July 22 (Bloomberg) -- Cattle futures surged to a record, signaling Americans will have to keeping paying more for burgers and steaks in the midst of barbecue season.
Shrinking U.S. livestock supplies have pushed meat prices to all-time highs. Ground beef reached a record $3.88 a pound in June, and boneless-sirloin steak climbed to a peak of $7.689 a pound, Bureau of Labor Statistics data showed today.
Futures climbed 17 percent this year after the U.S. cattle herd on Jan. 1 reached the smallest since 1951 as ranchers struggled to recover from years of drought. Prices for wholesale beef jumped 26 percent in 2014. Consumers have yet to balk at higher grocery bills, said Mark Schultz, chief market analyst at Northstar Commodity Investment Co. in Minneapolis.
Supplies are “much tighter than we expected,” Schultz said in a telephone interview. “The bigger surprise has been the ongoing demand, which just continues to be much higher than I would have expected at these price levels. I just don’t see it falling off.”
Cattle futures for October delivery climbed 1.7 percent to close at $1.57875 a pound on the Chicago Mercantile Exchange, and touched a record $1.582.
Consumers will pay as much as 6.5 percent more for beef and veal this year than in 2013, the biggest gain of any food group, the U.S. Department of Agriculture forecasts. Costs will “remain elevated for the foreseeable future,” prompting Chipotle Mexican Grill Inc. to increase prices of steak-based menu items by about 9 percent at its restaurants, Chief Financial Officer John Hartung said in an earnings call yesterday.
Cattle slaughter through July 19 was down 6.8 percent in 2014 from a year earlier, USDA data show. Prolonged drought has parched pastures in Texas, the top U.S. producer.
Beef costs at the Beverly Hills, California-based Fatburger chain have risen by about 25 cents a pound this year, leading the restaurant to raise menu prices 3 percent to 5 percent, Chief Executive Officer Andy Wiederhorn said in an interview last month.
Expanding the cattle herd to boost beef output is a slow process. The gestation time for calves is nine months, and animals take as long as 22 months to reach slaughter weight. Placements of animals into feedlots in June probably dropped 3.8 percent compared with a year earlier, a Bloomberg survey of 15 analysts showed.
“People are anticipating we’re going to have tight supplies of cattle all the way into the end of the calendar year,” Northstar’s Schultz said.
Feeder-cattle futures for August settlement gained 1.4 percent to $2.16025 a pound on the CME. Hog futures for October settlement climbed 0.7 percent to $1.1345 a pound.