Why Beef Is Getting So Pricey

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. New data from the Bureau of Labor Statistics shows that inflation in the U.S. has continued to cool from its pandemic era peak. Inflation rose just 0.2 percent in January from December, according to BLS data released on Friday. That's lower than Wall Street expected. The report also showed drops in energy costs, used vehicle prices and the cost of eggs, which are down 30 percent from a year ago. But it's a different story in one corner of the economy. The backstory has been that consumer prices have been coming down for the last couple of years, David.

1:39That's great. But there are pockets of the grocery store where prices are still raising like it's a pandemic. One of those is beef. Beef costs have risen faster than most other items in the Consumer Price Index, with the broad beef and veal category up 15 % over the past year as of January. Bloomberg's Enda Curran says it's a price surge that runs counter to the broader trend of cooling inflation. And that is why it's worth paying attention to. So we took a look to see at what's going on there. And the reason beef prices are going up at the rate they are, it's pretty complicated. That's because the price of beef is driven by a lot of overlapping factors.

2:17The U.S. is the world's largest consumer and one of the largest exporters of beef. But it's facing an historically low cattle herd and soaring production costs that are putting a squeeze on American ranchers. My family landed in Oklahoma in the early 1900s, and we've been farming and ranching on the same land ever since. Casey Schurler is a fifth-generation cattle rancher who runs a ranch with her husband called ReFarm. I think a lot of people assume that when cattle prices are high, it must be really good for ranchers right now. But it's actually a really challenging and volatile time. She says the inflationary environment in the cattle industry is putting pressure on their business.

2:56It's getting really, really hard to continue operating a profitable business. We can't continually depend on government bailouts, for example, for farmers and ranchers. We have to think like business people. We have to make decisions that are better for our bottom line, and we have to be willing to adapt. That squeeze is being felt all along the beef supply chain, too, from ranchers and meat processors to consumers. I think it's a reminder, David, that the inflation story hasn't fully gone away. It just demonstrates that there are parts of the economy where prices remain quite persistent, remain quite high.

3:30And that's what's feeding the whole cost of living story. That's feeding into the whole political cycle ahead of the midterms. That's one of the reasons why the Federal Reserve hasn't brought down interest rates, maybe as fast as some people would hope, certainly as fast as President Trump would hope, because they continue to warn there are pockets of inflation still in the economy. Beef prices are not the be-all and end-all. Not everyone wants to buy beef, of course, but it's just an illustration of how fragile the overall supply lines do remain in the economy, that there are still these pockets of food that are increasing, just like it's a pandemic.

4:10I'm David Gurra, and this is The Big Take from Bloomberg News. Today on the show, beefflation. what rising beef prices show us about the state of the U.S. economy and what it could take to bring them down.

4:26And when you look at beef, the broad beef and veal category, it's gone up 15 % over the last year as of January. At a high level, what is going on with beef prices? There's a lot happening all at once. So on the one hand, you've got the cattle herd in the U.S. shrinking. You have issues like drought. You have issues like the cost of production for the ranchers. So they're juggling high interest rates, high labor costs, high costs associated with their equipment and the like. You have other factors, too, structural factors like retiring, ranchers retiring, not being replenished. It's a tough job.

5:00And, of course, now we have the latest issue with disease in the cattle herd coming in from Mexico. That's a top concern for ranchers. Dangerous flesh-eating parasite, the New World screw worm, has been spotted just miles from the Texas border in northern Mexico. So that's raising alarms for Texas livestock, producers, pet owners. So there's a whole series of issues there that I'm conflating into one sentence. But the net takeaway when you speak to ranchers is that that's what's hammering production. They can't get cattle to meat factory and then to the store in time to meet consumer demand. How dire is the situation for ranchers, for producers and for consumers?

