Dive Brief:
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Home cooks will continue purchasing beef this grilling season despite higher prices bolstered by strong demand and limited domestic cattle supplies, a meat analyst said.
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Retailers have kept beef prices elevated due to market uncertainty as they work through a temporary surplus of beef from increased imports and heavier domestic carcass weights, said Lance Zimmerman, a senior protein analyst with Rabobank, a Dutch bank.
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Although barbecue grocery items are more expensive today, he noted that consumer dollars are going farther for ground beef and steak compared to spending 10 years ago.
Dive Insight:
Beef prices have increased over last year more than any other animal protein or retail item typically purchased for barbecues, second only to beer, according to Rabobank. However, sticker shock is not convincing shoppers to trade down to chicken, pork and other affordable options for the Fourth of July.
“In the grand scheme of this basket of goods for grilling season, while relatively expensive, it’s worth it,” Zimmerman said about beef during Rabobank’s annual BBQ index webinar last week.
While there are signs of economic stress in the beef market as prices continue to rise in response to strong consumer demand and a tighter supply of domestic cattle, there is also some room for shoppers to spend more. Over the past 10 years, Zimmerman said wage growth has outpaced retail beef price gains.
In general, grocery shoppers are working more minutes to pay for a pound of beef today than in recent years, but not to the same degree as in 2014 and 2015. This means the market has the ability to take on basically $1 to $1.50 per pound of price growth over the next two years, Zimmerman said.
“We still have some opportunity where perhaps beef isn’t going to be as much of a stressor on the consumer in the short run,” he said.
At the rancher level, U.S. producers have been selling off their herds due to drought and market pressures over the last five years, resulting in a shortage of cattle. Additionally, geopolitical tensions have affected trade, production costs have increased and demand has shifted from restaurants to retail since the COVID-19 pandemic.
“As a result, they’ve liquidated cows,” Zimmerman said. However, today, a larger share of retail dollars are funneling their way down to the ranch level. As prices increase, Zimmerman said there will be more of an incentive for producers to retain their heifers and rebuild their herds.
“Our expectation over the next several years is a slow, but gradual and consistent rebuild of that cowherd going forward,” he said.