The worst U.S. drought in a half century and record feed prices are spurring ranchers to shrink cattle herds to the smallest in two generations, driving beef prices higher.
Beef output will slump to a nine-year low in 2013 after drought damaged pastures from Missouri to Montana, the U.S. Department of Agriculture estimates. The domestic herd is the smallest since at least 1973, and retail prices reached a record last month, USDA data show.
Retail beef reached an all-time high of $4.72 a pound in July, according to the USDA's composite price, which includes choice beef, other beef and hamburger values.
Feedlots are losing $300 a head this month fattening cattle for slaughter, after corn surged 61 percent since June 15, University of Missouri data show. Greeley-based JBS SA, the largest beef producer; fast-food chain Wendy's Co.; and Greenwood Village-based Red Robin Gourmet Burgers Inc. are among those planning price increases.
The USDA expects food inflation of 4 percent in 2013, compared with an average of 3 percent since 2004. Next year, domestic beef prices will rise 5 percent, pork 3.5 percent and poultry 4 percent, the USDA estimates.
"We've had a huge liquidation off of pastures," said Walt Hackney, 74, who buys and sells 250,000 cattle a year in Omaha and has worked in the livestock business for about a half century. "It's all due to the drought. There's no grass for them to graze on."
Retail ground beef averaged $3.085 a pound in July, the highest since at least 1984, and whole chickens were $1.45 a pound last month, the highest in at least 32 years, according to the Bureau of Labor Statistics.