Steak prices are up — why, how long will it last, and can imports help? Economist Dr. David Anderson breaks down the April inflation spike, the drivers behind rising beef costs (smaller cattle herd, higher fuel and production expenses, seasonal demand), what the president’s executive order on tariff-rate quotas would actually do, and how quickly changes in oil supply might affect food and shipping prices. Quick, clear explanations for shoppers and food-industry watchers.
Jeffrey Snyder, Broadcast Retirement Network
Well, Dr. Anderson, it’s always great to see you. Thanks for joining us in the program this morning.
Hey, you too, it’s great to be with you. So I have to be honest, when I saw the recent executive order from the president about beef prices, I thought of you. But before we get to that, not because I tie you to the president or to executive orders, but I think about Dr. David Anderson and beef. But before we get there, we just had an inflation readout, came in pretty hot. I wanna get your reaction to that, and then we can go into beef prices. So what was your reaction to this hot inflation number?
David Anderson, PhD., Texas A&M University
Well, I think my reaction was that can’t have been a surprise to anyone, really driven by fuel prices. We get the April data here in May, gas and diesel prices shot up pretty immediately. And that’s the one all of us consumers see right away is gas and diesel, because we drive by the pump every day.
But I think we’ve probably not seen the end of that because it takes some time for that to filter through the rest of the economy. And there’s some longer term effects too, like fertilizer prices and things like that, that we won’t see the direct effect of those for quite a while. So I do think there’s probably more to come, but that it really couldn’t have been a surprise.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, I don’t think anybody who follows the news or follows business, that there’s not a one for one relationship, but there’s all these causation. And as I mentioned, I always come to you when it comes to kind of looking at the economic impacts. So it should come as no surprise to people that grocery prices have gone up as a result of the fuel prices.
Why? Because you have to truck in, a lot of the food gets trucked in and you need that fuel to do that, clearly. Let’s talk about beef prices.
Where do we stand with the, forget the hamburger for a second, but with just with beef cuts in general?
David Anderson, PhD., Texas A&M University
Well, beef prices really jumped in the report. In fact, we were up, gosh, a little over 18% compared to for April, compared to April of a year ago. We were actually up about almost 4% compared to last month.
And you know, on the beef side, that’s not a big surprise, I don’t think. We are producing less beef. The demand for beef is there to push prices higher.
There’s also a big seasonal component. You know, we’re getting into grilling season and you’ve got buying ahead to stock the shelves and to feed into restaurants that really, you know, this is the time that happens to hit Memorial Day, that kind of traditional kickoff of summer. And so prices tend to go, that retail price data tends to go up in April from March.
And so, you know, that’s really where we are at. So I don’t view that as a huge surprise either, particularly if we think about the season and where we are in the calendar.
Jeffrey Snyder, Broadcast Retirement Network
So we’ve got Memorial Day coming up, then we have America 250, the 4th of July, which is the 250th anniversary of the United States for those watching who maybe weren’t aware of that. Let me ask you about this executive order because I think the president, I don’t wanna speak for him and I don’t speak for him, but they had a recent executive order. You’ve been, you know, you watch this stuff on a very close basis.
What does that executive order do relative to beef prices? Let’s start there first.
David Anderson, PhD., Texas A&M University
Well, the executive order included really what I, what I’m gonna call a rescinding or a temporary cancellation of tariff rate quotas on beef. A TRQ is, or a tariff rate quota is really, what happens is we import an amount up to a trigger level at a very low tariff. And once we hit that amount, the tariff jumps up.
And so on beef, it’s very low for countries covered by the tariff rate quota. It’s a very low, in some cases, zero tariff. But once they hit their limit, tariff jumps to 26.4%. So what this would do is leave that tariff low. And the idea is that would reduce the tariff and we’d end up importing more and reduce beef prices. So directionally, that’s the idea. I think in reality, I don’t think it means much of anything for prices.
We’re importing a record amount of beef already. The countries we import from, there’s only a handful of them that have huge supplies. They have other customers.
And there’s other things that affect trade besides a tariff, exchange rates, supply and demand in all of those countries. There are other customers. There’s a lot of moving parts.
And so, I don’t think it means a whole lot for prices, for beef prices for us consumers. And I think the other important thing is the very next day, there was some kind of rethinking about that and maybe backing off of that whole idea. So, it’s really another one of these.
It’s just kind of unclear, but should that go through? I don’t think it means a whole lot for us in terms of price.
Jeffrey Snyder, Broadcast Retirement Network
So the president would sign an executive order. Then I imagine it has to go to the agricultural secretary, if I’m not mistaken, and then they have to implement or maybe the trade representative. I mean, I don’t know the whole machination behind it, but there’s a process that goes into place to kind of move this along if they decide to move it along.
