Where’s the Cheap Beef? by David Frum, The Atlantic
G
rocery prices are rising. Meat prices are rising more than most other grocery prices. Beef prices are rising more than most other meat prices. But on the ranch, these are not prosperous times. Even as ground chuck costs more than $5 a pound at Walmart, ranchers complain that they are receiving less for their animals than it costs to feed them. Rising food prices are likely depressing President Joe Biden’s softening approval numbers. The U.S. economy has added almost 5 million non-farm jobs since Inauguration Day. Yet Biden’s approval rating has dropped into the mid-40s. In a recent Fox News poll, 82 percent of respondents described themselves as “extremely” or “very” concerned about the cost of living. More than scenes of chaos in Afghanistan, the numbers at the supermarket checkout may be weighing Biden down. On September 8, the White House
CAROL GUTIERREZ Home on the Range Quilting Custom and E2E Quilting
5 Mule Canyon Rd., Mayhill, NM 88339 Home: 575-687-3415 • Cell: 575-626-8546 carolcg@pvt.net
unveiled an analysis of the problem—and an ambitious plan for action: $500 million in loan guarantees to smaller and regional beef processors. What’s going on here is bigger than beef. It’s a test of a theory about the U.S. economy—and about a philosophy of government. The theory, expressed most powerfully in a 2019 book by Thomas Philippon, The Great Reversal, is that the U.S. economy is in thrall to a few dominant corporations. In industry after industry, Philippon argued, a few companies have gained the power to keep prices high, wages low, and competitors out. The philosophy of government that follows from this theory is that the government should vigorously police competition, not only by means of traditional antitrust enforcement but also through a broader program of market regulation and intervention. Market regulation went out of style in the 1970s, a victim of its internal contradictions. As academic critics such as Robert Bork argued back then: If, say, a supermarket gains market share from its mom-and-pop competitors by offering a wider selection at lower prices, you can understand why Mom and Pop don’t like it. But how is it “pro-competition” if the government intervenes to protect Mom and Pop from competitors who are doing a better job of meeting customer needs? That argument prevailed for most of the past half century. The Biden administration is seeking to change course—and beef is where it’s starting. To understand the choices facing the Biden administration, here are the two warring explanations of what’s going on with beef.
Farming is your livelihood, and it’s our business to help protect that. We make it simple to help you select the coverage that’s right for you today and provide options for the future of your growing operation. Now that’s Smarter Insurance for Agriculture.® Contact us to schedule an on-site SuperCheck® and ensure you have the coverage you need.
Monte Anderson Agent, AgWise Master Certified Farm Bureau Financial Services 815b E. Llano Estacado Blvd., Clovis NM 88101 (575) 762-4729 (575) 762-1774 fax
15 Oak, Clayton, NM 88415 (575) 374-8933 (575) 374-8934 fax monte.anderson@fbfs.com monteanderson. fbfsagents.com Bethany Posey
Farm & Ranch | Commercial Ag | Crop | Succession Strategies | Workers Compensation Farm Bureau Property & Casualty Insurance Company,* Western Agricultural Insurance Company,* Life Insurance Company*/West Des Moines, IA. *Company providers of Farm Bureau FinancialServices PC044 (1-18)
60
OCTOBER 2021
The first explanation is a classic story of supply and demand. The beef industry has been hammered over the past two years by a series of supply shocks. COVID closed many processing plants. Then, when the plants reopened, they had to work less efficiently, with workers spaced farther apart from one another. Like many other employers, meatpackers have had difficulty hiring enough labor at pre-pandemic wages, so they have had to pay more, which raises their costs. Meanwhile, U.S. cattle herds have been ravaged by drought across the American West. The 2020 drought was bad; the 2021 drought has been worse. More than onethird of American cattle have grazed under drought conditions in 2021, sometimes—as in Montana and Washington State— ex treme - drought conditions. The aggregate national herd has shrunk in numbers, and the animals that have come to market have weighed an average of 15 pounds less than animals weighed a year earlier, according to U.S. Department of Agriculture statistics. Drought has also pushed the price of cattle feed to dizzying heights, raising beef prices even higher. The feed crisis explains some of the woes of small ranchers. Many cattle spend their early months on a ranch eating grass, then are shipped to a feedlot where they are fattened with corn and other grains. If the feed costs more, the rancher earns less. Over the past year and a half, surging demand slammed into this constrained supply. Throughout the coronavirus pandemic, the federal government has pumped enormous purchasing power into consumers’ wallets. This extra money—plus consumer cutbacks on other kinds of spending—has enabled consumers to increase their spending at the grocery store; they spent $84 billion more in 2020 relative to 2019. If this supply-and-demand explanation is correct, then the right policy for government is: Do nothing. Higher prices will encourage ranchers to raise more cattle. Higher prices will enable meatpackers to pay higher wages. Higher prices will induce consumers to substitute other foods for beef. Supply and demand will equilibrate, as they always do. And this time, the high prices can serve another function, too: warning consumers of the pocketbook impact of drought-causing climate change. But there’s another story to tell, and it’s the story the Biden administration is telling. Meatpacking is becoming a more concen-
