Omaha, Nebraska, 6 o'clock dinner reservation. The Thomas family, party of six, is settling into one of the great old school steak houses in the Midwest. It's the kind of place with low lighting and heavy chairs. The room smells like brown butter and seared beef fat. It's old timey, it's kind of got the wooden exterior. The floors are creaking when you walk in. That's what we're calling Patrick Thomas, as in the Thomas family, party of six. You've kind of got that brassy, Sinatra type of music, old world type of steak house. I'm going to go from the most tender all the way up to our most heavily barbled cut. To our most tender cut here will be the filet. So what brought you to that steak house in Nebraska? My family still lives out there. My brother was actually graduating high school. Oh wow, congratulations. Cheers. Rye bread. Rye's graduation. I heard his name is Ryan. It's another Ryan. What a great name. How's your steak? My steak's delicious. Very tender and juicy. But while the steak was delicious, the price was a lot harder to swallow. You know, so a 11 ounce filet, $62, a bone-in ribeye, 25 ounces, that's going to be about $90. That seems expensive for Nebraska. The tomahawk, that's $137. Wow. It's not just expensive for Nebraska. It's expensive everywhere. Beef prices are skyrocketing at restaurants, grocery stores, all over America. Welcome to the era of the $100 steak. I went to the restaurant's Yelp page to find a picture of what the menu looked like 10 years ago, and it's about double from what it was 10 years ago. Wow. Why is beef so expensive? Beef is a very complex supply chain, but the answer is very simple. We don't have enough cattle in this country right now. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Wednesday, June 10th. Coming up on the show, where's the beef? Are you one of those media strategy people clicking through slides, scrolling spreadsheets? Yes? Good. This is for you. Because on Spotify, there's an audience that's different, locked in, loyal, invested. They're called fans. Fans don't just listen to music. They feel seen by it, like it belongs to them. So when your brand shows up on Spotify, that's who you're talking to. And you're right next to artists like me, Lizzo. So are you ready to talk to fans? Spotify advertising, you're among fans. The reason beef is so expensive right now has everything to do with the animals. Our colleague Patrick grew up in Nebraska, aka the beef state, and recently went to a cattle auction about four hours outside Omaha. If you've never been to a bull sale before, there's one thing Patrick says you need to watch out for. Flying poop. You have the bull running into the ring who kind of trots out right away, he's kicking up some of the manure, and sometimes, you know, he runs by and the manure will kind of fly up a little bit. So you got to be careful if you're in the front row. Yuck. Right now, the best cattle in America are worth a fortune. Here at the TD Angus bull sale, ranchers pay astonishing amounts of money for breeding bulls. The father's a future herds. Some will sell for as much as a new Cybertruck. On this spring day, all eyes in the room were on a hulking bull named the man in black. His breeders call him a quote, man amongst boys. He's the man in black. Five, six, $5, $1.78. Right now, $9.50. In the end, he sold for $75,000. No bull. Soldable $75,000, $75,000. The man in black is basically the start of the supply chain. He'll go on to father potentially dozens of calves each year. Caves that will make up part of the nation's cattle herd. But the cattle herd in the US has dramatically shrunk. It's now at its smallest size in 75 years. There simply isn't enough cattle. And America wants beef. The shortage is making the auctions really competitive. You have guys been described as vicious because you'll have, you know, sometimes personal Vandettas take place if they want to drive the price higher on somebody. And sometimes it gets pretty bloody in there. I mean, the knives come out from all different directions. That's Sean Lockery, one of the ranchers who tried to win the man in black. Sean is a sixth generation Great Plains Cattleman. Sun brown skin, broad shoulders, cowboy hat. Competition is so fierce that Sean will sometimes send in a decoy to bid on his behalf just to throw off his rivals. They make it a lot more competitive than it used to be. It's very cut throat. It gets a little, you know, gets edgy at times, but. But, you know, Patrick caught up with Sean outside the sale barn. So how do you think you made out today? I've been on four bulls today and didn't get anything bought today. Unfortunately, not too happy. Nice to bring one home. But, you know, like I said, the bulls are selling for eye watering amounts now. But it wasn't always like this. Historically, cattle ranching has been one of the hardest jobs in agriculture. The profit margins have been largely, for the most of history, pretty lackluster. There's always boom and bust cycles. But historically, it's a tough business. And as Sean told me, it got particularly bad during COVID. Yeah, we weren't. No, we weren't getting a lot of money for the