US beef prices have climbed to record highs, but South Dakota cattle rancher Eric Gropper says that has not translated into bigger profits for him or for other beef farmers. Supermarket beef is now 12% higher than it was a year ago, a rise more than three times the rate of general inflation, and the BBC World Service's Follow the Money series spent a week tracing the American beef supply chain to see what is driving the increase and where the money is going.
What is happening on the ranch?
Eric Gropper has about 350 breeding cows on around 8,000 acres of grassland in south-west South Dakota, most of it leased from the Pine Ridge Indian Reservation. He is seven miles from the nearest paved road and two and a half hours' drive from the closest town of any size.
Gropper does not set the price for his calves. Once a year he takes them to a livestock auction, where buyers place bids and the hammer decides. Right now the bids are the highest he has ever seen - around $2,500 (£1,883) for a 600lb (272kg) calf, up from $2,000 two years ago.
Those record prices are being driven by a simple fact: there are not enough cattle. Because of a combination of drought in many states and disease pressure, the US had fewer cattle at the start of this year than at any point since 1951., external
Gropper is feeling the drought directly. The 13 natural wells across his land that provide groundwater for his cattle have run dry, so he now has to use a water tanker instead.
His costs have also risen sharply. A new pick-up truck that once cost $40,000 now runs to $100,000. A wooden fence post has gone from about $6 to as much as $19. A quarter-mile roll of barbed wire has doubled, from $60 to $130. He says everything he uses day to day has increased in price since the Covid pandemic.
With little grass on parched fields - well over 60% of US cattle are now grazing on drought-hit land - farms like his have had to buy in hay, silage and other fodder for their cattle.
I'm able to pay my bills, but my input costs are so drastically high that if we didn't have these record prices we'd all be broke. I sit down to do my taxes, and it feels like I made a lot of money. But in the end I really didn't make any more.
What happens at the feedlot?
Gropper's calves do not go straight to slaughter. At around six months old they are bought by companies that run feedlots - large yards where the animals are fattened on corn and other grains for the final three to six months of their lives.
The biggest feedlots hold well over 100,000 cattle at a time, and around 95% of US cattle are finished this way.
Brenda Boetel, professor of agricultural economics at the University of Wisconsin–River Falls, watches this part of the chain closely. She says feedlot companies are currently selling cattle at record prices, but they are having to buy them at all-time highs in the first place, so they are not making bigger profits.
What are meatpackers earning?
A meatpacker is the plant that slaughters the animal and breaks the carcass down into the cuts that reach shops or restaurants.
Four companies - Tyson, JBS, Cargill and National Beef - control around 85% of American beef processing. That high level of market concentration has drawn accusations of price-fixing, even from President Trump.
You might expect those four firms to be making huge profits from high beef prices, but the opposite is happening. Tyson, the biggest of the four, reported in May that it had lost more than $500m, external on beef in the first half of its financial year.
Again, it may be selling its beef for record highs, but it is also buying cattle at all-time peaks.
Jamie Crumley owns one of the remaining smaller meatpackers - Harpley's Meatpacking in central North Carolina. She says the price companies like hers have to pay for live animals has gone up by as much as 60% over the past three years.
Although meatpacking companies have increased the prices they charge for their beef, there is a limit because supermarkets, restaurants and US consumers can simply switch to chicken or cheaper imported beef instead.
There is also the inefficiency of running meatpacking plants at much less than full capacity. Harpley's, for example, is built to handle 425 to 450 cattle a day, but it is currently running at just 350 because it cannot get the additional animals.
The building, the line and the staff cost the same either way, so those fixed costs now spread across fewer animals. On any given day Crumley says she can lose anywhere from $100 to $400 on a single head of cattle. That helps to explain Tyson's giant losses.
Why can't restaurants charge more?
At the end of one beef supply chain are Paul and Jessica Urban, who own Block 16, a burger restaurant in Omaha, Nebraska. They use about 300lb (136kg) of ground beef a week, making 2,800 burgers a month.
When Block 16 opened in 2010, a burger cost $8.95. Today it is $11.95, but profits are limited because mince is much more expensive.
To maximise our profit, maybe we'd have to charge $13 for a burger
Well, we don't feel comfortable doing that. I wouldn't want to walk in here and have to pay $13 for a cheeseburger.
So we don't make the profit that we'd like — but you're still getting people through the door, and it's not always about the money.
So where did the money go?
The rancher is selling calves for record sums, but is not better off because he has higher costs. The feedlot company is selling for all-time high prices, but it also has to pay them in the first place.
Then the packers are losing money because there is a limit to what they can charge. Restaurants and supermarkets also can only increase prices by so much.
Everyone is turning over more money than they used to, but not keeping any of the extra. The situation will not change until significantly more US cattle come to market.
As Eric Gropper puts it, you cannot conjure a cow overnight. A heifer, a young female cow, needs two years before she can produce a calf, and that calf needs another year to reach slaughter weight, so the extra beef takes three years to arrive.
