Soaring Meat Prices Fuel US Food Inflation

We noted at the end of April that Gro’s US Ag Price Index was at its highest level in 15 years, and it is even higher now. On May 24, it hit 104.48, compared to a 5-year average of 99.78. The index uses high-frequency local cash price data and is modeled based on US food manufacturing input costs. It is updated daily and provides an inflation estimate for the current month, up to 6 weeks ahead of when official data becomes available from the US government.

Gro data shows that soaring beef and chicken prices are among the biggest drivers of this inflationary trend. Spurring the rallies in meat prices are sharply higher prices for grains used in animal feed, coupled with distribution snags as pandemic restrictions on restaurants are relaxed. 

Corn is a key feed input for cattle and has a major influence on beef prices. Academic studies show that an increase in corn price of a dollar a bushel tends to cause a 16-cent-per-pound increase in beef carcass prices. July corn futures are up 36% so far this year, to $6.58 a bushel. At the same time, the USDA’s national select-grade composite beef price, commonly known as the beef cutout, rose 54%.

As restaurants increasingly are able to open, demand for certain cuts of beef and chicken is accelerating. For example, prices of beef loin primals, whose higher-value cuts tend to find their way into restaurant dishes, have jumped 86% so far in 2021. By contrast, beef chuck primals, which contain many grocers’ meat-case cuts, have risen just 31%. 

Chicken cuts favored by restaurants also have seen the biggest price jumps. While chicken breast prices are up 132% year to date, prices of drumsticks, sold largely in grocery stores, have increased just 45%. 

The easing of pandemic-related restrictions has caused supply chains to shift their focus away from last year’s more grocery-targeted demand to a more historically normal balance of retail and food service. That has prompted some price disparities as the industry readjusts. Meanwhile, shortages of grains used as animal feed are expected to maintain upward pressure on meat and chicken prices for some time to come. 

This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.