U.S. beef production hit a 21-year low in July causing beef prices to rise.
The drop in production is due to last years drought, which forced many ranchers to slaughter more cattle due to a lack of grain. Feed cost aren’t as high this year, but it takes farmers up to two years to extend their herds. Tucker Hughes, a 65-year-old rancher in Stanford, Montana, estimates that the number of animals he keeps for breeding will drop as much as 20% in the next two years. Traders are expecting to see beef prices go up again, possibly even hitting the $1.35175 a pound high reached in January. McDonald’s (MCD) is only expected to spend about 2.5% to 3.5% more on beef this year, reports Bloomberg.
Steakhouses won’t be as lucky.
“For 2013, we expect food cost inflation of 6.5% to 7% with the third quarter coming in at 7% to 8%, and the fourth quarter in a range of 6% to 7%,” George Price Cooper, CFO of Texas Roadhouse (TXRH), told Burger Business. “There’s still some flux in these numbers, given the fact we are on the market for about 20% of our beef needs, as well as the majority of our produce and dairy needs.”