Time Clock: MEAT PRICES

Why Are They So High?

THE farmers are mad,” a Republican politico said last week.

“They don’t see why steaks from grass-fed beef cost 98¢ a Ib. when all the farmer gets for that meat is 14¢.” Their anger touched one of the most sensitive nerves in U.S. politics. In Washington a congressional committee responded by proposing price supports for cattle while the Department of Agriculture is already investigating the spread between the price of beef on the hoof and on the butcher’s meathook.

Are meat prices high because someone between the rancher and the retail counter is getting too much gravy? The answer is no, even though cattlemen are selling their grass-fed steers at a loss in today’s markets. But middlemen are making no lush profits. The feeders, who buy steers to fatten up for market, are lucky to make a 10% profit—provided that they guess right on what the price will be when they sell. Meat packers’ profits are smaller: last year they were six-tenths of a cent on each dollar of sales. The retailer, whose average markup on beef is 16%, often has an overhead that eats up much of this.

–

The chief reason meat prices are so high is the heavy cost of bringing meat to market. Actually, the price of a steer on the hoof is only a small factor in what the housewife pays for beef. The total cost includes such expenses as freight (up 75% since the war) and labor (up about 100%). Since these costs are fixed, a temporary drop in cattle prices may mean only a small reduction at retail.

All along the line there are big risks and small profits. For example, an 800-lb. grass-fed steer that costs the cattleman $160 to raise, and formerly sold at a nice profit, today usually sells for only $128. To get the cattleman’s steer ready for market, and possibly make a $25 profit, a feeder must stuff it with corn for three to nine months. But to the packer who buys it weighing 1,100 Ibs. the steer represents only 660 Ibs. of salable meat. Once, such byproducts as the hide, tallow, blood, offal and stomach were very profitable. But today their prices are down and the packer must figure on making more money on the carcass, for which he can currently get about $275. Whether he will make any profit at all, after expenses, often depends on whether the meat is graded “prime,” “choice” or only “good” by Government graders. He does not know the grading for sure until after he has bought the meat. If the steer is “choice,” he will make a 2¢-a-lb. profit; if it grades “good,” he may lose about 4¢. But even the carcass (shrunk to 653 Ibs. in transit) is not all salable at the 42½¢ a Ib. the butcher pays for it. Two-thirds is hamburger and other low-priced meats that the butcher must sell for less than his cost; nearly one-fourth is bone, suet and fat, which must be stripped from the carcass, and brings the butcher little when sold. Only 260 Ibs. are steaks and roasts, and their prices must be high enough to make up for all the losses on the fat and cheap meats. –

Another cause of high meat prices is the consumers’ preference for “choice” and “prime” grades of beef instead of the lower-priced “good” and “commercial” grades. Thus the premium-grade cuts are bid up beyond their actual worth. Actually, “good” beef at its best is almost indistinguishable from the poorer run of “choice” meat. But many retailers refuse to stock it.

One way to narrow the wide spread between ranch and retail prices is to improve the steer so that there will be more meat, less waste, less expense in raising it. Some experts also believe that even the traditional feed-lot method of fattening cattle with expensive corn can be greatly improved. One development in feeding is the use of synthetic urea to nourish the bacteria in the rumen (part of a steer’s stomach) so that a steer can be readied for market on cotton burrs, corncobs and even sawdust in its food.

–

Although the cattle population of 94 million is the greatest in U.S. history, there were few signs of overproduction, and there were no demands for price supports until the drought in the Southwest forced ranchers to dump their cattle on the market and collapse prices.

Unlike the U.S. appetite for wheat, which is declining, and thus adding to the surplus problem, there is still an increasing appetite for meat. Since 1951, beef-eating has soared from 55 Ibs. per capita to an estimated 75 Ibs. this year. As long as Americans keep their healthy appetite for beef, the way to lessen the spread between range and retail prices does not seem to be price supports. What is needed is a wider attempt to breed better-grade cattle with less waste, and a recognition by the consumer of the value of the cheaper cuts of meat.