calves. The market completely dropped out. I mean, it. COVID created huge problems for the beef supply chain and made your paying for ranchers like Sean. The way the beef supply chain works is that ranchers like Sean sell their cattle to meatpackers. But during the pandemic, the meatpackers weren't running at full capacity because workers were getting sick and plants had to temporarily close. This created a problem. Ranchers suddenly found themselves with cattle they couldn't sell. So you had a bottleneck at the meatpacking level and you had too much supply and there wasn't anywhere to put them. And their animals were almost worthless. The struggle for cattle farmers around the nation is real as they watch prices drop for their livestock. Cattle prices have dropped a third in two months. Forcing some North Texas ranchers to sell off cattle by the thousands. Many have stopped saying it can't get worse. And that made a lot of guys take out debt to stay in business. It put a lot of ranchers like Sean in pretty dire straits. Every day you woke up it was the next crisis. Farmers and ranchers, you know, barely could get through it mentally. And it's just, it's a pull yourself up by the bootstraps kind of moment. Then things got worse. In 2022 extreme drought swept across cattle country. Grass was disappearing, but the cattle still had to eat. Ranchers found themselves spending tons on hay and feed for animals that weren't turning a profit. Sean watched his neighbors sold off their cattle. Some euthanized them. Others left the business altogether. Financially it buried a ton of people. You know financially they said, well I'm done. I'm not going to go through the tough times again. I'm done. I'm out of here. After all this, the total herd size in the U.S. dropped by 7 million cattle to around 86 million. So when did things start to turn around for ranchers? As I think Sean put it, the rain started coming again in 2023. And once it starts raining, you know, that's the golden ticket out here. The grass came back. And for the first time in years, ranchers weren't having to worry as much about how they're going to feed their cattle. For ranchers who had hung on during the tough times, like Sean, their fortunes were starting to turn. Even though herds were smaller, Americans still had a huge appetite for beef. And that meant that now ranchers were finally making some good money. Like really good. The profit margin for one animal for a rancher is about $1,000 right now. In 2020, it was $2. $2 to $1,000? Yes. Holy cow! A 500-fold increase in profit margins. With all that cash, ranchers have been able to hire more staff, pay down some of that debt they racked up during the pandemic, and upgrade old equipment. We have unprecedented times here in the cattle business right now. I mean, it's just this business has just turned upside down overnight. I mean, it's unbelievable. For the people raising cattle, these are boom times. Ranchers are riding high. But for everyone else in the beef business, not so much. That's next. Official partner of the FIFA World Cup 2026. Coca-Cola has also partnered with Panini to bring fans closer to the tournament. Selected Coca-Cola bottles will feature exclusive Panini FIFA World Cup 2026 stickers under labels. Collect 12 exclusive stickers for the dedicated Coca-Cola double-page spread. Pick up a Coca-Cola Zero Sugar and start collecting. Peel, sip, collect. If ranchers are finally on the winning end of cattle economics, there are a few folks who are losing. The biggest loser right now is the meatpacker. Remember that during COVID, there were lots of cattle and not enough capacity at meatpacking plants. As a result, the meatpacker is able to buy cattle for dirt cheap, and they were making lots of money. But now that the meatpackers are back up to full speed and cattle herds have shrunk, the meatpacker is losing about $300 per animal that goes through their plant. Ouch. Well, you have some of these big packers, I mean, JBS, Cargill, Tyson, they have plants that process 6,000 cattle a day. Wow. And they're losing 300 bucks per animal going through it. So we're talking billions of dollars in losses that these packers are sustaining right now. That's pretty incredible that just a few years ago, the packers were in the opposite position, and that they were the part of the chain that was extracting all the value. Yeah, it's how the pendulum swings, and it's really swung in the ranchers direction. And it's been so severe in this particular time that you've seen Tyson closed one of their largest plants in Lexington, Nebraska in January of this year. You've had expectations in the industry that more big plants will have to close just because it's so unsustainable for packers to keep losing this amount of money. And keep in mind, Ryan, when one of these plants closes, it's a big deal for the local economies. Well, yeah, because they employ a lot of people usually. They employ a ton of people. These small towns are kind of company towns. Lexington, Nebraska is set to forever change this week as its largest employer, a Tyson meat packing plant, prepares to close. A third of Lexington's community is