Soaring Beef Prices Have Restaurants And Consumers Making Painful Choices

Skyrocketing beef prices are battering restaurants and customers. With drought conditions continuing to hit the Midwest and California and cattle herds at 60-year lows, finding reasonably priced beef is becoming a thing of the past.

According to USDA statistics, the average price of retail fresh beef rose 12 percent since last May, wholesale prices for choice-grade beef rose 11 percent in the same period. Consumers find themselves left considering alternatives: chicken, fish, even tofu, to cope.

“Be patient,” one shopper said while buying tofu, “[beef] is expense now, but sometimes you have to conserve, droughts happen sometimes.”

Other consumers are having a difficult time planning their holidays; the week of the 4th of July is typically huge for beef sales as people prepare for their barbecues.

Restaurants are also being left with tough choices.

Some restaurants are passing the price directly to consumers, while others either take the hit or offer smaller portions.

Chipotle is raising the price of beef entrees by 8 percent. Chicken, pork and vegetarian options will go up only 4 percent to 6 percent.

“Rather than bringing everything up proportionately, we decided to let steak prices carry more of the load and let customers decide if they wanted to pay the premium for steak,” according to Chipotle spokesman Chris Arnold.

California’s In-N-Out hamburger restaurants also increased the price of their most expensive, double double cheeseburgers by 15 cents to $3.45.

Carls Jr. and Hardees restaurants have been dealing with the problem by rolling out smaller sized hamburgers and more chicken sandwiches.

Steakhouses and barbecue joints are the hardest hit.

“We’re preparing ourselves that it’s going to be a long journey on beef,” said Arne G. Haak, the CFO the company that runs Ruth’s Chris Steak House. The company saw operating costs increase 3.3 percent. They’re responding by trying to lock in beef contract prices now.

Experts are saying that it will be at least two years before beef prices stabilize.

Drought is the most highly cited reason for the recent price surge. As the drought kicked in, growing feed became more expensive and ranchers ended up culling herds rather than paying excessive feed prices.

As a result, the supply for beef has shrunk, but demand continues to grow, aggravating the situation. Steak sales by volume grew by 18 million pounds in 2013, ground beef sales grew by over 20 million pounds.

Any relief in sight?

The Midwest has seen recent moderate to heavy rainfall, alleviating some of the drought conditions. And government forecasters are saying that the odds have increased for El Nino to bring rain to California this year.

Until then, restaurants and consumers will have to do their best with rising beef prices.

(Image Source: Alpha/Wikimedia Commons)