In a season that routinely sees increased demand for beef and pork, this goes far beyond people excited to get back outside to barbecue.
Michael Nepveux, an economist for the American Farm Bureau Federation, ticks off the factors contributing to skyrocketing prices: Labor shortages in the meatpacking industry on the heels of months of slowdowns and shutdowns due to covid-19; a surge in restocking food service as restaurants reopen; high grain and transportation costs; and strong exports and domestic demand.
“Consumers may have become more comfortable cooking some of this stuff at home during the pandemic,” Nepveux said. “And while recessions tend to not treat beef consumption well, the government stimulus offset that somewhat.”
Meat processing plant shutdowns last April caused the largest drop in feedlot populations since records began in 1996, according to Gro Intelligence, an agriculture data platform. And with declines in pork production last year and diminished stockpiles in cold storage (some of this due to the federal Farmers to Families Food Box program, which distributed excess commodity foods to food banks), Nepveux said things might get worse before they get better.
The Bureau of Economic Analysis reported Friday that overall prices were up in April by 3.6 percent compared to a year earlier, even as disposable personal income fell 14.6 percent, as a stimulus-check-fueled spending spike subsided.
And that grocery price inflation trend is also happening worldwide, according to the United Nations food agency. Globally, the U.N.’s Food and Agriculture Organization has recorded seven consecutive months of rising meat prices, putting April 5.1 percent higher than a year ago, a month that at the time saw the sharpest increases in meats, poultry, fish and egg prices in the United States in nearly 50 years.
In April 2020, meat hoarding and panic-buying hit its peak, leaving many grocery shelves bare and prompting Tyson Foods, the country’s second-largest processor of chicken, beef and pork, to warn that the U.S. “food supply chain is breaking.”
Bottlenecks due to coronavirus outbreaks at meat-processing plants caused dramatic supply-chain gaps last spring. This is responsible for some of the current high prices, but only a little. The reasons now are more complicated, a function of supply and demand, weather, transportation costs, labor shortages, export markets and, in some cases, opportunism.
Demand for meat went up last year by 2 percent and is up another 5.7 percent so far this year, says Steve Meyer, an economist with Partners for Production Agriculture.
“A part of it is government stimulus payments,” he said. “There’s been cash in people’s pockets, even though some of them weren’t working. And so that has been a positive for meat demand in general.”
He says employed people stuck at home and away from restaurants during the pandemic had substantially more disposable income. Even unemployed people saw a sizable boost in benefits — more, and more expensive, proteins are something people throw money at when they get a little jingle in their pocket. Money goes further in retail than at restaurants, and meat is bought by the package, not the single portion.
Restaurant reopenings are another contributor to price spikes, says Grady Ferguson, senior analyst at Gro Intelligence. As restaurants reopen, a lot of meat has already been sold to grocers or is packaged in cuts specifically for grocers. This causes newly reopened restaurants to initiate a bidding war for the remaining meat. Hundreds of thousands of restaurants are charged with filling their walk-in refrigerators, adding to price hikes.
Domestic retail prices are also affected by surges in meat exports, says Don Close, senior animal protein analyst for Rabobank. Because China’s own pig herd was decimated by African swine fever starting in 2018, it has supplemented with massive purchases of American pork; American pork exports to Vietnam are up 400 percent in the last year for the same reason. In March 2020, restrictions on selling American beef in China were lifted. Earlier this month, Argentina, the world’s fourth-largest beef exporter, announced a 30-day ban on beef exports as part of an attempt to control inflation — some experts say this provides another opportunity for American exports to balloon.
Although Close and Meyer say higher grain and animal feed prices resulting from protracted drought in the American Grainbelt are not yet affecting retail prices, they soon will. And while this month’s hike in gas prices due to the Colonial Pipeline cyberattack hasn’t impacted costs at the farm level, it has had a dramatic effect on transporting meat, says Mike Salguero, chief executive of ButcherBox.com, an online subscription meat company. According to the personal consumption expenditures price index, energy prices increased 24.8 percent in April from one year ago.
“The price to run a truck from the West Coast to the East Coast used to be $6,000 or $7,000 and now it’s $12,000, if you’re lucky,” he said.
Salguero said his business more than doubled during the pandemic as consumers began looking beyond grocery store shelves for meat, but that capacity was constrained by lack of processing facilities. He says more and expanded slaughterhouse processing facilities are planned around the country, which will minimize bottlenecks as happened last spring. It’s not that there aren’t enough pigs or cows, he said, just not enough places to turn them into consumer products, which contributes to high prices.
Meanwhile, he says, “the best antidote for high prices is high prices. As they go up really high, demand will slacken and prices will go down.”
Meyer says the industry is on target to have the second-best year ever for hog prices, but the relationship between the value of beef and the price of cattle is not as tightly linked.
According to Bill Bullard, chief executive of R-CALF USA, an association for independent cattle producers, retail prices have been trending upward since 2017, but the prices of cattle paid to U.S. farmers and ranchers has been trending downward.
“Consumers are paying record prices for beef and yet cattle producers are receiving prices comparable to a decade ago and many of them are at the verge of going broke,” he said. With high prices and record exports, the market is generating unprecedented profits for the four main meatpackers — JBS, Tyson, Cargill and National Beef Packing Company/Marfrig — which together control 85 percent of the fed-cattle market. But Bullard says the ranchers aren’t benefiting. Cargill, the largest private U.S. company, is having its most profitable year ever, with $4.3 billion in net income in the first nine months of its fiscal year on the strength of surging meat, corn and soybean prices, the company disclosed to bond investors this past week.
The four big meatpackers have faced accusations of price fixing, and earlier this spring Sens. Deb Fischer (R-Neb.) and Ron Wyden (D-Ore.) introduced the Cattle Market Transparency Act to increase cash sales and bring more transparency to the cattle market and potential beef market manipulation.
Andrew Van Dam contributed to this report.