The Good, the Bad, and the Ugly Reponses to Higher Beef Prices
The Right Ways to Make Grilling Cheaper
This past weekend, when you were buying steaks and burgers for your Memorial Day grilling, you may have noticed that they’re more expensive than they used to be.
In May 2019, a pound of sirloin steak cost, on average, $8.66. Today, it’s $11.66, a 34% increase. Over that time, a pound of ground beef went from $3.82 to $5.23, a 37% increase.
Just over the last year, beef prices are up 7%, more than almost any other food item that the Bureau of Labor Statistics tracks in the Consumer Price Index. Drought, pandemic disruptions, and increases in input costs have gone up, all of which have contributed to a shrinking cattle supply.
Voters hate inflation and particularly hate it at the grocery store, and so it’s worth asking what can be done to combat inflation in food. Given its cultural significance and the fact that its prices have gone up so much over the last few years, beef makes for a good case study into this question.
So here are The Good, The Bad, and The Ugly ideas on how to make backyard barbecues more affordable.
The Good: Empower Consumers via Trade, Innovation, and Targeted Antitrust
The United States is the world’s leading exporter of beef and, perhaps surprisingly, it is also the world’s leading importer of beef. The U.S. subjects imported beef to what are known as tariff-rate quotas. What that means is that below a certain quota (it varies by country), the U.S. charges only a very small amount but then adds substantial taxes above that quota.
For example, once Brazil has hit its import quota, American companies that would want to import beef from Brazil have to pay a 26.4% tax to do so. That makes it basically unviable to import significant amounts of beef once the quota has been reached.
Here’s a chart of where the United States imports beef from. That tiny green sliver under Uruguay is Brazil. Brazil, Argentina, Uruguay, and Paraguay combined export about two-thirds as much beef as the United States.
These are major producers; if we let them export more to the U.S., that would increase our beef supply and bring down prices for consumers. The federal government can, and should, increase those quotas.
U.S. beef imports are mostly trimmings that go into ground beef, so allowing more beef imports might not make steaks cheaper, but it would make burgers cheaper. Some consumers may prefer American beef; others may not care if it’s from Brazil or Australia. That should be up to the consumer to decide.
It is worth pointing out here that these are basic commodities, and these are our allies. The geopolitical and strategic factors that influence our thinking about something like semiconductors from China do not apply here. In fact, if we are trying to build an effective anti-China international coalition, we need to be trading more with our allies, not less.
A second way to empower consumers is stop getting in the way of innovation in plant-based and lab-grown/no-kill meat.
Plant-based meat tastes a lot better than it once did; Glenn Beck — no one’s idea of a cultural progressive — even liked the Impossible Burger. If consumers have access to more plant-based options, at least some of them will opt for those and that market will attract investment and innovation — which in turn will improve taste, increase market share, on and on.
Unfortunately, a number of Republicans have sought to garrot the plant-based industry with red tape. Other Republicans are seeking to ban lab-grown meat. These efforts are rather obviously about culture war posturing more than anything. That’s a shame because this is yet another way that consumers’ interests are not being prioritized. Consumers should have the freedom to choose whether they want to eat lab-grown meat or not.
Obviously, plant-based meat is not an exact substitute for animal-based meat, nor does it directly influence the beef component of the Consumer Price Index. But if we think broadly about how to defend consumers’ interests and how to make grilling season more affordable, allowing increased supply and more competition from plant-based and lab-grown meats is a part of that.
Third, the meatpacking industry has consolidated considerably over the last few decades. While that comes with some benefits such as economies of scale and cost savings, it also make it easier for these producers to behave in anti-competitive ways.
Last year, a group of purchasers including Target and BJ’s Wholesale filed a lawsuit against the four dominant meatpacking companies (Tyson, Cargill, JBS, and National Beef) alleging that they colluded to raise beef prices. Some of these meatpackers like JBS have already had to pay large fines for price-fixing in the past. They’ve also had to pay big fines for wage-fixing. These companies have a poor track record when it comes to anticompetitive behavior. The Department of Justice and the Federal Trade Commission should continue to vigorously enforce the law in this area.
Competition is good. If incumbent beef producers have to compete with Brazilian beef, plant-based and lab-grown meat, and have to compete with each other more fiercely, that’s a win for consumers.
