Ground beef price rises show no signs of slowing

Already high ground beef prices could go even higher by yearend and into 2014, according to some analyses of recent production and price data. The latest U.S. Department of Bureau Labor Statistics Consumer Price Index data for June 2013 show the average retail price for 100% ground beef hit $3.382 per pound. That’s up 2% from $3.311 but 12.5% above the June 2012 price.

Prices have risen even more steeply for lean/extra-lean ground beef. The CPI pegged it at $4.805 per pound, up 18.6% over the year-ago price. Ground chuck is high at $3.403 but that is a 1.7% decline from a year ago.

Smaller herds resulting from droughts in cattle country are cited as a major reason for the price rise. The number of domestic cattle and calves on Jan. 1, 2013, was 89.3 million, a 2% decline from 2011 and the lowest herd size since 1952, the U.S. Department of Agriculture reports. The number of cows and heifers that have calved stood at 36.8 million at the beginning of the year, the lowest count since 1941.

Price spikes in ground beef will hurt small chains and independents quicker than large chains, which contractually lock in prices for half- or full-year terms. McDonald’s Corp. CFO Peter Bensen told analysts last week that the “full year outlook for the increase in our U.S. grocery basket remains at 1.5% to 2.5%.”

But earlier this week, Texas Roadhouse CFO George Price Cooper gave analysts a different story from the perspective of a steak chain. “For 2013, we expect food cost inflation of 6.5% to 7% with the third quarter coming in at 7% to 8%, and the fourth quarter in a range of 6% to 7%,” said Cooper. “There’s still some flux in these numbers, given the fact we are on the market for about 20% of our beef needs, as well as the majority of our produce and dairy needs. The good news is that while it appears we are weathering our second straight year of 6%-plus food inflation, we feel much better about 2014 at this time.”

Consumers have shown themselves to be fairly tolerant of reasonable menu-price increases (since they see supermarket prices rise), but Technomic research finds 77% of adult meat-eaters say they would change their ordering habits if menu prices for beef dishes increase. Nearly half (49%) say they would order beef less often. Among burger-loving 18-to-24-year-olds, 60% said they’d cut back on beef. For 43% the answer would be to dine out less often.