searching for new jobs. The pain doesn't stop at the packing plant. Beef dependent restaurants are also suffering. More and more barbecue joints announced they're closing up shops. In Texas, barbecue joints are losing money on brisket, a staple menu item. Pitmasters are trying to steer people away from brisket. Are you making any money right now serving beef? No, none at all. None at all. And then there are the consumers. In some cases, Patrick has tracked 40% price increases from a couple years ago. And yet Americans keep finding room in their budgets for beef. Domestic consumption has actually gone up in recent years. You know, the Americans love their beef, Ryan. That is kind of part of our DNA. At that steakhouse in Omaha, Patrick's dad had a theory. Beef is like gasoline in a car. You need it. It doesn't matter what the cost of gasoline is. You need it. It's the same thing with beef. I agree. I agree. But that's a good point. That's good. Despite the higher prices, people really, really love beef and protein, in particular with the protein craze. So beef demand hasn't dropped off. So it's supported these higher prices. And that's been the big revelation to a lot of people. So what can be done about these high prices? There's a couple of things that could bring some immediate relief, one of which, which is very controversial, is imports. Importing beef from other countries. Correct. The Trump administration, as we've reported, has considered, you know, signing executive orders that would basically reduce a tariff rate on certain beef exporting countries out of South America. The president says the move will help bring down record high beef prices, while also helping Argentina's struggling economy. Trump on Thursday removed his 40 percent tariffs on Brazilian food products. That includes levies on beef, coffee, and- The administration's efforts haven't gone very far, though. Ranchers view the idea of foreign beef as a threat. And after pushback from the industry, the White House appears to have backed away from the proposal. Members of the Trump administration have also asked ranchers to grow their herd sizes. They came up at a recent cattle trade show. I eat beef every day. I eat beef twice a day. So I- Health and Human Services Secretary Robert F. Kennedy Jr. pleaded with cattle ranchers to produce more. Begging you to increase the size of their herds. But ranchers are resisting. Larger herds means they can't charge as much. The rancher is scarred from history of low profits, and they don't want to lose the good times. They are making more money than they ever have in history, and the data backs that up. They're getting more money for their cattle than they ever have, and they want to keep that going. Ranchers are in no rush to replenish their herds. Not while Nebraska is currently experiencing another dry spell. And if that weren't enough, there's also a flesh-eating parasite going around. The screw worm is back. The screw worm loves beef just as much as Americans do, and it's threatening herds. A case of new world screw worm has been detected in the U.S. Even if ranchers decided to boost their herd sizes, it's not like you can just flip a switch and instantly have more beef. It takes a couple years before a calf ends up as a steak on somebody's plate. For now, America is stuck with fewer cattle. And for the foreseeable future, pricier burgers and steaks. For his part, Sean the rancher says he does feel for American shoppers. But he also wants them to appreciate that they're getting what they pay for. People are going to get used to paying the prices for the taste of the good old United States raised beef, okay? It just tastes different. It just tastes that much better. So is the era of $100 steak just here to stay? Right now, there's no end in sight. Some things could happen, but at this moment, it seems like beef prices are going to be high. They're going to stay high and keep rising for some time. But right now, it seems like we're headed for a place where beef is more of the luxury protein and that we're going to have to stomach these higher prices for good. And it just might be kind of the luxury item at the meat case. Talk about a rare community. Oh my God. Is everyone okay? Can I get you any sauces or anything? Very good. Perfect. Back at the steakhouse, Patrick sliced into his filet. The warm red center, the glossy juices, the ribbons of fat, all of it traced back to prized bowls, bidding wars, and ranchers trying not to repeat old mistakes. What went through your mind when you saw the prices of this menu? Well, thank God my dad's paying. And you know, I'm not on the hook for it. Glad that this is on the family tab. All right, dad, how was his steak? Delicious. Was it worth it? Yes. Well, that wouldn't have minded it a little bit cheaper, but it was still good. And you do it again? Even if it was a little bit more expensive? Goes up a couple more bucks. Still going to pay for it? Yes. Yes, put a couple blocks. That's all for today, Wednesday, June 10th. The journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. Route every weekday afternoon. Thanks for listening. See you tomorrow.
