You think a pound of beef is expensive? Wait until you hear what it costs to produce it in Colorado.

Since 2018, the cost of beef has risen 28% at retail — and ranchers are feeling the pinch from all sides.

From The Colorado Sun

By Tracy Ross3:30 AM MST on Dec 19, 2023

Photo by LKY

By the time beef — Colorado’s second-favorite protein source after poultry — gets to the grocery store, it couldn’t resemble its original state any less. 

Nor could the tidy package of burger — ground from the trimmings left after a butcher chops a cow’s edible parts into cuts like chuck roast, ribeye and skirt steak — be less revealing of the complexity of the year-long transformation from a young calf into the most popular cut of beef. 

Most of the Americans — Coloradans included — who turned up their beef consumption during COVID “because they had more time to experiment with cooking”  have no idea how much it costs a rancher to get the source of their ground round from stable to table, said Bernt Nelson, an economist specializing in livestock markets for the American Farm Bureau Federation.

The fact consumers feel they are paying more may have no connection to whether ranchers are making any profits. The rancher’s share of every food dollar spent on beef has been under 40 cents in recent years, and that number alone does not provide much insight into the profitability of individual ranching operations. Cost and Return Estimates from the USDA show that Colorado ranchers lost money per cow in 2022. Their revenue per cow averaged $872, but their average operating expenses to raise that cow to market were $972, according to Daniel Mooney, assistant professor of agricultural and resource economics at Colorado State University. Both numbers were higher than in 2018, when ranchers were making profits. Their revenue in 2018 was $737 per cow, while their costs were $717.

“So livestock producers could cover their input costs in 2018 but not 2022,” Mooney said. “And when allocated overhead consisting of fixed costs like taxes, insurance and utility bills is added in, the average net value of production was negative both years.”

The rising cost of raising a calf

All of Colorado’s cattle-raising regions are seeing the cost to raise a calf to productive age jump by hundreds of dollars in the last 5 years, with Northeastern Colorado being the priciest place to raise cattle.

That might be hard to imagine when a customer hits their local Sprouts Farmers Market store and sees prices ranging from $7.49 for 16 ounces of Sprouts brand 85% lean beef to $8.99 for 16 ounces of 95% lean. Or their local Walmart, where a pound of store brand 72% lean ground beef is $4.22 and a pound of 85% lean is $5.97. But according to Nelson, outside of stores adjusting their retail prices to match or outdo their competition, those basic prices reflect an array of “inputs” ranchers must pay to bring their best beef to market. 

Cow-calf production marks the first stage of the beef production process and is a good way of showing the annual cost analysis of raising a cow and calf for a year, Nelson says. The input costs for a rancher to raise one of Colorado’s estimated 624,000 beef cows include everything required for the female cow to birth the calf up to the calf being transported to and sold at auction six to nine months later and weighing between 400 and 700 pounds. 

These inputs include feed (purchased, homegrown and grazed), land (bought or leased) vet visits and medicine, livestock supplies, marketing, repairs on equipment, labor and general farm overhead, according to CSU’s cow calf cost-return data. 

“Then there are things like barbed wire and wooden posts for fencing and the diesel cost embedded in these through the transportation needed to have them delivered,” added Nathan Weathers, whose multigenerational family farm produces corn, popcorn and cattle in Yuma County. 

“For generic cattle, not the value-added kind you’re selling to a niche market (like grass-fed), expenses have been going up for the last five years,” he added. “The cost of diesel has made transportation costs go through the roof, for instance.” In June of 2022 it rose to $5 a gallon (though today it’s back in the $3.50 range). That hit every aspect of the agriculture industry “and it hit it both ways,” Weathers said. The cost of trucking wholesale products like chemicals, fertilizer and seed to a farm rose as well as transporting calves to sell at a calf barn. “It was costing you twice as much to get them there,” he added.  

Beyond intrinsic costs, there are external forces associated with growing and selling cows, which the majority of people rushing to King Soopers for a plastic-wrapped pound of burger on Taco Tuesday almost certainly don’t know about, Nelson said.   

Fluctuations are constant, based on things like consumer preferences, weather trends and geopolitical conflicts. The most recent have occurred following the COVID beef-eating boom plus three years of drought, the war in Ukraine and inflation, he added.  

And don’t forget the state of Colorado’s external impact on beef consumption. In 2021, Gov. Jared Polis signed a proclamation promoted by animal activists to designate March 20 “MeatOut Day,” infuriating ranchers in the state’s $4.6 billion livestock production industry and inciting the Colorado Cattlemen’s Association to make the 20th “MeatIn Day.”  

External forces create “expansion and contraction of cattle supplies and right now we’re in a contraction phase,” Nelson said. “That’s because when ranchers respond to one force — say, drought — by dialing back on the number of heifers they buy, it directly impacts the number of calves born.” 

In America’s current cattle grow-shrink cycle, “we are with certainty” in the contraction phase, with ranchers moving a “very high number” of female cows through the market supply chain instead of breeding them, Nelson said. “In order for the inventory to expand, more females will have to be retained by farmers rather than marketed for processing.” 

When farmers start keeping females, they will be used to produce a bigger calf crop for the upcoming year, resulting in expansion. And increasing the cattle supply should provide some relief to customers buying beef at the store.