Athens, GA |
The price of beef at the grocery store has been a headline for months — and while consumers are feeling it in their wallets, the story behind those prices runs much deeper than simple supply and demand. It starts with the cattle cycle, and a combination of economic and environmental pressures that have been building for years.
“Usually, we follow the cattle cycle about every ten to fourteen years. We hit periods where we have low profitability, and in that situation, producers look to try to increase their revenues — and by doing so, they’re liquidating some of their herd,” said Will Secor, Extension Livestock Economist with the University of Georgia. “We’ve also seen significant drought throughout much of the U.S., particularly in the Central Plains, and the Southeast has certainly had its own drought over the past number of years. As we don’t have those forage resources available, we reduce the number of cattle. Those different combinations are creating a situation where we have fewer head of cattle.”
Fewer cattle means tighter supply — and tighter supply has pushed beef prices higher. But Secor says it isn’t just a supply story. Consumer demand has been equally powerful in driving what people pay at the meat counter. For cattle producers, those higher prices have been a long-awaited reward — the payoff after years of drought, low margins, and difficult herd decisions. Many were beginning to reinvest and rebuild.
Then came the announcement of new beef imports — and with it, uncertainty at exactly the wrong point in the cycle.
“If a producer is thinking about where they were last year versus where they are today, they’re probably thinking: the supply fundamentals in the U.S. haven’t changed, but we’ve certainly seen prices start to slide. What’s going on?” Secor said. “Part of it is macroeconomic and policy uncertainty — and that uncertainty plays into the decision process of retention. Uncertainty hurts not necessarily as much today, but when you’re thinking about making plans for the future. That’s going to impact their expansion decisions.”
Beef imports are nothing new to the U.S. market, but Secor says the downstream impact on cattle prices is a legitimate concern for producers who were just beginning to see the rewards of a tightened market.
“We’ve been importing beef for a long time. A lot of times it’s lean beef or beef trimmings, so that’s going to go to things like ground beef — and a lot of times, that ground beef isn’t going directly to U.S. consumers at retail. It might be going through fast food restaurants and other food service locations,” Secor said. “So it isn’t necessarily going to have a huge impact at the retail level, but it could overall from a price-of-beef standpoint.”
For Georgia’s cattle producers, the question now is whether the current moment of uncertainty slows the expansion cycle before it ever really gets started — a familiar frustration for an industry that has grown accustomed to being tested just when things start to look up.