The Bad: The Robinson-Patman Act
While that kind of targeted antitrust enforcement would be helpful, there is another antitrust idea being mulled that would do more harm than good: reviving the now-dormant Robinson-Patman Act (RPA).
In 1936, Congress passed an antitrust bill (the Robinson-Patman Act) aimed at A&P, a pioneer in large-scale grocery retail. The bill succeeded in hamstringing A&P’s practices that had been helping to keep groceries low for people struggling with the Great Depression.
A century ago, A&P was the Costco of its day. Like Costco, A&P was vertically integrated, purchased in bulk, produced many of its own private label brands, and focused on low prices and high variety. Like Costco today, to keep costs down, A&P built its own distribution network and bought directly from suppliers, bypassing middlemen wholesalers that smaller grocers had typically used. In important ways, the A&P built modern retail.
A&P also purchased in large, predictable quantities that allowed it to negotiate big discounts with suppliers. It then passed much of the savings onto customers. Smaller grocers, who still used those middlemen wholesalers and could not buy in bulk, were thus not able to compete with A&P on price.
A&P’s model quickly spread across retail; consumers, and particularly low-income consumers, loved it. A Congressman named Wright Patman did not. He saw the chain stores like A&P as a threat to small producers. And so, in 1936, Congress passed the Robinson-Patman Act (RPA), nicknamed ‘the anti-A&P Act’, to bar many of the practices that A&P used to cut costs. Tellingly, its original title was “the Wholesale Grocers Protection Act”; its purpose was to protect middlemen wholesalers.
To keep A&P and other big retailers from being able to negotiate those deep discounts, the RPA added price discrimination to the list of forbidden activities. The RPA took the side of smaller stores and wholesalers and against the bigger stores and consumers.
To put it another way, during the Great Depression, the Robinson-Patman Act made customers, many of whom were struggling to make ends meet, pay more for food. Over time, the Robinson-Patman Act fizzled and hasn’t been used much for decades.
Today, some policymakers associated with the Neo-Brandeisian school of antitrust want to revive the RPA. That would undercut large retailers’ ability to keep prices low and so would act as a tax on all Americans but particularly low-income and working class Americans who spend a disproportionate share of their income on food and retail. One of the middlemen advocating for the RPA even admitted that it would raise prices at the larger stores where many millions of Americans shop saying a re-invigorated RPA would mean “our costs would go down, and Walmart’s costs would go up.”
Consumers win when they can get the $5 rotisserie chicken at Costco instead of being forced to pay the artisanal price at a smaller vendor. Every worker is a consumer. When you help consumers, you help workers. This is particularly the case for working-class and low-income people. One of its most important tasks for the Biden administration is to help people with tight budgets stretch those budgets further. Reviving the RPA would be a terrible way to do that.
The Ugly: Trump’s Deportation Plans
If reviving the RPA is bad idea on beef prices, Trump’s stated goal to deport millions of immigrants is an even worse one. His plans for these deportations pretty clearly include a range of draconian measures including a curtailment of due process, giant camps, and sweeping raids. On a certain values level, beef supply is less important than the evisceration of civil liberties that these would represent, but it is important to reckon with how they would harm Americans at the grocery store.
In the top five meatpacking states (Nebraska, Iowa, Texas, Kansas, and Illinois), 56% of the meatpacking workforce is foreign-born and, of that 56%, 67% are noncitizens. These are physically demanding, dirty, dangerous, difficult jobs that most native-born Americans do not want to do.
Without these immigrants, many of whom admittedly are in the country illegally, meatpacking in this country would grind to a halt, with enormously negative consequences for beef supply and beef prices. Surely, we can hold two thoughts in our head at once: that, on the one hand, breaking the law is bad and border security needs to improve, and, on the other hand, these immigrants are workers who make all of us beef consumers better off.
We have more affordable steaks and burgers because of the hard work these immigrants do. Immigration is not primarily a nice thing we do for immigrants; it is a smart thing we do for ourselves. To deport these workers would be, on top of all of its other problems, an act of incredible self-sabotage.
So to sum up, we should raise quotas for imports of beef from our allies, embrace innovation in plant-based and lab-grown/no-kill meat, conduct vigorous targeted antitrust enforcement, leave the Robinson-Patman Act on the shelf, and reject deportations that would be economically self-destructive. If we do those things, we can help bring beef prices down so that backyard barbecues are more affordable for Americans this summer and in summers beyond.
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