day you and I decided the world needed more chicken to the day there was more chicken on people’s plates, that would be six months,” Lapp added. “For beef it’s over two years. So when the industry has to adjust it takes much longer.”

Last month USDA data showed higher than expected numbers of cattle, briefly causing futures prices on the Chicago Mercantile Exchange to drop.

But analysts put that rise down to droughts in the west of the US forcing lightweight cattle from pasture to feedlots sooner than they normally would be.

Speck at Gro Intelligence said: “Going into this year, you have record low hay stocks and pasture conditions that are not improving. Do you think cattle ranchers decided to start producing more calves? No, absolutely not.”

The soaring cost, however, has had little impact on US consumers’ love of beef, said Suderman of StoneX. “This is characteristic of the resilience we’re seeing in the US economy,” he said.

Nevertheless, ranchers such as Kent worry beef shortages mean consumers will switch to alternatives such as chicken or pork, and may not switch back so readily when prices fall again.

“Its great to have these really high prices,” she said. “But we need them to go down before we price ourselves out of the consumer market.”

Letter in response to this report:
America’s cattle ranchers will need a just transition / From Sarah Lake, Executive Director and Co-founder, Madre Brava, Denver, CO, US