Beef Prices Rise 20.1% Due to Increased Consumer Demand and Labor Shortage

By Megan Williams | November 16, 2021 | 4:33pm EST
(Getty Images)
(Getty Images)

(CNS News) -- Behind unleaded gasoline, beef prices have risen the most on the Consumer Price Index (CPI) since October 2020, rising 20.1% in the past year, according to the Bureau of Labor Statistics.

This is the highest single year increase in beef prices since 2003, when a cow was diagnosed with mad-cow disease for the first time in the U.S., which caused a beef recall. Normally, beef prices usually fluctuate between 1% and 5% each year according to BLS data.

But with inflation raising the prices of goods and services across the country, why is beef affected significantly more than other meat or animal products? Pork, the closest contender, rose 14.1% over the past year and dairy related products only saw a 1.8% increase.

Ron Lemenager, professor of animal sciences and beef extension specialist at Purdue University, told CNS News how the current beef market is similar to an hourglass.

(Getty Images)
(Getty Images)

“At the top we have the supply, at the bottom we have the demand, but we have this bottleneck at the packing level and the food processing level,” Lemenager said. “We had a shortage of labor; we had the product, we just couldn’t get it through the system.”

Assistant professor of meat science at the University of Idaho Phil Bass pointed to the increased demand for beef during the COVID-19 pandemic as the main source of its price increase. Citing how the beef industry had been near harvest capacity for the past 12 months, Bass explained how the pandemic encouraged higher beef consumption.

“Beef is a celebratory protein. If you’re celebrating, you don’t say, ‘Let’s go out and get a great chicken breast.’ People celebrate with steak,” Bass told CNS News. “People are trying to treat themselves during a time of uncertainty, and they’re treating themselves with beef.”

That increase in demand combined with labor shortages in the beef industry is contributing to the higher prices.

Prime rib.  (Screenshot)
Prime rib. (Screenshot)

The shortage of labor and food processing facilities first began in March 2020 at the onset of the COVID-19 pandemic, once businesses had to close and find ways to continue manufacturing while maintaining a safe work environment.

“[Facilities] had to figure out how to deal with this, how to keep the employees safe. So not only did it shut them down, they went dark for a couple days in certain areas,” Bass described. “The ability to harvest livestock really dropped off for all species.”

Comparing the COVID-19 pandemic to the market crash in 2009, Bass described how economic concern leads to a higher demand for beef.

The North American Meat Institute (NAMI) agreed that the combination of increased demand and COVID-related labor shortages created a perfect storm, leading to the higher prices consumers experience today.

“This increase in demand happened while the packing sector’s ability to process livestock was experiencing operational constraints, and has continued into this year because labor availability has similarly affected the packing industry’s ability to operate at full capacity” NAMI wrote in a press release.

  (Getty Images)
(Getty Images)

Higher demand, plus the higher prices of input costs, create higher market prices for the consumer. But that doesn’t mean cattle ranchers are increasing their profits.

“Labor costs are going up on all of our inputs, like feed and fertilizer,” Lemenanger said. “But we’re not seeing the same kind of return on that investment that might be perceived on the consumer level.”

The past year and a half proved difficult for ranchers as production facilities were unable to keep up with demand. As meat packaging and processing is able to reach production capacity again, ranchers will get paid more for their cattle.

Encouraged at how the process was returning to normal, Bass acknowledged that it was taking longer than anyone would like. 

“We've been able to catch up with the processing capacity, and the farmers and ranchers are starting to get paid more and that's a really, really good thing,” Bass said. “It's catching up. But unfortunately, it was a tough couple years for the farmers.”

However, Bass insisted that the increased demand for beef was a positive situation for the meat industry, despite the current complications.

“People like beef. They want it and are willing to pay for it,” Bass said. “Cattle producers should be excited about just how much people want meat--beef especially. I’m excited for that.”

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