Steak and burgers cost more these days. Drought may keep prices high for years.
- Beef prices have risen to historic highs in the past year, making steaks and burgers more expensive.
- Now drought is making it difficult and costly to feed cows, driving ranchers to cull their herds.
- The slaughter leaves fewer cattle for the future, putting upward pressure on beef prices for years.
The brown hills of Northern California are peppered with cattle. They spend their days slowly meandering under the sun, munching drought-withered grass.
Cattle are California's fourth-biggest agricultural commodity, valued at $2.74 billion in 2020, according to the state's agricultural department. But increasingly dry conditions are making the land less and less suitable for feeding and watering them. In March 2021, every pond on Scott Stone's ranch was dry for the first time in the 46 years his family has owned it.
"It's not pretty," Stone, who keeps a large herd of about 650 cows at his Yolo Land & Cattle Co. ranch, told Insider.
It's not pretty for consumers, either. The cost of beef in US cities rose steeply from March 2021 to March 2022, increasing 16.7% for steaks and 25.4% for other beef. Steak prices reached a record high of $10.23 a pound in November, and ground beef hit its own high of $5.41 a pound in April.
The trends driving the price increases — from labor shortages to high fuel costs — are the same challenges most of the world's food supply faces.
Drought, however, is steering the beef market toward a future where prices might stay elevated for years. Withered grass and high grain-feed prices are making it more economical for ranchers to cull their herds than feed them. That means the number of cattle in the US is declining and there will probably be less beef — at higher prices — next year.
Normally, ranchers slaughter the most cows at the end of the year. In the first quarter of 2022, cows were slaughtered in the greatest numbers since the 1980s, according to the US Department of Agriculture. In the first four months of the year, there were 15% more beef cows slaughtered than in the same period of 2021.
At this rate, there will simply be fewer cattle to slaughter next year. That's why the USDA expects beef production to drop 7% in 2023.
"That's pretty ominous," David Anderson, an agriculture and livestock economist at Texas A&M University, told Insider, adding that ranchers "are reducing the number of cows because it hasn't rained and there's no grass and feed costs are extremely high."
All the slaughter of early 2022 flooded the market with beef, causing a brief dip in prices in April and May, but experts don't expect that to last. Fewer cows means fewer calves and, ultimately, less meat next year, and the year after that.
Anderson fears beef prices will climb again and stay high for several years.
"We're really headed towards, I think, much tighter supplies of beef," he said.
Ranchers can't wait for rain forever
Dry conditions — which have been plaguing parts of the US for the better part of the past 20 years — have been pushing ranchers to their financial limits for years. Without knowing how long the drought will last, they're forced to make tough choices to stay afloat.
"This drought's a big deal," Anderson said.
When Stone's ponds dried up in spring 2021, it caused the grass to run out early, and his hay harvest was low. In October, he was about two weeks away from sending his older cows to slaughter — even the ones that were already impregnated.
"Once you start liquidating the herd, it's very difficult to go back" and rebuild it, he said.
Finally, in the last week of October, a few days of heavy rain brought enough water to save his cows. Not everyone is so lucky. Across the US, 60% of cattle are living in drought areas, driving this year's record slaughter, according to the USDA.
If it rains, and it seems like there will be enough grass, ranchers may decide to breed their cows and expand their herds, replenishing the US cattle population. But it will take time for those cows to give birth, and for the calves to grow big enough to eat.
"Even if there's a decision to expand next year, it's not going to really manifest itself into higher beef production for two to three years down the road," Shayle Shagam, a USDA livestock analyst, told Insider.
Nobody can say when a drought will ease, but the climate crisis makes the future even more uncertain. Scientists expect droughts to become more common and more intense as global temperatures continue to rise in the coming years, according to the latest report from the UN's Intergovernmental Panel on Climate Change.
Anderson said ranchers across the country should be "very worried" about the climate emergency: "I think it has the potential to make some areas of the US uneconomic for cattle production."
The climate crisis doesn't manifest only as drought. In Kansas, at least 2,000 cattle died in June during a heat wave — another type of extreme-weather event that's worsened by climate change — Reuters reported.
In California, Stone's drought woes have been compounded by fires, which are growing more severe and frequent as the climate gets drier and hotter. In 2018 and 2020, he lost thousands of acres of grass to two fires — one wild blaze and one burn the state lit to stop a wildfire. He said the 2020 fire forced him to spend an extra $100,000 on hay to make up for the burned grass his cows couldn't eat.
From pasture to supermarket, costs are rising
Once a cow is slaughtered, its journey to grocery-store shelves is fraught with labor shortages and rising costs of transportation. Some meatpacking plants closed after they lost workers to the coronavirus pandemic. Fuel for trucks is getting more expensive, and there are fewer people to drive the trucks.
All that has driven up the price of beef. If that makes consumers switch to other meats, prices should eventually decline again, Shagam said.
That wouldn't address the decline in US herds, though. Rising consumer prices don't always translate to profits (and, therefore, herd expansion) for ranchers. They don't decide how much to charge for their animals. They have to sell cows for whatever price the meatpackers, like Tyson and Cargill, are paying. Those cattle prices are rising, Shagam and Anderson said, but ranchers' costs have risen much faster.
"When my fuel prices go up 40 or 50%, I have no way to pass that on," Stone said. "A cattleman's dream is to break even."
But it takes more than breaking even for ranchers to expand their herds. "That's all subject to what Mother Nature wants to hand out," Stone said. With yet another week of record heat looming, and Western water reservoirs drying up beyond recognition, it's shaping up to be an exceptionally hot, dry summer.
Anderson said he didn't expect grocery stores to run out of steak in the coming years. If ranchers don't expand their herds, though, the diminished beef supply will put constant "upward pressure" on prices, he added.
High prices could be here to stay unless the drought ends or costs for ranchers fall. "Neither one of those particularly seem to be very near on the horizon," Anderson said.
- JPMorgan CEO Jamie Dimon told wealthy clients there's a chance the US is heading into 'something worse' than a recession, report says
- A 29-year-old woman found a mark on her head and was diagnosed with a fungal infection. It turned out to be invasive skin cancer.
- Here’s a list of stocks that can benefit from the festive season
- Rakesh Jhunjhunwala-backed Concord Biotech files for an IPO
- Ather 450X Gen 3 vs Ola S1 vs TVS iQube S – price, specs and features compared
- Adani Transmission becomes first group company to hit ₹4 lakh crore market cap
- Life and times of Rakesh Jhunjhunwala — the man behind the trader
- Your milk will now get dearer as Mother Dairy and Amul raise prices by ₹2 per litre