Broadcast Retirement Network’s Jeffrey Snyder discusses rising beef prices with Texas A&M University’s David P. Anderson, PhD.

Jeffrey Snyder, Broadcast Retirement Network

Joining me now is Dr. David Anderson of Texas A&M University, Dr. Anderson, it’s always great to see you. Thanks for joining us this morning. Hey, it’s great to see you too.

So we had some, I would say, positive CPI numbers a week or so ago. The market seemed to like the information, but when you drill down a little bit more, the cost of food seems to be still high, and an area of expertise of yours is beef prices. How are we doing on the price of meat and beef?

David P. Anderson, PhD., Texas A&M University

Well, beef prices, if we looked at the CPI, we like to compare this month versus the same month a year ago, really because of a lot of seasonality factors, excuse me, because of a lot of seasonality, and beef prices are double digit more than they were a year ago. Compared to the month before, because a lot of times we look at, well, our price is going up this month versus last month, or last week when we went to the store last, it was a little bit of a mixed bag. We had some items that were a little lower than last month, and then we had some that were a little higher, but overall, the level of beef prices continues to be essentially record high, just very high prices, but we’re producing less beef.

We got a big USDA report on the number of cattle in the US on January 30th, which reflects January 1, and it showed we had fewer beef cows this year than last year, and what that tells us is we don’t have much expansion in herds yet. I think for a variety of factors, including drought, including higher costs, higher interest rates are part of that, and just a reluctance to really expand herds, and what that tells us is fewer cows, fewer cows, less beef production, and from a supply standpoint, some more pressure for higher prices in the future.

Jeffrey Snyder, Broadcast Retirement Network

Yeah, and you’ve talked to us about this over the last, I would say, two years. It seems like the price of beef still remains high. Obviously, there’s causality.

There are the reasons that you outlined. Is there anything that we can do, either as consumers or your interaction with suppliers, to improve prices? Because meat, from what I can tell, is still a staple of the American diet.

David P. Anderson, PhD., Texas A&M University

Well, it really is, and part of higher prices of beef also, we ought to look at ourselves a little bit, because we actually have had growing demand for beef for the last decade, really driven by growing demand for higher and higher USDA quality grades, more prime, more high choice, some of your branded products, like certified Angus beef, and I think that’s part of the picture of high prices, is that consumers continue to see beef as providing value for the dollar.

Now, we know that beef is getting more expensive relative to pork and chicken, and so you would think that there would be some shifting around because of that, but we don’t have a lot of evidence of that yet, but certainly, I think the overall picture is that people see beef delivering value for the dollar.

Jeffrey Snyder, Broadcast Retirement Network

And, you know, as you mentioned, we’ve got drought. That’s nothing new. We’ve had that for the past couple of years.

We’ve got thinning herds, so we need to have cows make babies and create more cows. That’s certainly important. When you go to the store, are consumers considering lower quality of beef so that they still like beef in their diet, they have value per dollar, but are they looking, for example, maybe instead of sirloin, they’re kind of going down a little bit in order to kind of keep the prices kind of budget-friendly?

David P. Anderson, PhD., Texas A&M University

You know, I think we see a lot of that shifting kind of within the beef space. And you think about, you know, the real expensive stuff, your filet mignon, your rib-eyes, then you’ve got New York strips and sirloins and, you know, roasts and other kinds of cuts of beef. I think we see all of that, some shifting down to lower-priced cuts.

I think you also notice if you kind of wander around the grocery store and look at the meat case, I think we see grocery stores offering different cuts than they used to, looking for a price point that works for consumers. I think you also see steaks maybe cut thinner and some different variety that way that kind of gets the price point a little lower but still keeps beef in folks’ diet. And so, you know, I think that’s pretty common to see around the store.

I see a new or I see a changing kind of types of cuts in the meat case over time.

Jeffrey Snyder, Broadcast Retirement Network

What does this mean for our fast food restaurants or McDonald’s or Burger King? You know, we’ve talked to you in the past that they’re looking to create more value for their customers. They’re probably including things like chicken and possibly other cuts of meat.

But what’s this mean for them? Because people, from what I can tell, are still going to McDonald’s. They’re still going to Burger King.

They’re still going to Wendy’s. So they like fast food.

David P. Anderson, PhD., Texas A&M University

Well, it’s really difficult on the hamburger side of that. We think of fast food places, they got hamburgers and they got a chicken breast of some kind, sandwich, nuggets, tenders, something like that. And I think that’s really where we see a lot of competition between beef and chicken.

You know, the ground beef part as an ingredient, as a as a as an input cost for fast food places, we have record high ground beef prices. We’ve got record high prices for trimmings and the things that we grind up into ground beef. And and, you know, those are record high prices, which really pressures their margins on the hamburger side.

Yet the chicken can provide some value and some more margin. And so I think we see that competition within the kind of the the looking at the at the fast food restaurant when you’re looking at the board and what to order. I think that’s where we see some competition there.

And and then trying to figure out how do we price some of these things to still remain remain profitable? You know, I might say, too, that, you know, we’ve had a lot in the news about, you know, importing more beef. You know, we are importing a record amount of beef in the US because we have record high prices.

The majority of what we import are lean beef trimmings from places like Australia, New Zealand, Brazil. Argentina has been in the news more and we’re importing more of that really lean beef to go into ground beef because we don’t we aren’t producing enough of that really lean beef because our cow herds so small. And so that’s really where imports come in and largely speaking is really in that that ground beef market.

Jeffrey Snyder, Broadcast Retirement Network

Well, this is certainly something that, you know, affordability is certainly important to all of our audience members. It’s certainly certainly important to you and I. And I’m sure we will continue to talk about this.

Dr. Anderson, great to see you. Thanks for joining us. And we look forward to having you back again very soon, sir.

Hey, thanks. It’s great to see you.