There’s no question that Texans love their beef, but a lot of consumers are experiencing sticker shock at the meat counter. According to the USDA’s Economic Research Report, pork is up 13% followed closely by chicken, which is up 9% compared to last year. But the cost of beef is up nearly 20%, putting a considerable strain on family grocery budgets. Jeff Geider, director of TCU’s Institute of Ranch Management, has an extensive background not only in agriculture, but also in marketing and economics. He breaks down the reasons for the soaring cost of beef and predicts when carnivores can expect relief.
How do labor shortages and poor yielding soy and corn crops affect the cost of beef?
There are definitely labor shortages, but there haven’t been poor yields of soy and corn crops. In fact, in the last few years there have been really good yields. The problem is that the supply is offset by the demand. We have been exporting grain in record numbers overseas, primarily to China. Rising corn and soy prices, which make the feed for livestock more expensive, factors into why beef prices are climbing. When you see increases like this, it is never just one thing. It’s a stack of things.
How did the pandemic play a factor in rising beef cost?
The pandemic played a huge factor. It forced meatpacking facilities to shut down, thus reducing beef production. And they still haven’t recovered. Many agriculture economists estimate the effect to be in the billions. Unlike in manufacturing, which involves inanimate products that can be shelved or completed at a later date, in agriculture the process of producing commodities cannot be stopped and started easily when dealing with crops and animals.
Are the main meatpacking companies manipulating prices?
Many people in the industry believe that the meatpacking companies are manipulating prices, but it’s more complicated than that. There are only three or four main processors in the U.S. There’s an issue with the function of the structure of the industry. It’s an oligopoly. There simply isn’t enough competition. If we were to build more meat processing facilities, that would begin to resolve the issue. However, building and operating these facilities can be extremely expensive. This question is timely because the current administration is in the process of promoting competition in meat and poultry processing. The USDA also recently announced it is investing $500 million to expand local and regional meat processing plants.
How does a cow's lifecycle make it difficult to adjust supply compared to that of a chicken?
Those in the beef industry are at a disadvantage due to the physiology of a cow. They just can’t adjust their processes as quickly as those in the pork and poultry industries. Think of it as turning a battleship versus turning a speedboat. For cattle producers, the decisions they make today will affect production three to five years down the road. With chickens, you could make a change and potentially see the effects in a matter of months.
What do you predict for the future of beef costs? Any relief in sight?
Everyone has their own crystal ball, but I don’t foresee any relief in the immediate future. I know that’s not what people want to hear. Compare it to what we are seeing at the gas pumps. Prices are quick to skyrocket, but you’ll find that prices drop at a much slower rate. These are both cyclical markets. Sometimes it takes seven to 10 years to see a change.
Learn more about TCU’s Institute of Ranch Management.