I was looking up the figures for meat production earlier this evening and I ran across something puzzling:
The volume of beef and pork produced follow each other almost perfectly. I can't think of any reason for them to be tied so closely together. What's going on?
POSTSCRIPT: This chart also shows that the production of beef and pork seems to be pretty steady over the past year. So why do we keep hearing about shortages, and why is the wholesale price of beef and pork so high?
According to the USDA, the farm price of beef is up 16% over the past year while the retail price is up 24%. But why? Is it really just higher feed costs?
If they have a roughly similar time to maturity, isn't that pretty much what we'd expect? Or even if each could have a different, but relatively regular, time to maturity?
Also, and maybe more important, there's the demand side to think of-- if it's anything like the chicken market, there are major buyers that decide when it's time to move them off the hoof, and their markets depend on the overall economy and so run parallel.
Pricing could be affected by changed slaughterhouse conditions due to covid, though that would have happened much earlier this year, but more by increased demand from restaurant and hospitality businesses as these have been reopening unevenly over the past few months but more aggressively since late summer. They were really major markets before the spring of 2020, then cratered for more than a year, and now supply chains have to adjust to their reappearance in both quantity and pathways. (Maybe not the best reference in this connection, but just recently I heard a story about how the toilet paper supply chain was disrupted by sudden hotel/motel closures-- overall demand was the same, but it needed to move through different channels, as it were.)
That is what makes this so weird, cattle and pigs don't have anywhere close to the same production methodologies or timeline to market weight. The early 2020 inspection decrease lasted for 2-3 months which is a significant portion of the 4-6 month it takes to raise a pig in a factory farm. A steer on the other hand takes 16-20 months in a field and then another couple on a feedlot. Where is the rebound effect for beef? Perhaps the issue is not production but that processing and inspection capacity was operating at near maximum capacity and is relatively inelastic. There are also many products that don't normally require recently butchered meat and can better accommodate production fluctuations temporarily. Eventually though the sausage and hamburger companies need to start competing with the retail meat market though and prices go up.
Meat packing is dominated by a few companies, and with little excess capacity. So...
see also:
https://www.theatlantic.com/ideas/archive/2021/09/biden-beef-prices-plan/620187/
That article also points out that this year’s and last year’s droughts have driven the cost of feed way up.
Is there a bacon/pork belly factor in the mix?
But why? Is it really just higher feed costs?
The cost of Ivermectin has skyrocketed!
In all seriousness, it may be that other costs to beef/pork producers have risen sharply: labor? energy?
Also, what's the export picture like? If production has fallen in other countries (or if some of them are preemptively buying extra to build up food reserves) it may be the case that produces in the US would be affected. Also, a lot of swine in a lot of countries have had to be culled, I I I think, due to disease, and this might increase pork and (because it's sometimes a substitute) beef prices.
note to self: don't post without reading glasses.
Is that about the I-I-I? That was the angel's preferred pronoun in Angels in America.
Good point, exports could be a really important element here, especially for pork. In the early phases of the pandemic China's domestic production was cut way back and US packers were running full tilt to sell there. That's a big reason covid was so terrible in that business-- they didn't want to take any measures like distancing or slowing down lines that would affect production. Most other countries have probably more or less resumed production but it seems likely that to the extent possible, there's a nearly world-wide market for beef and pork (excluding the EU for US meats, I think).
MCRIB IS BACK!!
Econ 101? Demand has increased (because covid relief gave people $$$ and restaurants were closed) but production hasn't caught up yet for whatever reason?
Might be interesting to compare to beer/wine production and prices during covid. Anecdotally at least, a lot more drinking was going on.
All of this is simple supply/demand economics. Too much pent up demand chasing too little supply. There's no magic bullet either the Biden Administration or Republicans in Congress have that's going to magically fix this problem overnight. Sue the Feds can make some tweaks here and there but ultimately it's going to have to fix itself (as markets supposedly are supposed to do according to so-called "conservatives"). Yet don't tell that to the media with minds fixed on the hot topic de jure (INFLATION). Is there going to be a demand for wage and price controls next?
Average time from birth to slaughter for Pigs is 6 to 7 months
Average time from birth to slaughter for a Cow is 3 years
Average time for a chicken is 8 - 12 weeks for a MEAT chicken and slightly longer for laying chicken (eggs)
What I find interesting is that chicken prices seem to be excessively high
Also keep in mind that production does not equal "available on US food shelves"
An awful lot of meat/poultry/pork is exported
I have no data to support this, but my hunch is that this is related to USDA inspector capacity, which is likely moderated by either political pressure from the competing industries or by actual legal regulation (which would have been developed as a result of political pressure) to remain comparable. I would be interested to see poultry plotted alongside this info.
Meat prices are higher not because of supply per se, but due to increasing feed and fuel costs (for transportation to and from feedlots and slaughterhouses), and a lack of capacity at processing facilities. Processing plants (dominated by a few huge corporate players) and their surrounding communities were decimated by Covid and the broader shortage of low-wage labor right now.
We are told that the shortage of truck drivers is critical, presumably everywhere. Are farmers or meat processors getting stuck with livestock that they can't sell right away because of lack of transportation?
By the way (as I said before) it is claimed in many stories that shortage of truckers is holding things up at ports, but the same stories often describe how truckers have to wait for hours in long lines to pick up their containers. Which way is up here (as Dean Baker would say)? What's the situation at meat packers? The moral is that any story in the media about worker shortages has to be taken with a grain of salt.
I think I saw a story that farmers are having trouble delivering meat for export because of the port problems, but this should make the meat more abundant for domestic consumption (if farmers are on the ball) and reduce domestic prices. This stuff is complicated and the media are not necessarily getting everything right.
The Farm Bureau has a good write up, including the fact that prices farmers got dropped in 2019 (and 2020?)...
https://www.fb.org/market-intel/when-will-beef-and-pork-markets-return-to-normal
I'll also blame climate change: The drought has meant a number of ranchers had to sell their stock, or a large portion of their herd, to pay for feed for the rest. Yes, the drought has been going on for a while, but with Lake Mead hitting historic lows recently (past few years), the economics has changed--drought means more need for feed if range land is in poor condition. Loss of water rights means less feed production...
All I know is that chicken feed and scratch, as well as sunflower seeds, have really gone up recently. Also hogs and cows have to be trucked before and after processing.
Take a more careful look at your plot, KD. Your "pretty steady" is really gently declining, which it wasn't doing before the pandemic.