5:37So it's a difficult situation. It depends where you are on the supply line. And there are some different views on this. If you're at the very start of the supply line, whereby you're in cow and calf territory and you're producing those calves, calves are in hot demand right now. You know, one of the ranchers we spoke to said, for example, he gave the example of a bottle calf. That's a calf reared by a bottle that once upon a time wouldn't be considered a premium buy. But, you know, a few years ago, that might have fetched you a couple of hundred dollars. Now it can be anywhere up to$1 ,500. So if you're producing calves, getting them out the door, hot demand, you should be making money.

6:08But the further along the supply line you go, and if you want to keep those cattle and fatten them up as you would traditionally and then send them off to the market, send them off to the meat factory, that's where it's getting a lot harder. They're feeling a squeeze. And of course, the processors, the meat processors, they're under a lot of scrutiny from the White House for what the White House says they want to promote more competition in the sector. They complain of their own high processing costs. So as I say, if you're at the very beginning, you're maybe doing OK. But along the rest of that supply line, you're facing all those issues I spoke about.

6:38Like the issues threatening the supply of beef in the U.S., the supply chain itself is complicated. Cattle rancher Casey Schurler says the process of raising and prepping cattle is long and expensive. Coming out of a downturn in the industry is not something that can happen overnight. A cow is pregnant for about 283 days. When she has a calf, you raise that calf to wean for another nine months. and then if that calf is a heifer, a female, and you decide to keep her, she's not going to have her first calf for about two more years. So you're talking about a four-year production cycle, right, before it adds any sort of meaningful value to the beef supply.

7:20There's no quick fixes to fixing this. Part of the reason this is happening is because the number of cattle in the U.S. is at an all-time 75-year low. And the cattle cycle naturally goes through these periods of expansion and contraction. We're in a period of contraction and we can't legislate our way into a bigger calf crop next quarter or even next year because biology is slow. And so we just we have to focus on things outside of strictly policy, I think, to fix these things. And we have to be really careful about what we say and what we do because it does cause some fallout for farmers and ranchers.

8:00You know, we are a country who loves beef. And if we want to keep doing that sustainably, then ranchers have to have a way to make a viable living. We've got problems around the cost of land, problems around the cost of equipment, problems around levels of interest rates, issues with the drought, and so on and so forth. And it's a classic example of a young rancher family clearly getting squeezed at the very beginning and facing very different circumstances than what ranchers in previous times would have faced. Then you spoke to another rancher, Patrick Montgomery, who runs KC Cattle Company outside of Kansas City, Missouri.

8:35He said something astonishing, that there were no cattle left in America. Tease that out for us. He's illustrating the point that the herd is at the smallest since the 1950s. And that's because production cannot keep up with demand, David. Let's not forget demand among consumers is another part of the story. It's not just a drought. It's not just the impact of disease. it's not just the issues around costs as the wife ranchers cannot produce the beef it's also that that americans want to eat more beef and they're they're moving up the value chain in their own diet and that's why we're having this crunch and he wanted to replenish his herd the genetic line in his herd last year so he sold a chunk of his cattle and he wanted to come back to market this year and to buy new cattle to replace those and he does specialize in wagyu beef i should say so he's maybe a little bit up the value chain compared to others.

9:24But when he came back, they were around 30 % more expensive to buy. So it wasn't economical for him. He's yet to replenish the cattle he sold last year. So he's pretty frustrated. He's among the ranchers I spoke to who has a pretty downbeat view on where things are going at the moment. When you're not wandering around ranches or feedlots, your day-to-day job is at the Federal Reserve. You're following what the Fed chairman and other policymakers have to say. How interested are they in this facet of the American economy, in the fact that beef prices are going up? I think it's fair to say that the price of a hamburger is not going to change the trajectory for US monetary policy.

9:56I don't think the Fed policymakers are sitting around talking about ground beef prices. But when we do hear officials come on and when they use the official jargon and when they say, listen, inflation remains persistent in some areas. They're not fully comfortable with where it's at and they have this inflation target that they set. And one of the reasons it's not back to that target of 2 % is because of pockets like this. And don't forget, of course, they're very aware of the staples that people buy and the cost for those staples. And putting food on the table is one of those. So they're not setting monetary policy based on the price of beef.

