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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: New data from the Bureau of Labor Statistics shows that

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Speaker 2: inflation in the US has continued to cool from its

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Speaker 2: pandemic era. Peak Inflation rows zero point two percent in

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Speaker 2: January from December, according to BLS data released on Friday.

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Speaker 2: That's lower than Wall Street expected. The report also showed

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Speaker 2: drops in energy costs, used vehicle prices, and the cost

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Speaker 2: of eggs, which are down thirty percent from a year ago.

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Speaker 2: But it's a different story in one corner of the economy.

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Speaker 3: To backstory has been the consumer prices have been coming

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Speaker 3: down for the last couple of years. David, that's great,

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Speaker 3: but there are pockets of the grocery store where prices

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Speaker 3: are stead raising like it's a pandemic. One of those

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Speaker 3: is beef.

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Speaker 2: Beef costs have risen faster than most other items in

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Speaker 2: the Consumer Price Index, with the broad beef and veal

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Speaker 2: category of fifteen percent over the past year as of January.

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Speaker 2: Bloomberg's end Occurrent says it's a price that runs counter

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Speaker 2: to the broader trend of cooling inflation, and that is

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Speaker 2: why it's worth paying attention to.

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Speaker 3: So we took a look to see at what's going

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Speaker 3: on there and the reason beef prices are going up

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Speaker 3: at the rate the r It's pretty complicated.

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Speaker 2: That's because the price of beef is driven by a

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Speaker 2: lot of overlapping factors. The US is the world's largest

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Speaker 2: consumer and one of the largest exporters of beef, but

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Speaker 2: it's facing an historically low cattle herd and soaring production

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Speaker 2: costs that are putting a squeeze on American ranchers.

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Speaker 4: My family landed in Oklahoma in the early nineteen hundreds

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Speaker 4: and we've been farming and ranching on the same land

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Speaker 4: ever since.

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Speaker 2: Casey Schirler is a fifth generation cattle rancher who runs

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Speaker 2: a ranch with her husband called Refarm.

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Speaker 4: I think a lot of people assume that when cattle

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Speaker 4: prices are high, it must be really good for ranchers

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Speaker 4: right now, but it's actually a really challenging and volatile time,

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Speaker 4: she says.

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Speaker 2: The inflationary environment in the cattle industry is putting pressure

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Speaker 2: on their business.

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Speaker 4: It's getting really, really hard to continue operating a profitable business.

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Speaker 4: We can't continually depend on government bailouts, for example, for

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Speaker 4: farmers and ranchers. We have to think like business people.

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Speaker 4: We have to make decisions that are better for our

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Speaker 4: bottom line, and we have to be willing to adapt.

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Speaker 2: That squeeze is being felt all along the beef supply

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Speaker 2: chain too, from ranchers and meat processors to consumers.

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Speaker 3: I think it's a reminder, David, that the inflation story

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Speaker 3: hasn't fully gone away. It just demonstrates that there are

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Speaker 3: parts of the economy where prices remain quite persistent, remain

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Speaker 3: quite high, and that's what's feeding the whole cost of

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Speaker 3: living story, that's feeding into the whole political cycle ahead

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Speaker 3: of them in terms. That's one of the reasons why

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Speaker 3: the Federal Reserve hasn't brought down interest rates maybe as

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Speaker 3: fast as some people would hope, certainly as fast as

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Speaker 3: President Trump would hope, because they continue to warn there

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Speaker 3: are pockets of inflation still in the economy. Beef prices

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Speaker 3: are not the be all and end all. Not everyone

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Speaker 3: wants to buy beef, of course, but it's just an

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Speaker 3: illustration of how fragile the overall supply lines do remain

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Speaker 3: in the me that there are still these pockets of

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Speaker 3: food that are increasing like just like it's a pandemic.

