Herd decimations push beef prices to all-time U.S. high

What's worse, they are not expected to come down anytime soon.

LOS ANGELES TIMESApril 11, 2014 

Come grilling season, expect your sirloin steak to come with a hearty side of sticker shock.

Extreme weather has thinned the nation's beef cattle herds to levels last seen in 1951, when there were about half as many mouths to feed in America.

"We've seen strong prices before but nothing this extreme," said Dennis Smith, a commodities broker for Archer Financial Services in Chicago. "This is really new territory."

The retail value of "all-fresh" USDA choice-grade beef jumped to a record $5.28 a pound in February, up from $4.91 the same time a year ago. The same grade of beef cost $3.97 as recently as 2008.

The swelling prices are roiling the beef supply chain from rancher to restaurant.

Norm Langer managed to go two years without raising prices at his famed Los Angeles delicatessen.

But last week he reluctantly began printing new menus showing a 50-cent increase for sandwiches at his 67-year-old restaurant.

Langer accepts it's one of the perils of business when your bread and butter happens to be corned beef and pastrami. But he fears he may have to raise prices again, driving away customers.

"No beef, no delicatessen. That's the bottom line," Langer said after a typically frenetic lunch service. "Jewish delis aren't vegetarian; they're based on corned beef and pastrami. Things are beyond my control. With the price increase, I hope my customers are tolerant."

Langer said beef prices are the main reason his wholesale food costs have risen 45 percent in the past two years - much of it passed from his longtime supplier, R.C. Provision Inc.

The half-century-old Burbank, Calif., company prepares corned beef, pastrami, roast beef and chili for L.A. icons such as Canter's Deli, Pink's Hot Dogs and Original Tommy's Hamburgers. All the restaurants have to do is heat it up or slice it to their liking.

"For any profitability, you have to mark it up more and more," said the company's general manager, Jerry Haines, who has watched profit margins dwindle to about 1 percent from 5 percent in the last few years rather than raise prices enough to cover the increased costs.

Speaking last week at his company's plant scented with paprika and smoked beef, Haines said small businesses like his are struggling to secure enough red meat. Slaughterhouses, also known as packers, are more likely to reserve their reduced supplies for big customers like McDonald's.

There's more pressure to throw the special cuts needed to make deli meat into the grinder for hamburgers. What's left for Haines costs more. Brisket has more than tripled in price since 2008. Navel has more than doubled.

"This whole thing now is being driven by hamburger," said the gravelly voiced Haines, who keeps years of beef prices recorded on stacks of small sheets of paper. "You take all the McDonald's and Burger Kings across the United States; the amount of meat needed to make those hamburgers is forcing the value of other cuts of meat to go up."

The biggest fast-food chains aren't immune to the price pressure either. Experts say $1 value menus could soon be a thing of the past.

In October, McDonald's said its Dollar Menu of more than a decade would morph into a so-called Dollar Menu & More, which mixes $1, $2 and $5 items. Wendy's made a similar move last year.

The nation's cattle population has fallen to 87.7 million. In 1951, there were 82.1 million on hand, according to the USDA. The peak was 1975, with 132 million head of cattle, but the animals then were less meaty and required more feed.

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