Beef prices are at record highs this year. However, some South Dakota producers say just because prices are up, that doesn’t mean their pockets are getting filled.
The price of beef has been a national talking point, especially following disagreements between President Donald Trump and the cattle industry. Trump has announced plans to try and bring the markets down, including importing more Argentinian beef and dropping tariffs on the product altogether. Beef markets retracted by about 20% after these comments.
The administration had put a 40% tariff on Brazilian beef, something some have said contributed to recent price increases because Brazil is the largest global beef exporter and fills the lean beef markets in the U.S.
Adam Bode is the CEO of the Demkota Ranch Beef, a beef processing plant based in Aberdeen. He spoke on a panel of people from the state’s cattle industry at a recent Downtown Sioux Falls Rotary meeting. He said lifting those tariffs will show up in grocery store pricing, particularly on ground beef and processed foods.
“Recent announcement on rescinding Brazilian tariffs will have a meaningful impact. It will fill the lean meat. So, most of that meat’s going to end up in your ground beef or your processed food,” Bode said. “So, it’s not going to affect your ribeye pricing or any of those. It will probably drive down ground beef pricing a little bit. Now, it’s going to be drastic in the front part of the year because it’s still a quota-based tariff system that is with Brazil.”
In an interview after the panel, he affirmed the industry is keeping its eye on the consumer.
"Yeah, it’s an important concern because we don’t want our consumers to stop choosing beef and taking a pork or a chicken or down to beans, et cetera,” Bode said.
So, he said the beef and cattle industry must look at the issue economically.
“But every consumer has to manage their budget. So, we’re trying to find economical choices, and the way to do that is potentially providing alternative products that are still beef. Rather than buying a 90% lean hamburger, maybe you go to an 80%,” Bode said. “And that should lower your cost. Everybody still wants a good eating experience so you may not be able to go all the way there. But that is one option that a consumer can do is just make a slight substitute in that versus substituting all the way to an alternative protein source.”
Some producers have pointed to inflation as a driver behind the price increases for beef.
Inflation's Role in Rising Beef Prices
Bode said it’s certainly a factor in the whole equation.
“Well, inflation’s real and it impacts every aspect of our goods. So, whether it’s the labor at the grocery store, they’re having to pay a higher wage rate for their stockers and they’re meet cutters, etc., too the packaging they put it in is certainly more expensive than it was two years ago. And that’s been a reality,” Bode said. “And same thing for our operation. Our labor rates have gone up, our cost to all things have gone up in that. Inflation is a thing that gets pushed to the end consumer. It rarely stops in the supply chain.”
Bode isn’t the only one who think that.
Dave Geraets is a producer on a 2,500-cattle head farm near Colton, South Dakota. He said inflation is certainly part of the reason.
“Prices being high is associated with inflation. If you look back to the year I was born, 1974, the Inflation rate was 11.3. Price of corn was exactly the same price it is today," Geraets said. "So I mean, there is some marketing or ebb and flows on this or highs and lows. It’s just a normal cycle as far as what I see.”
According to the Federal Reserve Bank of St. Louis, the price of
beef and veal products has continued to see increases in consumer price index, or CPI, over the past decades. The CPI is a measure of inflation and tracks the average price of goods and services at a given time. Fresh or frozen beef and veal products were 30.4 points in 1947. This September the same figure approached 410. The CPI continues to trend upward.
Inflation hits multiple sides of the supply chain to drive prices up.
Increasing Input Costs
Gereats said that includes input costs for cattle producers.
“Price of corn, which is a major input for us, is static or that is not very high. But the price of the calf that we have to buy off the cow is actually record high. It’s never been this high before. So, if we’re sitting at, you know, that costs me $2,800, $3,000 for a bull and calf, and I have to get that to fat, we have to put another $1,000 on that," Geraets said. "Our break evens are way above where the market is or going to be.”
He adds that once you get the calf or bull, you’re about 18 months away from knowing whether you’re going to profit or not.
The industry also has its eye on other input costs, such as permitting requirements and potential regulations on the horizon.
In November, some lawmakers said it might be time to look at South Dakota’s ag industry after a report showed that many of the state’s rivers and lakes are polluted to the point, they can’t fully support their intended uses. That includes looking at regulations for the industry.
Geraets said he has concerns for what that could mean.
“Just making sure on the regulatory side that we’re all on the same page and that also the playing field is leveled," Geraets said. "I guess knowing that if they’re looking at, for instance the Sioux River mixture, they’re looking at all the possibilities from municipalities all the way down to everything that’s coming into there.”
He also said he’d like to see more education to everyone, so everybody can be involved.
Geraets contended that South Dakota's water systems could be improved.
“I guess, I think the current regulations I think are fair. And the channels to go through are there," he said. "I think it’s all warranted, it’s just that if they’re going to point fingers, I would just make sure that we’re leveling the playing field on all tributaries and everything that’s going into the problem that they’re looking at.”
He adds that “once urban sprawl happens, you lose the acreage forever.”
“At the end of the day we’re still an ag state, so I’m trying to hold onto that and pass it on to our kids," Geraets said. "And it’s very capital intense the amount it takes to run these operations.”
In addition to market volatility, inflation and rising input costs, the U.S. cattle herd is the smallest it’s been since the 1950s.
Taking an overarching look, Demkota CEO Bode told the panel audience that he thinks Americans also don’t recognize that beef is often seen as a luxury item in other countries.
“I don’t think that we truly highlight that it’s actually an inexpensive protein when you compare it to other goods that you’re buying from your grocer," Bode said. "Especially when you start comparing it to a cup of coffee or a bag of Doritos or something like that on a per ounce basis.”
He added that if it’s viewed as “important calories,” it’s an inexpensive product and protein.