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Speaker 2: I'm David Gerret, and this is the big take from

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Speaker 2: Bloomberg News today on the show Beefflation, what rising beef

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Speaker 2: prices show us about the state of the US economy

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Speaker 2: and what it could take to bring them down. And

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Speaker 2: when you look at beef, the broad beef and veal category,

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Speaker 2: it's gone a fifteen percent over the last year as

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Speaker 2: of January. At a high level, what is going on

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Speaker 2: with beef prices.

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Speaker 3: There's a lot happening all at once. So on the

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Speaker 3: one hand, you've got the cattle herd in the US shrinking.

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Speaker 3: You have issues like drought. You have issues like the

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Speaker 3: cost of production for the ranchers, so they're juggling high

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Speaker 3: interest rates, high labor costs, high costs associated with their

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Speaker 3: equipment and the like. You've other factors too, structural factors

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Speaker 3: like retiring a ranchers retiring not being replenished. It's a

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Speaker 3: tough job. And of course now we have the latest

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Speaker 3: issue with disease in cattle herd coming in from Mexico.

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Speaker 3: That's a top concern for ranchers.

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Speaker 1: Dangerous flesh eating parasite, the New World screwworm has been

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Speaker 1: spotted just mouths from the Texas border in northern Mexico.

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Speaker 1: That's raising alarms for Texas livestock producers, pet owners.

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Speaker 3: So there's a whole series of issues there that I'm

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Speaker 3: complating into one sentence. But the net takeaway when you

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Speaker 3: speak to ranchers is that that's what's hammering production. They

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Speaker 3: can't get cattle to meet factory and then to the

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Speaker 3: store in time to meet consumer demand.

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Speaker 2: How dire is the situation for ranchers, for producers, and

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Speaker 2: for consumers.

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Speaker 3: So it's a difficult situation. It depends where you are

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Speaker 3: on the supply line, and there are some different views

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Speaker 3: on this. If you're at the very start of a

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Speaker 3: supply line, whereby you're in count calf territory and you're

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Speaker 3: producing those calves, calves are in hot demand right now.

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Speaker 3: You know, one of the ranchers we spoke to said,

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Speaker 3: for example, he gave example of a bottle calf that's

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Speaker 3: a calf rared by bottle. At once upon time wouldn't

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Speaker 3: be considered a premium buy, but you know, a few

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Speaker 3: years ag that might have fetched you a couple of

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Speaker 3: hundred dollars now can be anywhere up to fifteen hundred.

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Speaker 3: So if you're producing calves getting them out the door

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Speaker 3: hot demand, you should be making money. But the further

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Speaker 3: along this ply line you go, and if you want

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Speaker 3: to keep those cattle and fatten them up as you

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Speaker 3: would traditionally and then send them off to the market,

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Speaker 3: send them off to the meat factory. That's where it's

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Speaker 3: getting a lot harder. They're feeling a squeeze. And of

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Speaker 3: course the processors, the meat processors, they're under a lot

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Speaker 3: of scrutiny from the White House firm what the White

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Speaker 3: House says, they want to promote more competition in the sector,

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Speaker 3: They complain of their own high processing costs. So, as

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Speaker 3: I say, if you're at the very beginning, you're maybe

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Speaker 3: doing okay, but along the rest of that supply line,

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Speaker 3: you're facing all those issues I spoke about.

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Speaker 2: Like the issues threatening the supply of beef in the US.

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Speaker 2: The supply chain itself is complicated. Cattle rancher Casey Schuler

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Speaker 2: says the process of raising and prepping cattle is long

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Speaker 2: and expensive. Coming out of a downturn in the industry

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Speaker 2: is not something that can happen overnight.

