Drought Causes Chipotle To Increase Its Steak Prices

CREDIT: AP Photo/Gene J. Puskar

First the guacamole, now the steak.

Chipotle announced this week that it would be raising the prices of its steak filling more steeply compared to price raises on chicken, a decision that the company says reflects the record-high beef prices in the United States. Chipotle, which announced earlier this month that it would be making its first price increases in three years, said that it would be hiking its beef prices 4 to 6 percent, resulting in an increase of 32 to 48 cents, the AP reports.

“There’s a very narrow gap between our steak burrito and our chicken burrito. We’re going to widen that,” Chipotle Chief Financial Officer Jack Hartung said. “We’re going to allow our customers to choose whether they want to pay the higher price of steak.”

One of the forces behind Chipotle’s choice to raise its beef prices is drought: dry weather in much of cattle-heavy U.S. is forcing feed prices up, which in turn has forced farmers to sell off their cattle. This trend has created a national cattle herd whose numbers are at a 63-year low, leading to cost increases that could affect consumers into 2015. In February, the LA Times reported, “all-fresh” USDA choice-grade beef hit a record $5.28 a pound — in 2008, that same cut of meat cost $3.97.

“You can’t keep buying $7,000-$8,000 a load for hay. Pretty soon you’re in this hole, so you sell your cattle and try to buy them back next year,” rancher Jim Warren told the AP in January.

Chipotle isn’t the only restaurant to feel the strain of higher beef prices. White Castle Management Co. said its beef costs went up 12 percent this February compared to last, and it predicts that by August, prices will be almost 27 percent higher than they were last year. Grocery bills, too, could increase as a result of severe drought in California, not only for beef but also for milk and some fruits and vegetables. And it’s not just drought — heavy rains in Mexico have caused lime prices to soar this year.

Chipotle warned investors earlier this year that changing weather patterns have the potential to affect its guacamole supplies, but it also mentioned drought’s effect on beef prices in its annual report.

“Weather related issues, such as freezes or drought, may also lead to temporary spikes in the prices of some ingredients such as produce or meats. For instance, two years of drought conditions in parts of the U.S. have resulted in significant increases in beef prices during late 2013 and early 2014,” the report reads. “Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price or availability of some of our ingredients.”

Scientists predict climate change will exacerbate drought conditions in some parts of the U.S., and they’ve also linked California’s severe drought to climate change. And though beef lovers may be dismayed at Chipotle’s increased steak prices, studies have shown that cattle — and meat in general — contributes significantly to climate change, thus helping drive the forces that could exacerbate drought in the future. Scientists have found that eating less meat and dairy is “key to bringing agricultural climate pollution down to safe levels,” meaning avoiding beef’s higher price at Chipotle and other restaurants and supermarkets would be a win for the planet.