Worst We Have Seen

Why Meat Prices Are About to Soar

Worst We’ve Seen

There are several threats currently impacting the primary ways in which we obtain protein in our diets: meat.  Each threat could warrant a stand alone blog covering such things as overfishing which is impacting our oceans or how Avian flu is wiping out poultry operations, but this blog will focus on the beef industry exploring its complex and fragile supply chain.  You may have heard of cattlemen selling their herds because operational costs have skyrocketed.  You may have heard rumors of shortages on the horizon, but what’s the real story?  In this blog, will explain the production cost dilemma, inflation’s impact, the import and export shell game, and, most importantly, we’ll try to answer the question: “is there a meat shortage looming in our future?”

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Meat PriceBefore being sold for slaughter, regular cattle achieve the age of 12 to 22 months and 18-24 months for grass-fed.  Cows will consume 25 pounds of feed per day in the form of grain or hay.  At today’s prices, that’s a minimum of $1,000 per year just in the hay, and the price is way up and still climbing since 2010.  Additionally, the cow will need between 8 to 30 gallons of water per day, depending upon its weight and age.  In some cases, the cost of the water is enhanced by the expense of pumping it from aquafers.  The USDA puts that figure for the cost of transporting water at around .07 per gallon, so just using that low figure, each mature cow is drinking another $800 in water per year.  So the current input cost of one head of cattle for just food and water is around $1,800.  This doesn’t include transport, ranch hands, electricity, medicine required to keep a healthy herd, and so much more.  We do know, however, that in 2019, the value of one head of cattle was only $1,031.  Prices have shot up in 2022, which corrects the inequities somewhat, with a bred cow topping over $2000.  These price adjustments move slowly over the 22 months for a cow to reach maturity, and $200 of marginal profit is a risky gamble.

These price increases and adjustments ricochet across a very complex meat supply chain that begins with the rancher and moves to the meat processor, packer, then retailer.  You would be mistaken if you thought the meat in your grocery store was fresh if your definition of fresh is related to time.  After processing beef, for instance, it is aged approximately 21 days in large chunks under refrigerated conditions.  These large pieces have less surface area for bacteria to take hold.  By comparison, something like ground beef, typically the cheapest processed form, must remain frozen or has to sell relatively quickly after being thawed at the store.  After those three weeks of hanging in refrigerators, meat workers process the carcasses by boning, slicing, and packing them in freezer boxes or cutting them into quarters for stores and butchers.  The quarters are shipped to grocery stores, butchers, and restaurants, where they are cut into primals and possibly aged further.

The beef is sometimes shipped to other countries for further processing and then returned to the US.  In the best-case scenario, it is delivered to your grocery store, further processed into the smaller cuts you are familiar with, and packed in an oxygen-free environment.  During COVID, there was a shortage of healthy, skilled meat processing workers.  This has been corrected somewhat, but several lawsuits are still pending for many meat processors ranging from working conditions to treatment to safety and wages.

All that detail to say that the animal supply chain starts when the decision to produce that animal is made and ends when the consumer eats the meat. This spans a period of more than 2-years.  Quite a bit has to occur between those two points and two years, and disruptions can vary depending on which stage of the supply chain is impacted and how severe that disruption is.  We have seen disruptions in the last two years in the supply chain, from workers to a lack of styrofoam packing materials.  Earlier this year, we saw a massive sell-off by ranchers because the prices for a head of cattle were high, but the input costs in the future looked to be even higher.  This has created a glut of meat in the market and swelled frozen inventories, but, and here’s the important point to pay attention to, it also points to a smaller supply in the future.


Import Export Shell GameIf you talk to a cattleman, he’ll tell you that the beef market is broken but not on their end.  Beef is bought at a premium, exported, then sold back to us.  You may have seen those package labels that indicate your steak is a product of Canada, the US, and Mexico.  There is a record amount of imported meat, and some of that imported meat originated right here. In the last 20 years, 75% of the feed lots in the US closed down.  More people have left the farming business, and the supply chain has shifted to a more just-in-time method that favors the corporate packers.  They don’t particularly care where the beef comes from.  Talk to a cattleman, and they’ll tell you that corporate packers are more concerned with keeping profits up and controlling the market than they are providing quality meat.  Just this year, for example, meatpacking giant JBS agreed to pay a 52.5 million dollar settlement in a beef price-fixing lawsuit.

