US cattle herd at lowest since 1951 as drought and disease strain supply
The cost of meat in US supermarkets is now 12% higher than it was a year ago, a rise more than three times the rate of general inflation. Yet the people who raise, fatten, slaughter, and serve beef say the record prices have not translated into larger profits, because their own costs have climbed alongside the prices they receive.
The BBC World Service’s Follow the Money series spent a week tracing the American beef supply chain to determine what caused the price jump and where the revenue is going. The reporting found a chain in which each link is turning over more money than before while keeping none of the extra.
At the end of the chain, Paul and Jessica Urban own Block 16, a burger restaurant in Omaha, Nebraska, that goes through about 300lb of ground beef a week and makes 2,800 burgers a month. When the restaurant opened in 2010, a burger cost $8.95; today it is $11.95. Paul Urban said profits are limited by the much higher price of mince.
“To maximise our profit, maybe we’d have to charge $13 for a burger. Well, we don’t feel comfortable doing that. I wouldn’t want to walk in here and have to pay $13 for a cheeseburger. So we don’t make the profit that we’d like — but you’re still getting people through the door, and it’s not always about the money,” he said.
Restaurants and supermarkets cannot raise beef prices without limit, the reporting notes, because consumers can switch to chicken or cheaper imported beef instead. That constraint runs through the whole chain.
Tyson, the biggest of the four meatpacking companies that control about 85% of American beef processing, reported in May that it had lost more than $500m on beef in the first half of its financial year. It is selling beef at record highs, but it is also buying cattle at all-time peaks.
Jamie Crumley owns one of the remaining smaller meatpackers, Harpley’s Meatpacking in central North Carolina. She said the price companies like hers have to pay for live animals has gone up by as much as 60% over the past three years. Harpley’s is built to handle 425 to 450 cattle a day but is currently running at just 350 because it cannot get the additional animals. The building, the line, and the staff cost the same either way, so those fixed costs are now spread across fewer animals; on any given day, Crumley said, she can lose anywhere from $100 to $400 on a single head of cattle.
Most US cattle pass through a feedlot before slaughter. Around 95% of US cattle are finished this way, fattened on corn and other grains for the final three to six months of their lives in yards that can hold well over 100,000 cattle at a time. Brenda Boetel, a professor of agricultural economics at the University of Wisconsin–River Falls, said feedlot companies are currently selling cattle at record prices but are having to buy them at all-time highs in the first place, so they are not making bigger profits.
At the start of the chain, Eric Gropper runs about 350 breeding cows on around 8,000 acres of grassland in south-west South Dakota, most of it leased from the Pine Ridge Indian Reservation. He is seven miles from the nearest paved road and two and a half hours’ drive from the closest town of any size. Gropper does not set the price for his calves; once a year he takes them to a livestock auction where buyers place bids and the hammer decides. Right now the bids are the highest he has ever seen — around $2,500 for a 600lb calf, up from $2,000 two years ago.
The record prices reflect a simple fact: there are not enough cattle. A combination of drought in many states and disease pressure left the US with fewer cattle at the start of this year than at any point since 1951. Well over 60% of US cattle are now grazing on drought-hit land, and farms like Gropper’s are having to buy in hay, silage, and other fodder for their cattle. Gropper is experiencing the drought firsthand: the 13 natural wells across his land that provide groundwater for his cattle have run dry, forcing him to use a water tanker instead.
Gropper’s costs have climbed to new highs along with his prices. A new pick-up truck that once cost $40,000 now runs to $100,000. A wooden fence post has gone from about $6 to as much as $19. A quarter-mile roll of barbed wire has doubled, from $60 to $130. Everything he uses day to day, he said, has jumped in price since the Covid pandemic.
“I’m able to pay my bills, but my input costs are so drastically high that if we didn’t have these record prices we’d all be broke. I sit down to do my taxes, and it feels like I made a lot of money. But in the end I really didn’t make any more,” Gropper said.
The pattern repeats at multiple links. The rancher is selling calves for record sums but is not better off because he has higher costs. The feedlot company is selling for all-time high prices, but it also has to pay them in the first place. The packers are losing money because there is a limit to what they can charge. Restaurants can only increase prices by so much.
The situation will not change until significantly more US cattle come to market, and that takes time. As Gropper put it, you cannot conjure a cow overnight: a heifer, a young female cow, needs two years before she is able to produce a calf, and that calf needs another year to reach slaughter weight, so the extra beef takes three years to arrive.