Why does the cost of beef rise?
The cost of beef is the highest ever, and analysts say it won’t fall anytime soon.
Fox-5 Atlanta
- Rising beef prices have created a financial burden for many restaurants.
- Last year’s drought has led to a historically low supply of cattle, coupled with high consumer demand, increasing costs.
- Experts predict that beef prices are unlikely to fall until at least the second half of 2027.
City Barbeque, a fast, casual barbecue restaurant chain founded in Columbus, Ohio, is used to selling brisket worth just under £4 million a year in the 11 states it serves.
After all, the “premium barbecue experience” is something City barbecue is proud of, said Rachel DeMrs, senior director of supply chain.
But this year, City Barbeque is preparing for a change in consumer preferences to other proteins such as chicken and pork. Not because customers don’t want beef anymore, Demars said, but because some are willing to pay more than $11 for a brisket sandwich.
As of July, the USDA reported an average retail cattle price of $9.69 per pound. At the same time as a year ago, its price was $8.43 per pound. Six years ago in 2019, that number was $6.09.
“It definitely strains local restaurants financially,” Demars said. “The profit margins are undoubtedly still more severe than ever.”
City Barbeque tried to absorb as many domestic prices as possible, but restaurants had to raise the costs of certain menu items. DeMers said the same brisket sandwich, which costs $11.49 today, cost $9.99 in April or May.
“They don’t complain,” Demars said. They were asked if the customer was uttering complaints that would raise the price of beef. “They don’t have that many supplies, so they don’t come in that often.”
Why is the cost of beef so high?
The explanation for the recent surge in beef prices is complicated, but essentially challenges the issues of supply and demand.
On one side of the equation is the fact that farmers have historically faced small herds of cows, said Elizabeth Hirsch, executive director of the Ohio Cattlemen Association. During last year’s severe statewide drought, Harsh said many farmers must sell animals that don’t have the plants they need to feed them.
On the demand side of things, national beef sales have risen 6.3% from last year, despite record prices, as harsh consumers’ desire for beef is characterized as “as high as 40 years.”
Another variable in play is that the cost of raising cattle, including fuel, equipment, land, energy, labor, and more, is increasing the cost of raising cattle, and farmers are driving farmers to increase what beef charges to compensate.
Cattle farmers may benefit from higher prices, but she also said they are paying more. And with all these factors in action, she added, it is important to remember that farmers are “price holders, not pricers.”
“They’re not villains,” Hirsch said. “And sometimes, when we draw them that way, I think it’s wrong.”
How have companies with record beef prices been affected?
City Barbeque is not the only business facing challenges due to the beef market.
Little West Tavern, a restaurant inside Junto Hotel in downtown Columbus, said it serves several cuts of steak. This said that the price of the national beef had no effect on menu pricing or the amount of beef purchased, but the restaurant had to absorb the higher costs of the signature items.
Petito said Little West Tavern is an independent restaurant with no “purchase power” for a national chain, so the current market has been forced to be more strategic about how restaurants buy beef by finding ways to offset higher beef-related costs, such as controlling waste.
“The advantage is that we are deeply connected to our providers and local farms. “We can move quickly and bring in the entire animal or work directly with the producers to get the best quality at a fair price.”
White Castle, whose headquarters is in Columbus, said in an email statement that the beef “slightly exceeded” the company’s cost forecast for the summer, while no price increases were needed.
The current beef market is playing a role in White Castle’s decision to shift its promotional focus to other non-beef products, such as chicken and pork sliders, according to the statement.
John Barker, president and CEO of Ohio Restaurant and Hospitality Alliance, said the strategy has become more common in light of the current beef market, with many restaurants known to convert beef products to other meats to reduce overall food costs and earn additional sales.
“Taco Bell, for example, now offers chicken nuggets. If you think about it 10 years ago, would you say that it doesn’t make sense?” Barker said. “But for them, if they can move their product mix a little from beef to chicken during this time, that can really help them.”
Barker said the restaurant industry is resilient. That said, the impact of the cost of such expensive beef is “severe” and is not just a daily road.
Beyond the beef market, Barker said national food costs have generally surpassed the average by around 35% over the past five years.
“We haven’t seen anything like that,” Barker said. “That’s the overall pressure and you can layer something like (the beef market) on top of that. That’s the restaurant’s problem. Their profitability is really under pressure.”
When will be the price of beef fall?
Barker said Ohio restaurants and hospitality alliances do not expect beef prices to drop until at least the second half of 2027.
“This will be with us for a while,” Barker said. “It’s our new normal.”
And for City BBQ, it’s a concern, Demars said, as the holiday season, especially (one of the busiest times at restaurants) is approaching.
“It definitely doesn’t go away anytime soon,” Demars said. “It’s the life cycle of a herd. Cows cannot be fixed within six weeks. It’s as fast as 18 months when a new herd is ready to come and harvest.”
Reporter Emma Wozniak can be reached at ewozniak @dispatch.com or at @Emma_Wozniak_ on X, previously known as Twitter.