The US exports 6% of its beef, with the significant countries being: Japan, South Korea, China, Canada, Mexico, and Taiwan.  Those six countries imported 1.94 billion pounds of beef through August of this year.  1.06 billion pounds of that beef shipped to Canada, Mexico, and Japan and returned to the US as imports.  Yes, you heard that correctly.  We exported our meat to import it back.  The route recently went through China. Then China started hoarding beef while simultaneously finding reasons to halt US exports, probably in escalating tensions with the US.  Subsequently, they remain the largest importer of beef, even paying record high prices for it, from Australia, Brazil, Argentina, and Uruguay, and through a backdoor US import route that passes through Hong Kong and Taiwan.

The US government is currently planning to invest through the USDA $1 billion in expanding independent slaughterhouses.  They hope to ease the corporate stranglehold and shift some of the power closer to the ranchers and away from international corporations who ship beef so far across the supply chain that the cows should probably get frequent flyer miles.


Inflation and ShortagesIn an inflation environment, prices go up for several reasons.  If there is a rumor of a shortage, the prices go up.  If news breaks that cattlemen are reducing their herds, prices go up.  If a few thousand head of cattle dies from heat and lack of water, prices go up.  Then there are the genuine input costs for feed, fuel for equipment, herd transport, processing, and even for pumping water from aquifers.  These all put upward pressure on the cost of meat production.  In some ways, the chain corrects itself slowly over time.  However, each hiccup, even swelling freezer inventories, results in higher consumer prices.  The retail price per pound of boneless steak has climbed from $9 per pound to about $14 per pound in just the last two years, making it a luxury food and pricing many right out of the market.  The average consumer will be purchasing more affordable roasts and ground beef.

One thing is for sure, once the price tag goes up, it rarely ever goes back down.  During an inflationary period, perception often outpaces the realities of supply and demand.  That is what we are seeing today.  There’s no doubt that input costs have exponentially grown.  There’s no doubt that the supply chain is peppered with little holes here and there, from labor to price fixing to feed supply, but is there really a shortage?  The simple answer is no, but just the high cost of beef might keep it off the table for many.

Beef isn’t like the poultry farms that are culling millions of birds because of the avian flu.  While you will see big stories about herds dying off from high heat and humidity, the numbers compared to the national herd are actually pretty small.  It’s not a supply problem we face as much as a pricing problem that is having trouble balancing itself across a fragile but extensive supply chain.  Beef production in 2022 is forecast to decrease by 2.2 percent to 27.39 billion pounds.  That’s a total of 7 billion more pounds than needed to keep every American at their average consumption of 67 pounds per person.  There’s no shortage here at the moment or in the near future.


Meat Supply ChainObviously, the mega-drought will complicate supply levels moving forward.  Reduced water supplies, high heat, and more aggressive wildfires burning up pasture land will be an ongoing problem as this drought, and high heat continues into next year.  Skyrocketing input costs will continue to pressure cattlemen to reduce herds or even give-up all together, and these added costs will wreak havoc on the supply chain until they can be adequately absorbed and passed along to you–the consumer.  When the herd’s overall health is strained, overall genetic uniformity can create an atmosphere where diseases can flourish and nutritional quality can deteriorate. Still, we are only seeing this beginning to impact the poultry industry at the moment. Overall, herd health right now remains good.  These are all things we are monitoring rather closely.

From whatever angle we look at the beef industry in this country, we don’t see a looming supply crisis.  Production levels will go down, but as we said, there’s still plenty of room for a decline before we are in any kind of crisis.  Still, cattlemen are getting marginalized out of the equation, and there’s a lopsided market control by international corporations. These economic issues have to be extreme to impact actual supply.  That’s not to say that cattlemen won’t continue to struggle in the current atmosphere.  They still have their work cut out for them.

Here’s the deal.  There is massive centralization, corporatization, and consolidation complicating things.  There’s a labor issue, and there appears to be some price fixing.  There are elevated import costs that haven’t yet equalized themselves all the way across the supply chain.  Drought and weather factors are shrinking the US herd.  But there isn’t a shortage.  Any freezer sections of your local grocery store you see vacant of the product are isolated supply-chain issues, not a harbinger of a massive shortage.  The only scarcity we collectively face now is high prices leading to a shortage of beef on your table.  If things change, we will let you know.  As a prepper, you should take advantage of whatever low prices you can find.  Try and find local sources closer to home.  Preserve by canning, dehydrating, or freeze-drying if you want to, but do that to save money in the long run and not because you are panic buying for a coming shortage.

We hope this explains some of the real issues facing beef production in our country and clears up some rumors.  If you see something threatening our supply that we haven’t mentioned here, feel free to let us know in the comments below.  

As always, stay safe out there. 


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