We Got Beef

America, we have a bone to pick. Or do we?

I know I’ve become synonymous for bringing the problem to your table and today is no different. Literally. Post 2020 pandemic has brought about a variety of challenges and second to none is our food supply. It should come as no surprise to us that economics would rear its ugly head in a matter of whether we eat or not? Or at what cost? That damn economics. Always finding its way into what matters. Since you always have something to say Economy, I have only one question to ask…

Where’s the Beef?

It was a chilly morning at the Treasure Valley Livestock Auction in Caldwell, Idaho. In a compact indoor arena, about 60 ranchers sat on metal bleachers around a pen, looking at their phones, chatting and drinking coffee. Every few minutes, a handful of cows were ushered into the pen. The auctioneer, Zack Zumstein, a young guy in a black cowboy hat, started the bidding. “A dollar seventy five, a dollar 80…” the prices climbed quickly. Zumstein pointed to different parts of the arena, jumping a little in the booth, and the bids kept rising.

“Two-fifty… two-fifty….” Final bid: $2.50 a pound. That is a very high price. “These are record calf prices that we’ve been having this year,” Zumstein remarked. He’s been coming to this auction house since he was a kid with his grandparents and his parents. He studied economics and owns cattle of his own: cattle prices are in his blood. He said he’s never seen a cattle market like this. “It’s great and I hope it stays this way,” he said. Beef is fetching record prices and that’s great for ranchers, maybe not so great for burger lovers. The culprit pushing prices up? Supply and demand. The supply of cows is low. So low, Zumstein says it can actually be hard to source cattle for the auctions. “I have so many guys right now that are looking to buy cows,” he said. “And this year, I can’t find cows for these guys.”

The number of beef cattle in the US is the lowest it’s been in years. Part of this dates back to the pandemic, when safety issues at meat packing plants and supply chain snags meant ranchers couldn’t sell their cows. At the same time, the cost of the hay to feed the cattle went through the roof. “If you had a cow that came in and looked at you kind of crazy in the pen, you were getting rid of her because you couldn’t afford to feed her,” Zumstein said. The result: Herds got a lot smaller.

When supply chains started to normalize and demand for beef spiked, ranchers started growing their herds again, but it takes years before a cow is old enough to sell for beef, so increasing the supply of beef takes time.

Inflation Indigestion

The latest Consumer Price Index report from the Bureau of Labor Statistics shows beef and veal prices are up 7.7% compared to January 2023. More specifically, ground beef is up 5.5%, beef roasts 6.7%, and beef steaks are up 10.7%.

This comes a week after the American Farm Bureau Federation (AFBF) warned we could soon see record-high beef prices.

So what’s behind the price jump? Like we previously saw with egg prices, supply is largely to blame.

At the start of the year, there were 87.2 million cattle and calves in the U.S., AFBF economist Bernt Nelson explains. While that sounds like plenty to support U.S. beef demands, Nelson notes that’s the lowest inventory to start a year since 1951, when estimates from the U.S. Department of Agriculture put the overall count at 82.08 million.

The last time the U.S. experienced such a dip was in 2014 when, according to AFBF, cattle inventory fell to 88.24 million.

Unlike what happened with eggs, the latest limited supply isn’t being caused by illness among cattle.

Instead, experts from the Farm Bureau point to drought conditions and the rising costs of supplies to maintain herds. Both have led to farmers reducing their herd sizes, Nelson explains.

“The latest cattle numbers are a stark reminder of the challenges facing America’s farmers and ranchers,” said AFBF President Zippy Duvall in a press release last week. “Severe weather, high inflation and geopolitical uncertainty are taking a toll on farmers across the country, and families will see the effects in their grocery bills.”

When we last saw cattle counts dip in 2014, beef prices hit a record high in 2014, data analyzed by CNBC shows. Prices dropped in the years after, jumping again in 2020, only to fall later that year. Since early 2021, beef prices have continued to climb.

As for now, the AFBF says there is “enough cattle in the supply chain for processing,” which can help keep prices from increasing aggressively now. That could change in the latter half of 2024 and into 2025, the agency warns.

“Even with lower supplies and higher pricing, beef will be the second-highest consumed animal protein at almost 58 lbs per person annually, according to USDA estimates,” Courtney Schmidt, Wells Fargo Agri-Food Institute sector manager also told the outlet.

Economics Wins in the End

So, America with such low inventory of food supply it appears we don’t have a bone to pick. Who knew that prices affect production? And this is exactly why I, like many others, have fallen in love with economics.

Because in 2020 I predicted this very outcome. Not because you have to be financial wizard to understand what’s going on, but more often it is about paying attention to current conditions and expanding it to further probabilities. And even the mildest intellectual can see that if we are a growing population and we are forced to produce less for any amount of time, it would cost each item to rise in price individually.

But have another opportunity for you to show your economic intelligence. If the price of food is at an all-time high. The cost of producing food is at an all-time high. The supply of food is at an all-time low. That means there’s less money to go around to other expenses. But mortgage payments are also at an all-time high. Car payments are at an all-time high. So, there’s a lot less money to go around. And with less ability to spend we decrease someone else’s ability to earn income. And as their ability to earn income decreases, so does their livelihood. So regardless of what you are hearing from every media outlet in palms reach, where do you think the economy goes from here?

But hey, let me give you some positive news. Life after all is a matter of perspective. Obesity rates can expect to be much lower! Reduction in obesity has become one reason to support the current administration in America because one thing is for sure, no one can afford to eat like they used too!