President Donald Trump is responding to consumers’ anger about high food prices, particularly the price of beef.
At the end of September, the average cost of a pound of ground beef was $6.30, according to data from the Federal Reserve Bank of St. Louis. Prices for ground beef are the highest on record and 50% higher than levels reached in 2022, as the COVID-19 pandemic subsided.
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Trump ordered the Justice Department to investigate the business practices of the four leading meatpacking companies: JBS, Cargill, Tyson Foods, and National Beef. These companies slaughter 85% of the country’s cattle. The Department of Agriculture said market concentration among meatpackers has resulted in higher prices for consumers. The meatpacking business is an oligopoly; an investigation is warranted. Last year, McDonald’s filed a lawsuit against the four big meatpackers, alleging price collusion. Price fixing cases are complex, and often many years pass before a final judgment is reached.
More immediately, Trump has promised to reduce tariffs on imported food products. Currently, Brazil faces a 76.4% import tariff on its beef. Still, the principal reason beef has become painfully expensive comes down to economics and weather, especially droughts in the cattle regions of the U.S.
Very dry weather has forced cattle ranchers to shrink their herds. Fewer cattle are available for the nation’s beef supply, but demand remains strong. Americans like their beef. It is an iron law of economics that prices rise when demand outstrips supply. As of the end of July, there were 28.7 million beef cows across the U.S., the lowest number since 1951. The population of the U.S. has more than doubled since 1951. The supply-demand imbalance is obvious.
Cattle ranchers have been reducing their herd sizes by up to 2% a year. Droughts have forced ranchers to buy expensive feed when their alfalfa crops wither from lack of water and truck in water for their livestock when springs dry up. Some ranchers have brought in feed and water from sources up to several hundred miles away. Droughts have made raising cattle very expensive.
In 2022, ranchers slaughtered the most cattle on record. Today, the repopulation of cattle herds is growing slowly. Operating costs are higher, and interest rates are squeezing ranchers. With cattle prices at record highs, for some ranchers, short-term gains outweigh long-term possible returns. Ranchers are selling young female cattle for meat. Without female cattle, rebuilding cattle herds is significantly delayed.
With prices at record highs, ranchers are now rebuilding herds, but it will take three to four years for beef supplies to increase. Consumers should therefore expect high beef prices for the next few years and perhaps longer.
As time passes, consumers are likely to substitute other protein sources for beef, resulting in stronger demand for poultry and pork. Regardless, the bottom line is that the price of beef is not coming down anytime soon.
