Cattle futures extended a rally to a record as Americans are gearing up to pay the most ever for beef served at barbecues over the Fourth of July holiday weekend.
Prices for wholesale beef jumped 23 percent this year, reaching an all-time high of $2.4813 a pound this week, and cattle prices have climbed 15 percent. Futures are rising after years of drought parched pastures in Texas, the top producer, forcing ranchers to shrink the U.S. herd to the smallest in 63 years.
Reduced supplies drove retail prices for ground beef and and boneless-sirloin steak to records. Meat costs are increasing at a time when drought in California is making produce more expensive, and rising demand for U.S. dairy exports is also adding to grocery bills. An index tracking foods popular at barbecues rose 5.1 percent in May from a year earlier to the highest ever for the month, signaling record consumer expenses for holiday cookouts.
"We're going to see beef as becoming the rich man's meat," Chad Henderson, the president of Brookfield, Wisconsin- based Prime Agricultural Consultants, said in a telephone interview. "It is very, very expensive."
Consumers will pay as much as 6.5 percent more for beef and veal this year, the biggest gain of any food group, the Department of Agriculture forecasts. The cost of beef for Denver-based Chipotle Mexican Grill rose 25 percent in April from the fourth quarter of 2013, a "pretty dramatic" increase that prompted the restaurant chain to boost menu prices, Chief Financial Officer Jack Hartung said at a conference on June 11.
Feeder-cattle futures for August settlement rose 0.7 percent to $2.17625 a pound on the CME, after touching an all- time high of $2.18775 Wednesday.
Beef and dairy farmers held 87.7 million head of cattle as this year began, the fewest since 1951, the latest data from the USDA show.
Expanding the cattle herd to boost beef output is a slow process. The gestation for calves is nine months and animals take as long as 22 months to reach slaughter weight.
Prices "are going to stay high," Dick Quiter, an account executive at Chicago-based McFarland Commodities, said in a telephone interview Wednesday. "You're probably looking at a two-year cycle from now into 2016 before cow numbers are ramped back up to what they were."