More Where’s the Beef?

Warning: Never use “beef stew” as a password. It isn’t stroganoff.

Retail Choice beef is going for around $10 a pound. I’m personally spared the sticker shock, since I haven’t bought a single cut of beef since 1971. What ends up on my plate is venison I harvested myself, or nothing at all. Still, prices like that demand an explanation. The textbook answer is simple enough: supply has shrunk while demand has held steady meaning that the short term demand for beef is inelastic (people keep buying even as prices climb).

The president’s response to the shortfall has been to open the door to imports. In February, he raised Argentina’s tariff-free quota for lean beef trimmings by 80,000 metric tons a year. Then in August, he announced that up to 300,000 metric tons of beef could come in tariff-free over 90 days, saying he had a commitment that it would sell at 25% below market.

However, that savings has not shown up in the grocery stores. Rather the price that ranchers get for their cows has fallen by $200 to $400 per cow, further infuriating ranchers. American cattlemen are understandably unhappy. One observer remarked “It wasn’t worth the headache and what it did to the market. It’s doing exactly what we thought it was going to do, which was nothing.” But it has help imperil republican seats turning otherwise noncompetitive races into tossups or “lean democrat.”

Of course, the White House has a different take. White House spokesperson (how many “spokespersons does the White House have?) Anna Kelly said in a statement that Trump has “done more for American agriculture than anyone” through new trade deals, tackling high production costs and sweeping investments in the farmer-facing programs passed through Republicans’ policy megabill. At the same time, he is delivering on his promise to consumers by reducing beef prices while allowing our American beef herd to grow,” Kelly said. The President will continue taking actions to support our great farmers while driving economic prosperity for all Americans.” In other words: let them eat cake! Or chicken. Chicken is still somewhat reasonable.

Ranchers say that they were hit twice. First, the president gave them $6 a gallon diesel and now because of the importing of foreign beef are getting less for their cows. The president said ““I did this one little thing because I think it’s very important, and it ends very quickly. And I’m not looking to renew it, but I do want them to produce more. It really became unacceptable to the voter, and we do have to get elected. Because if we’re not going to get elected, your ranchers and your farmers are in big trouble — if the Democrats got in.” Make that “bigger trouble.”

The U.S. herd is at a 75-year low: 86.2 million head as of January. That isn’t because Americans have forgotten how to raise cattle. Severe drought did real damage, but so did soaring input costs (diesel, equipment and fertilizer), driven up in part by Trump’s tariffs, that forced many ranchers to sell off their herds. Underneath it all lies a question that comes up again and again: how can something raised thousands of miles away be shipped here and still undersell what we produce right down the road? For beef, as for so much else, the answer may be that our own bureaucracy makes it easier and cheaper to import than to produce at home.

High beef prices have not translated into profits for the processors. Tyson Foods, one of the nation’s largest beef processors, closed its Lexington, Nebraska, plant in January. In August, citing the historic cattle shortage, it announced it would close its Joslin, Illinois, beef plant and its Eagle Mountain, Utah, case-ready (packaging) facility, and would try to sell its Pasco, Washington, plant. In June, JBS USA announced the closure of its Souderton, Pennsylvania, beef plant, which could process about 2,000 head a day. Add Tyson’s Lexington (about 4,500 head a day) and Joslin (about 3,000) plants, and that is roughly 9,500 fewer shackle spaces per day for cattle. Somewhere, 9,500 cows a day are enjoying an unexpected reprieve, though I wouldn’t advise them to make long-term plans.

Tyson isn’t abandoning beef. It is consolidating around its three central plants in Dakota City, Nebraska; Holcomb, Kansas; and Amarillo, Texas, where it plans to add a second shift as cattle become available. In its fiscal third quarter, Tyson’s beef volume fell 16% and its beef segment lost $138 million. That takes real talent: losing money selling something most everyone wants.

But Tyson’s closures probably won’t raise beef prices. Because of the cattle shortage, the industry has been operating well below capacity, and Tyson says it can keep harvesting about the same number of cattle across a smaller, more efficient network. That idle capacity is a big part of the losses Tyson is trying to fix.

If the processors aren’t getting the money, who is? Cattle producers – ranchers and feedlots – get around $5.23 of that $10 retail price. Out of that come costs: feed, fuel, labor, vet bills, fence repair, hay, equipment and interest payments. Even so, the cow-calf ranchers at the start of the chain are doing well. Oklahoma State livestock economist Derrell Peel says they are making record returns. But the feedlots that are getting squeezed: they sell cattle at high prices, but they also pay record prices for calves. As Peel puts it, “Pretty much everybody above [cow-calf producers] is a margin operation, and most of those margins are under some sort of adverse pressure.”

What I am wondering is whether closing processing plants raises the cost of getting cattle to slaughter? When JBS announced the Souderton closure, one market analyst predicted extra trucking costs would trim what regional producers get for their fed cattle. If those costs mount, ranchers may raise fewer cattle rather than more. And if a rancher wants to sell beef directly to local buyers, the animal first has to go through an inspected facility. If the nearest one is hours away and booked for months, the sale simply never happens. Ranchers who could sell straight to consumers, cutting out the distant packer entirely, are stopped not by a lack of demand but by the lack of a legal way to get the job done. It can be done, though. A rancher on the land next to our neighborhood in Knoxville sells his beef directly to the public, and some of my neighbors buy half a cow from him. But he’s the exception, and I wonder how much the bureaucracy is costing us.

To his credit, this is one of the few areas where the president has tried to expand competition rather than constrict it. On September 4, he signed two executive orders directing federal agencies to reduce regulatory barriers, expand opportunities for state-inspected meat to move across state lines, support smaller and regional processors, modernize inspections and give ranchers more options for processing and selling their own beef. Much of this is still at the report-and-recommend stage, but with more processing capacity, one hopes ranchers will have the incentive to rebuild their herds and put more beef on American tables.

Then again, one could always take up deer hunting.