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By Sebastian Pellejero

NEW YORK, May 23 (Reuters Breakingviews) - U.S. beef is getting seared. Cattle herds shrank to the smallest they have been since the Truman administration, pushing prices higher ahead of Memorial Day barbeques and the summer grilling season. Burger and steak restaurants are scrambling as chicken pecks away at the protein market.

It’s a rare situation. Live cattle prices reached $2.26 a pound last week, according to USDA data, a 20% increase this year that’s outpacing growth rates for most commodities in 2024. The average cost of ground beef also hit a record-high $5.69 a pound in March. Budget-minded diners are being forced to either swallow the increases or find cheaper alternatives. Chicken is handily winning the race against pork, soy and other niche options.

There’s evidence of a stampede. Years of punishing drought has decimated U.S. grazing land, compelling ranchers to thin herds. The 87 million cattle counted in January was the lowest tally since 1951, according to the U.S. Department of Agriculture. Imports have doubled since 2013, but President Donald Trump’s tariffs on Brazil and beyond may slow the flow. Because bovines born today won’t reach dinner tables until 2028, a tough run awaits.

Tyson Foods is feeling the heat. Boss Donnie King said it’s the most challenging beef market in the meatpacker’s 90-year history, contributing to a $260 million loss in the segment during the second quarter. Rising chicken sales carried the $20 billion company’s bottom line beyond Wall Street’s expectations.

Steakhouses are also suffering from meat sweats. Texas Roadhouse, a $13 billion chain, warned that beef inflation was starting to hurt. Its restaurant-level margin slipped nearly 1 percentage point to 16.6% in the first three months of the year and the company raised its cost inflation forecast to 4% this year, up from 2% to 3%.

Poultry will be ruling the roost. U.S. consumers devoured an average 100 pounds of chickens bred for eating apiece in 2023, nearly as much as beef and pork combined, per official data. A swifter 10-week production cycle allows farmers to adjust supply more easily, keeping prices stable even when demand surges.

Whether investors will feast is another question. Fast-food joints like McDonald’s may be able to shake up their menus. Many meat packers are also diversified. Although Texas Roadhouse’s valuation multiple has come down, its shares are still up 14% over the past year, outpacing the benchmark S&P 500 index. Chicken-wing chain Wingstop already trades at 75 times estimated 2026 earnings, according to Visible Alpha, but it’s a business with legs.

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CONTEXT NEWS

The average price of a pound of ground beef rose to $5.69 in U.S. cities in March, a 13% increase over the previous year and the highest on record, according to Department of Labor data released on May 13. The price of uncooked beef steaks also reached a record high of $10.98 per pound.

(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on PELLEJERO/ Sebastian.Pellejero@thomsonreuters.com))