Expect to pay higher prices to grill beef this Labor Day weekend.

Supply of beef is down and demand is up. That will translate into steak and hamburger prices that are 6 to 7 percent higher at the supermarket than last year, said Rich Nelson, director of research at commodities research firm Allendale Inc. in McHenry.
The beef industry has been contracting since 2006, due to a number of factors, including drought and high feed-grain prices, followed by lower demand when the recession hit. Supply of beef for sale in the United States is down about 4 percent, Nelson said.

Meanwhile, demand from consumers is rising more than expected, which led to frantic trading of cattle futures in the commodities market last week, Nelson said. Unemployment and the housing market have stopped worsening, which could give consumer confidence to buy more meat, he said. “For summer, we’re somehow seeing consumer feel a little better,” he said.

Lower supply and higher demand will mean higher prices at the supermarket for beef. The retail price for choice beef was $4.44 per pound in July, up from $4.18 a year earlier, according to the most recent numbers from the U.S. Department of Agriculture.

“Meat prices are trending up, probably to the highest they’ve been in a few years,” said Bob Goldin, executive vice president at food industry consulting firm Technomic.

For the beef industry, Labor Day is important, Nelson said. “It’s the last major holiday of the late summer and early fall period,” he said. “There are a lot of hopes that ride on this holiday.”