The price of beef per pound is affected by any factor that affects the beef supply chain, the number of cattle available for production or overall consumer demand for beef. Weather incidents, disease scares and drought can have an inflationary impact on beef prices, whereas decreasing transportation costs can have a downward effect on prices. On the demand side, an increase in consumer incomes or overall national employment can increase the price of beef because consumer demand likewise increases.
The price of beef is largely determined by simple microeconomic principles. The quantity of beef sold and beef's price are determined by the equilibrium between market supply and consumer demand. A change in the nationwide price per pound of beef is always the result of an external shock to supply or demand.
Beef prices tend to take a long time to respond to external shocks because beef prices for a particular year are often set in commodities futures markets the previous year. For example, if there is a drought that decreases the overall cattle count or a grain shortage that forces farmers to thin their herds, the effect of those supply shocks does not impact the price of beef until the following year. Beef price fluctuations occur within a given year because of mark-ups and sales at grocery stores and supermarkets that are only tangentially related to the beef market.