If they decided to move it along, how long does it take for any result to happen? I mean, beef prices probably change on a daily basis like any commodity, I would think.
David Anderson, PhD., Texas A&M University
Yeah, they do. And so, in theory, this could happen very quickly, but we’ve also got product in shipment. It’s already on the boat and coming.
So does it apply to that or only to new stuff? So there’s a lot of little details that somebody’s got to work out. I don’t know if that’s the custom service or who it is, but again, we’re importing a record amount of beef.
Most of the beef we import are lean beef trimmings that go into ground beef because all of us love a good hamburger. And we’ve got the smallest cow herd since 1961. So we really need, that’s the product we need.
So if you think about that, that’s just one of those beef items we consume. I don’t think this means a whole lot for a steak if you’re gonna go get a steak. We don’t import a lot of that.
We import a lot of trimmings, lean beef to make a hamburger.
Jeffrey Snyder, Broadcast Retirement Network
So with grilling season coming along, I mean, do you anticipate Americans, Americans, we’ve been going through these high beef prices for quite some time. They haven’t seemed, our fellow Americans haven’t seemed to curb their appetite for beef. I mean, it seems like there’s a high tolerance.
I don’t wanna speak for everybody, but it seems like when it comes to consumption of food, A, you need food, but B, it doesn’t seem like people are really curbing what they consume or changing their, maybe some people are, but it seems broadly not.
David Anderson, PhD., Texas A&M University
Yeah, I think broadly, I mean, certainly some people are. Some people are forced to. I mean, the price of beef versus alternatives versus their budget.
But we haven’t seen whole big, huge changes. And I think it’s because one is people like beef. It delivers something people like in terms of flavor and nutrients.
I think people continue to see beef as delivering good value for the money. And so people continue to buy beef. And so, if we think about it that way, yeah, we haven’t seen a whole lot of changes, but for me as an economist, we think about relative prices, beef relative to pork and chicken.
You know what? If we look at that CPI report, chicken prices and pork prices were actually a little bit lower than they were last year. So beef has become again for another month relatively more expensive than these other alternatives.
So I think that continues to kind of pressure this idea of beef demand. I think that’s got some other, particularly on the chicken side, some other effects, particularly on the restaurant side. Every quick service, fast food place, you got a hamburger and a chicken sandwich.
And I think we see more emphasis on the chicken products at those than we do on the hamburger because there’s a better margin for the restaurant on the chicken products. So we talk a lot about the CPI, which is grocery store prices, but there’s a whole lot happening on the restaurant side too.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, and to that point, and I have to close things out in about a minute, I’ve got about a minute and a half. It seems like Americans may be cutting back a little bit on the restaurants or maybe certain restaurants and redirecting themselves to those fast food type places, the McDonald’s, the Chick-fil-A’s, the ones that can kind of pivot a little bit more quick to offer a lower price product.
David Anderson, PhD., Texas A&M University
Yeah, I think there probably is some of that shifting around. We’ve also, you know, I think there’s some evidence of movement as we would expect, maybe away from what we call the food away from home back towards the food at home. If we look at the CPI data over time, prices at restaurants have gone up.
The food away from home part has gone up much faster than the food at home. And that would lead people to maybe kind of shift a little bit more towards home, changing between the restaurants, what the type of things they’re doing. And so I think all of that is suddenly happening through the economy.
Jeffrey Snyder, Broadcast Retirement Network
I thought of another question I did wanna ask you before to close out. Let’s assume, you know what they say about assumptions and assuming, but let’s assume that this blockade, this war ends in the next 60 to 90 days. Therefore, oil can flow and gas can be refined.
How long does it take to trickle down into the market for shipping, for beef, for our prices? Is it another 90 days? Where would you see that?
I mean, hypothetically, I’m not asking you to pinpoint a date, but where would you see it? When would you see that approximately?
David Anderson, PhD., Texas A&M University
Boy, I’m not really sure how fast that goes through. You know, we really, you know, even though we don’t import a lot of oil for gas, you know, products from that part of the world, we exist, we’re a big exporter of oil and we exist in a world market. And so, you know, you would think that would have an effect on that basic price of oil in the marketplace fairly quickly.
Yet, I think most of us know at the gas pump, it goes up a lot faster than it comes down.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, it’s funny, funny enough.
David Anderson, PhD., Texas A&M University
I think that’s true throughout it. So, you know, how fast does a fuel surcharge get revoked? Probably not as quickly as it got to put on.
Jeffrey Snyder, Broadcast Retirement Network
Well, you know, I have so many questions, I could spend hours, but I don’t think that would be fair to you and it certainly wouldn’t be fair to the audience. Thanks so much for joining us, Dr. Anderson. Look, we look forward to having you back on the program again very soon, sir.
