Increased costs of cattle production due to drought and war
Beef prices soaring… Food price impact
Will the price of US beef rise?
US beef prices soared. This is due to a lack of supply as farmers stop raising cattle due to drought caused by the climate crisis and increases in labor and energy prices. The price of hamburgers and steaks in the United States has soared, and domestic import prices are fluctuating.
The Wall Street Journal (WSJ) reported on the 1st (local time), citing Rabobank, the world’s largest agricultural bank, that the price of ground beef has risen more than 20% since 2020, and could reach the level highest ever this summer. Because of the barbecue culture, beef consumption is high in the United States during the summer. The WSJ also said, “The average price per pound (about 454 grams) of beef is expected to be $5.33 (about 6,965 won) this year, and is expected to rise at least 15 to 25 cents next year.”
The biggest reason for the increase in US beef prices is the drought that has been going on for several years. Feed costs have skyrocketed as pastures in dry regions such as Nebraska, Oklahoma and Texas dry up. While Russia’s invasion of Ukraine pushed up feed prices, inflation also increased labor costs, facility costs, oil prices, and bank interest rates.
The profitability of livestock farms has declined sharply. Ranchers in Nebraska, USA said, “The net profit from a cow has risen from $20 earlier this year to $80 recently, but it is much lower than the average net profit in 2014 (about $600).”
As farm owners reduced their breeding scale or closed their businesses altogether, a vicious cycle of beef supply was further reduced. As a result, the number of cattle raised in the United States this year has fallen to its lowest level in 10 years. The US Department of Agriculture said beef production this year could be down more than 5% year-over-year for the first time since 2015, and that next year could see its biggest decline since 1979.
The WSJ warned that “hamburgers and steaks, already near record highs, will become more expensive,” and could affect food and grocery prices. “Beef prices have become the most uncertain part of our business,” an executive at hamburger chain Shake Shack told analysts last month.
An increase in the domestic price of US beef, which accounted for about 21.6% of the annual domestic beef sales last year (published by the Korean Beef Fund Management Committee), seems inevitable. For domestic consumers, American beef is a cost-effective food ingredient that is cheaper and of better quality than Korean beef. An official from a major market in Korea said, “The price of American beef is constantly rising.” Another major market also said, “There is no direct impact so far, but US beef imports are on the decline.” This means that the beef crisis could hit Korea sooner or later.
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