By Kirk Maltais
Record-high beef prices will continue to wallop U.S. consumers this summer as drought conditions and the resurgence of an invasive pest are the latest obstacles to increasing cattle herds.
"Beef remains the centerpiece of the grill heading into Independence Day, but consumers are facing noticeably higher prices than a year ago," said Brian Earnest, lead economist for animal proteins with agricultural lender CoBank.
The average cost for a pound of ground hamburger rose to $6.725 a pound through May, according to the latest data from the Federal Reserve Bank of St. Louis--a 13% increase. Lowering beef prices has become a focus for the Trump White House--although plans to increase beef imports, or to pay small- and medium-size meatpacking companies to keep up production despite generationally small U.S. beef herds, have been met with resistance.
The cost for ground beef and cuts of steak are up 14% from this time last year, Wells Fargo's Agri-Food Institute said in a research note. As a result, the average cost to host a barbecue for 10 people rose by 2.4% this year to $161, or $16 a person, Wells Fargo said.
Drought conditions on cattle pastures have limited how many animals ranchers have been able to produce in recent years. These ranchers have also grappled with high costs for necessities like animal feed, pasture maintenance and farm labor. As a result, selling animals to lock in high profits has become a bigger focus compared with retaining breeding cows to replenish herds.
The Agriculture Department reported earlier this year that the U.S. cattle herd was the smallest since 1951 at 86.2 million head. Reversing this will take time.
"[It's] approximately two to three years for calves to reach the market, so this dynamic is expected to continue," said Robin Wenzel, head of Wells Fargo's Agri-Food Institute.
The emergence of New World screwworm within U.S. borders is yet another factor U.S. ranchers must contend with while trying to rebuild their herds. The USDA's Animal and Plant Health Inspection Service reported 27 cases of New World screwworm have been found within U.S. borders, mostly in southern Texas.
The USDA said cases of screwworm--in which flies plant their eggs in the open wounds of warm-blooded animals to allow their larvae to live off the surrounding tissue--do not pose food safety issues for the U.S. beef supplies. But attempts to contain the spread of the disease add to supply-chain complications that make shipping beef more expensive.
The costs for other meats are rising more slowly. Chicken breasts and hot dogs are assessed up 3% and 5%, respectively, said Well Fargo. This makes them candidates to take up more real estate on the grill. Wells Fargo suggests smoking a pork shoulder or ribs as an alternative to grilling burgers, with the average price for pork butts virtually unchanged from the prior year.
Americans have been resistant to changing their protein-consuming proclivities in the face of higher prices, but that's slowly changing, said Earnest. "Consumers are showing more willingness to trade across proteins," he said. "Retailers are reflecting that in feature activity, promoting a mix of beef, chicken, and pork rather than relying solely on beef as a traffic driver."
Live cattle futures trading on the CME remain close to all-time highs. The most-active contract is down 0.4% to around $2.42 a pound Monday, off of a record $2.54 a pound set in May, according to data from FactSet. Cattle futures are up 14% from the same time last year.
Wells Fargo did note that prices for some common cookout sides are lower from this time last year, with the cost to make deviled eggs down 14%. But beverages are expected to be 4% more expensive on average, particularly beer and wine.
While costs for a lot of the provisions of a July 4th barbecue are up, Wells Fargo doesn't discourage consumers from celebrating the holiday. "There is no reason not to fill up the grill, but a little strategic planning can save a lot of money," says the firm.
Write to Kirk Maltais at kirk.maltais@wsj.com