10:31But it certainly builds into the picture that the inflation story in the US has not yet totally gone away. It's headed in the right direction, but it still remains above target. So with meaty pockets of inflation still showing up in economic data, what is the White House doing to turn things around? And will it be enough to shift the picture before midterms? That's after the break.

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12:22and we've got the midterms coming up and that the key issue of course is cost of living or affordability how is the higher cost of beef shaping that that conversation among voters and between voters and politicians it clearly has bubbled up to the white house david because the white house has made several pronouncements on beef prices president trump has spoken about the need to import more beef from Argentina, for example. He's brought down tariffs on imported beef. And we know that they're taking actions to boost competition among meat processors. Antitrust, a DOJ investigation, have all been floated and spoken about by the White House.

12:58So, you know, when you consider that they're the experts, they're the politicians, they know what people on the ground are thinking. So it's obviously bubbling up enough to the level that the White House is having to pull levers on it. Now, they do cite the example of egg prices. egg prices were soaring when they came into office and they brought those prices down through a mix of insuring supply, for example. So they're talking about doing the same with beef. But beef, obviously, is a much different kettle of fish. It's going to take a lot longer to get more beef supply in the mix than it takes to get more chickens on the supermarket counter.

13:30And in fact, according to some experts, they say that even if the US herd was to increase this year, it would take several years before you start to see that flow through the whole food production line to the point where it starts to offer relief. So near term, White House pulling levers, boosting imports, cutting tariffs, and it's clearly a hot political issue for them. Trump signed a directive earlier this month to boost the amount of beef imported from Argentina to the U.S. under a new trade agreement. White House Press Secretary Caroline Levitt talked about that at a briefing last week. Cattle beef prices are coming down slightly, and the president wants to see that continue.

14:05He believes that a minor import to the country with cattle might be a short-term solution with respect to bringing down prices. But, of course, protecting our American cattle and rancher industry is a priority for the president. And is that an easy solution here? What do ranchers say about that? Well, one would assume, I mean, for the consumer on the ground, if beef is coming into the country and it's hitting the supermarket shelves and it's, you know, at a competitive price, You can imagine how the consumer will see that's an option for them. But certainly within the system, ranchers will care.

14:39They're not especially sure their solution to their issues is imported beef from Argentina. You know, they want support in bringing costs down. They complain about higher interest rates. They complain about the drought and that kind of thing. So you've got political sensitivities around that. Then there's the meat processors. Trump ordered a federal probe of the meatpacking industry, blaming the companies for soaring beef prices. The Meat Institute, a lobbying group representing more than 350 meatpacking and processing companies, pushed back on the probe in November, saying the companies welcome a fact-based discussion about beef affordability.

15:13Meanwhile, those meatpackers are also feeling the strain. The beef side of Tyson Foods posted consecutive quarterly losses since 2024. And Tyson, along with Cargill and JBS, have closed beef plants or announced plans to close them. As you talk to ranchers, what did they say would help policy-wise, could make a difference in their lives and getting those beef prices down? Well, so one message from the ranchers is that this will take time. When you consider that drought is part of this story, cost of labor, cost of equipment, cost of renting land, for example, the level of interest rates. Now, of course, you have the story of the threat of disease.

15:54You have structurally higher demand among consumers. I mean, you're lining up a lot of issues there that you're not just going to solve with a press release overnight. It's going to be a long road back before they can get to a point where this crunch is evened out and there's beef supplying to the supermarket stores in the way that can save consumer demand. You know, a lot of ranchers out there are essentially paying for the privilege of working 80-hour weeks. And this math is really sobering. So essentially, you know, when people ask, well, the cattle herd's small, so why aren't ranchers investing in expansion?

16:31I think a big part of this answer is just, you know, the capital requirements are huge and the returns are not. And eventually something's got to give here because it's becoming just harder and harder for ranchers to stay afloat.

16:49This is The Big Take from Bloomberg News. I'm David Gurra. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you like this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

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