What About the Price of Beef?

(Mises)—In September 2023, we looked at the high price of beef and how big government has been bad for the American family budget. With stock indexes even higher, the situation for beef consumers is even worse.

In the US, the price of hamburger meat ended last year near a record high of $5.60 per pound. Just 5 years earlier—prior to covid—it was $3.88 per pound. From the early 1980s to 2000, hamburger meat averaged $1.50 per pound. That means that over that 40+-year period, hamburger meat is four times as expensive.

While that seems like a big increase—and it is—the rate of increase is only slightly higher than what the government claims has been the increase in consumer prices in general over the entire period as measured by their Consumer Price Index or CPI. So, beef has been a fairly accurate barometer of the impact of government and Federal Reserve policies undermining the household economy. The most rapid increase in beef prices and consumer prices in general have come in the aftermath of the Trump-Biden covid spending sprees and, of course, the vast money printing by the Federal Reserve unleashed in 2020.

Like most businesses, raising cattle and related businesses have faced significant increases in costs due mostly to inflationary forces. Grains used to feed cattle are impacted by monetary inflation. There was a huge upward spike in grain prices from the Fed’s covid monetary inflation. Often blamed on Russia’s invasion of grain-producing Ukraine, grain prices actually peaked around the time of the invasion, leveled off, and even subsequently declined as the world economy contracted. Even though grain prices have retreated, herd size must have come under enormous pressure with the covid inflation as grain price surged, herd size retreated. Beef consumption also retreated in the post-GFC inflationary contraction.

With prices relatively high, and grain prices and herd sizes having retreated, beef producers are in a temporary sweet spot, but consumers and others along the supply chain, such as processors and wholesalers remain soured. It is a tough competitive business, subject to the cycles of uncertainty.

Another largely-unnoticed inflationary impact on beef supply and prices is the Fed monetary policy. The Fed has been suppressing interest rates for decades and causing price inflation. They did it again during covid on a massive level and have only recently tried to “normalize” interest rates.

Every real estate agent, broker, dealer, and investor knows that interest rates are the major key to the real estate market. One aspect that I explored in my book, the Skyscraper Curse (free HTML, PDF, or ePub download here) is that artificially low interest rates increase the demand to buy land and this causes land prices to increase. Higher land prices mean that some land used for cattle might have been purchased and developed into different uses or land that could be used to expand cattle ranching might simply have been too expensive to purchase and convert into cattle production.

It is possible to produce cattle and beef with very little land, as the Japanese famously do. However, economically speaking, it is much cheaper to produce cattle on grass and pastureland if that land is superabundant and close to market. You need far less land if feed corn and other grains were superabundant. However, the current circumstances are that land is scarce and high-priced and feed grains are also expensive and might get even more expensive. Both of those market conditions are driven, in large part, by the Fed’s monetary inflation.

I also suspect government intervention on behalf of the environmental terrorists might be playing a role. These are “angry” people who think that cow farts are a catastrophic problem, and that we all should be forced to follow their personal dietary philosophies, such as vegetarianism or veganism. This has certainly crippled the industry in Europe, which has experienced drastically restricted consumption and high prices. This should be opposed.