• Mike von Massow

Nebraska floods may lead to an increase in beef price

Updated: Aug 12, 2019

We pay a lot of attention to food prices. The reality is that food prices are increasing at a relatively steady rate over time. Increases in food prices matter, but they have tracked relatively closely to the overall rate of inflation for the past thirty years as can be seen from the graph below.

Graph showing relative price of various food items between 1999 to 2019 in Canada.

There is actually much more price variability within years than there is between years. You can see in the second graph that there is considerable seasonal variation in price which relates largely to importation during the winter. The seasonal variation can also be exacerbated by localized weather patterns or other events. In the past decade, there have been very dry years in California which has led to higher prices for some produce in the winter. Localized rain or frost can also lead to short term price spikes – we all remember the $8 cauliflower back in 2015. We are very sensitive to changes in prices and particularly to increases in prices. That means that we often have a perception that food prices are increasing more than they actually are.

Graph showing monthly inflation rates in Canada between November 2014 to November 2016.

Significant long term price changes can be driven by events too. In the food price index graph we can see a significant jump in the index for beef prices in 2015. This was caused by a significant drought in both Canada and the US. Drought reduces feed stocks and means that herds shrink. Smaller herds mean fewer calves. Fewer calves means fewer fed cattle and less supply in the market. Lower supply without a change in demand means higher prices. It is pretty simple really. The impacts in beef are more long lasting because the process for rebuilding herds takes time.

The recent floods in the US Midwest could have the same sort of effect on beef prices next year and perhaps as early as this fall. While specific numbers are not yet available, there have been significant losses of beef calves in Nebraska and Iowa. Those calves will not come to market in 2020 meaning supply will be down. Nebraska also feeds cattle and there are likely also losses in feedlots meaning supply could be lower as early as this fall.

Cattle grazing in a green pasture.
Beef cows grazing. Image retrieved from https://www.beefmagazine.com/cow-calf/8-drivers-profitability-and-how-manage-them-make-more-money

Retail beef prices are often buffered from price cycles in beef markets but big losses such as these will likely have big impacts on the prices we see in retail going forward. These are devastating losses for individual farm families that will send a ripple through the markets all the way to our grocery meat counter.

Recommended citation format: von Massow, M. “Nebraska floods may lead to an increase in beef price”. Food Focus Guelph (20), Department of Food, Agricultural and Resource Economics, University of Guelph, April 8th, 2019.

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