In 1918, a filet mignon at Delmonico’s Restaurant would have cost $1.65. That same item on their 2014 menu is $48.00. However, according to the BLS inflation calculator, if the price had remained the same, it would now be $25.56.
Including variable costs like labor and fixed costs like rent, there are countless reasons that steak prices fluctuate. However, recently reading that steak from a butcher shop will cost 10% more, I was curious about the price of beef.
This took me back to 2007. On the supply side, in addition to coping with drought conditions, ranchers were spending more for feed because corn prices had skyrocketed. As for demand, in 2008, the recession diminished the amount of beef that people were buying. Combine the 2–more expensive production and fewer purchases and you have the incentive to reduce the size of your herd.
And yes, beef herd size is at its lowest in 52 years. Just for 2013, there were 253,000 fewer beef cows–1% of the herd.
Economically speaking, usually, high prices attract more from the supply side. However, in the farm notes I read, experts predict slow growth because of the relatively low number of heifers and the continuing prevalence of drought conditions. Perhaps though, the best reason I read was the market’s uncertainties have generated a cautious outlook among ranchers.
Sources and resources: I found the 1918 Delmonico’s menu in an NPR news report and H/T to marketplace.org for alerting me to the vagaries of the beef cattle market which I then investigated further in an agricultural news letter. For the current steak price at Delmonico’s, here is a menu.