From bacon and Gorgonzola sliders to pan-seared New York Strip steaks, beef is on the menu of almost every restaurant in America. When the price of beef fluctuates, it can really affect a restaurant’s bottom line. To better manage your restaurant’s food costs, it’s important to understand the leading indicators of rising and falling beef prices.
Several factors go into the price of a cut of beef: changing government policy, the cost of energy, the price of feedstock (such as corn and soy), changing consumer preferences, and even weather patterns. Will a trade war cost the ranching industry a large international market? Do millennials prefer veganism, vegetarianism, or the new keto and carnivorous diet trends? How much will the government hand out in farm subsidies to corn and soybean farmers? Will a drought in the Great Plains dry up much of the cattle forage?
The market considerations are nearly endless. Even when leading indicators are accurately identified, such as a spike in the prices of corn, it takes time for the market to adjust to a place of equilibrium. For example, it can take 12 to 18 months for cattle prices to adjust to changes in feed prices. There’s no foolproof way to know precisely when beef prices will react to outside factors, let alone by exactly how much. Even the closest market observer can’t possibly sift through all the data and predict the future (the inconvenience of not having a working crystal ball!).
However, it’s better to have imperfect information that no information at all. Here are a few simple indicators you can look for that might give you a better idea where the beef market is heading.
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Keep a close eye on Washington. Farm subsidies, trade deals, and trade wars have a strong influence on U.S. beef prices. Right now, the most powerful factor affecting the expected price of beef might be President Trump’s trade tariffs on China. China now pays a 25% tax on beef imported from the US, so they’re buying less. Since ranchers lost a portion of their international market and now have an oversupply, price on beef is expected to drop until ranchers can adjust their cattle supply. In July, experts predicted prices may drop between 5 and 12 percent.
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Turn your attention to Mother Nature: After a multi-year drought struck the southern and western United States in 2010, beef prices spiked to record levels. Dry conditions compromised water resources for ranchers in Texas, Oklahoma, Kansas, and beyond, limiting hay and grazing land for livestock. Ranchers sent cattle to the market early, resulting in smaller yields and therefor, higher prices to meet consumer demand. Turn on the weather channel and pay attention to rainfall levels in the western United States. Wet winters, springs, and summers in ranching regions are connected to higher soil moisture levels, more forage supply, and increased cattle production, which might mean better prices for restaurants.
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Keep up with expert analysis. Let the industry pros do the work of sorting through all the data points. While the USDA keeps thorough data records and publishes regularly beef market outlook reports, industry resources like Drovers analyze and compile the data in simple terms. Subscribe to Drover’s newsletter and read their most recent cattle market analysis here.
You don’t need to be an economist to keep up with the ebbs and flows of the beef market. With a little attention on Washington, the weather, and industry experts, you’ll be better equipped to manage your restaurant’s bottom line.
Just like the price of beef, energy prices fluctuate and can take a big bite out of your profit margin. Contact GWT2Energy at info@gwt2energy.com to learn more about how we can protect you and your restaurant from expensive energy fluctuations.
Elise Daniel is a writer and the Creative Director of Bellwether Communications. Previously, she worked as a press secretary on Capitol Hill and as a senior writer for a non-profit. She is passionate about communicating tough issues in clear, simple ways. Elise lives with her husband and son in Virginia.
