Higher beef prices are biting into profits, but there early signs that relief is on the way

By James Rogers

Beef prices are a headache for the restaurant and food industries - just ask Restaurant Brands, McDonald's, Shake Shack and Hormel Foods

Burger King parent Restaurant Brands says beef costs are pressuring margins in its U.S. business.

An epic U.S. cattle shortage - the worst in over 70 years - has sent beef prices soaring this year, creating a headache for industries that rely on the red meat.

Multiple companies - from branded-food giant Hormel Foods Corp. (HRL) to restaurant chains like McDonald's Corp. (MCD) and Shake Shack Inc. (SHAK) - have cited the impact of beef inflation during their earnings calls. And on Thursday, Burger King parent Restaurant Brands Inc. (QSR) said higher beef costs are cutting into profits for the burger chain's U.S. business.

Speaking during the conference call to discuss the company's third-quarter results, Restaurant Brands Chief Financial Officer Sami Siddiqui described beef costs, which represent about a quarter of Burger King's U.S. commodity costs, as "a clear headwind" to results, according to a FactSet transcript. The CFO noted that beef prices have been at all-time highs, with year-to-date prices up in the high teens versus last year.

There are a number of reasons for this. U.S. cattle and calves inventory has been at historically low levels, according to data from the U.S. Agriculture Department - fueled by factors such as drought, labor shortages and rising costs for land and feed.

As a result, beef prices have skyrocketed: The U.S. city average retail price for a pound of 100% ground beef was $6.32 in August and September, according to the U.S. Bureau of Labor Statistics - the highest level on record, based on available data going back to 1984. September's price was also 11.5% higher than the price in September 2024.

Companies have been taking action to tackle the rise in beef prices. Hormel, which is best known as the parent of the Spam and Planters brands, recently cut its profit outlook amid higher-than-expected costs for meat, as well as nuts.

Shake Shack, which reported third-quarter results Thursday, increased its "In Shack" menu price by approximately 2% during the quarter to help offset cost pressures from the beef market.

It is not just the U.S. where beef costs are rising. When McDonald's recently reported its third-quarter results, Chief Executive Chris Kempczinski noted that beef prices are up around 20% in Europe, primarily as a result of a supply issue.

But there could be some light at the end of the tunnel, as Restaurant Brands believes the impact of beef prices on its overall costs is temporary.

"The increase is largely tied to the cyclical nature of U.S. herd rebuilding, and we're optimistic prices will normalize over time," said Siddiqui. "In fact, you've already seen cattle futures come down in the last week or so, and we continue to monitor movements in that market."

Cattle futures (LC00) (FC00) were recently knocked from their record highs amid the Trump administration's plan to tackle beef prices, which includes importing more beef from Argentina to the U.S.

"There's been optimism around some trade deals. Whether it's been with Argentina, whether it's been with Mexico, whether it's been with Brazil, we're sensing more optimism that there could be some relief on beef costs," said Siddiqui. The CFO also described the beef-related margin pressures on Burger King in the U.S. as "short term."

While a challenge for the companies involved, investors are clearly shrugging off the impact of beef prices. Restaurant Brands shares were up 2.3% Thursday, lifted by the company's better-than-expected third-quarter revenue and adjusted earnings, as well as comparable sales that topped the FactSet analyst consensus estimate.

Shares of Shake Shack, which also topped analysts' expectations for revenue, adjusted earnings and comparable sales, were up 1.6%.

McDonald's shares were down 0.2%, while Hormel's stock was down 0.7%.

Myra Saefong, Victor Reklaitis, and Steve Gelsi contributed.

-James Rogers

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10-30-25 1504ET