How Much Will You Pay For That Ribeye?

I recently read an article in the Wall Street Journal (WSJ) discussing the surge of live-cattle prices here in the U.S. and how this will impact the cost of beef at the grocery store. USDA estimates the average retail price for beef already has risen 9.1% in the last year to $4.43/lb., and the big question is how high are domestic consumers willing to go for that ribeye?

“When the cost of a dietary staple like beef rises faster than incomes, Americans typically buy less often,” Harry Balzer, a New York-based analyst and market researcher, tells WSJ. “We just change the frequency of eating something. I suspect that’s what’s going to happen here, too.”

In lean times, consumers tend to price down their protein sources, either opting for lower-end beef cuts or choosing chicken or pork in lieu of America’s favorite protein. And, with a strong demand in the export markets for U.S. beef, the domestic price isn’t likely to stabilize or move downward anytime soon.

The WSJ article goes on to say, “Some restaurants are trying to get ahead of beef prices, with Texas Roadhouse Inc. introducing premium menu items that carry higher prices. Still, the causal dining chain expects its costs to rise this year due to beef, which makes up 40% to 45% of its total ingredient costs.”

While high beef prices will surely trickle back down the chain from the retailer to the rancher, the pressure is on all of us to boost domestic beef demand and encourage consumers to choose beef. Whether that’s through sharing recipes, educating consumers about preparation or nutrition, or volunteering to serve samples at your local grocery store, we can’t ignore this important issue. Simply stated, we can’t afford for beef not to be at the center of the dinner plate.

What’s your take on this supply and demand issue? The size of the national cattle herd continues to dwindle, which means fewer calves to fill feedlots. How will this impact live-cattle prices, both in the short and long term? At what point will feedlots throw in the towel and shut their doors, or packers? How much will consumers be willing to pay for our product?