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Speaker 4: A cow is pregnant for about two hundred and eighty

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Speaker 4: three days. When she has a half you raise that

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Speaker 4: calf to wean for another nine months and then if

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Speaker 4: that calf is a heifer, a female, and you decide

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Speaker 4: to keep her, she's not going to have her first

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Speaker 4: calf for about two more years. So you're talking about

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Speaker 4: a four year production cycle right before it adds any

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Speaker 4: sort of meaningful value to the beef supply. There's no

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Speaker 4: quick fixes to fixing this. Part of the reason this

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Speaker 4: is happening is because the number of cattle in the

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Speaker 4: US is at an all times seventy five year low,

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Speaker 4: and the cattle cycle naturally goes through these periods of

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Speaker 4: expansion and contraction. We're in a period of contraction and

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Speaker 4: can't we can't legislate our way into a bigger calf

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Speaker 4: crop next quarter or even next year because biology is slow,

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Speaker 4: and so we just we have to focus on things

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Speaker 4: outside of strictly policy, I think, to fix these things,

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Speaker 4: and we have to be really careful about what we

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Speaker 4: say and what we do, because it does cause some

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Speaker 4: fallout for farmers and ranchers. You know, we are a

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Speaker 4: country who loves beef, and if we want to keep

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Speaker 4: doing that sustainably, then ranchers have to have a way

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Speaker 4: to make a viable living.

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Speaker 3: Got problems around the cost of land, problems around the

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Speaker 3: cost of equipment, problems around the levels of interest rates,

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Speaker 3: issues with the drought, and so on and so forth.

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Speaker 3: And it's this classic example of a young rancher family

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Speaker 3: clearly getting squeeze at the very beginning and facing very

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Speaker 3: different circumstances of what ranchers in previous times would have faced.

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Speaker 2: Then you spoke to another rancher, Patrick Montgomery, who runs

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Speaker 2: KC Cattle Company outside of Kansas City, Missouri. He said

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Speaker 2: something astonishing that there were no cattle left in America

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Speaker 2: to set out for us.

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Speaker 3: He's illustrating the point that the herd is at the

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Speaker 3: smallest since in the nineteen fifties, and that's because production

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Speaker 3: cannot keep up with demand. David, Let's not forget demand.

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Speaker 3: The mon consumers is another part of the story. It's

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Speaker 3: not just a drought. It's not just the impact of disease.

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Speaker 3: It's not just the issues around costs. As wife ranchers

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Speaker 3: kind of produce to beef. Also that Americans want to

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Speaker 3: eat more beef. They're moving up to value chain in

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Speaker 3: their own diet, and that's why we're having this crunch.

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Speaker 3: And he wanted to replenish his herd. The genetic line

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Speaker 3: in his herd last year, so he sold a chunk

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Speaker 3: of his cattle and he wanted to come back to

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Speaker 3: market this year and to buy new cattle to replace those.

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Speaker 3: He does specialize in maygu beef. I should say, so

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Speaker 3: he's maybe a little bit up to value chain compared

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Speaker 3: to others, but when he came back to around thirty

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Speaker 3: percent more expensive to buy, so it was an economical

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Speaker 3: for him. He's yet to replenish the cattle he saw

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Speaker 3: last year, so he's pretty frustrated. He's among the ranchers

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Speaker 3: I spoke to who has a pretty downbeat view and

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Speaker 3: where things are going at the moment.

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Speaker 2: When you're not wandering around ranches or feed lots, your

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Speaker 2: day to day's job is that the Federal Reserve. You're

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Speaker 2: following what the FED chairman and other policymakers have to say.

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Speaker 2: How interested are they in this facet of the American economy,

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Speaker 2: In the fact that beef prices are going up.

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Speaker 3: I think it's fair to say that the price of

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Speaker 3: a hamburger is not going to change the trajectory for

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Speaker 3: US monetary policy. I don't think the FED policy makers

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Speaker 3: are sitting around talking about ground beef prices. But when

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Speaker 3: we do hear officials command and when they use the

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Speaker 3: official jargon and when they say listen, inflation remains persistent

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Speaker 3: in some areas. They're not fully comfortable with where it's at.

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Speaker 3: And they have this inflation target that they said, and

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Speaker 3: one of the reasons is not back to that target

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Speaker 3: of two percent is because of pockets like this, And

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Speaker 3: don't forget, of course, they're very aware of the staples

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Speaker 3: that people buy and the cost of those staples, and

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Speaker 3: putting food on the table is one of those. So

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Speaker 3: they're not setting monitor policy based on the price of beef.

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Speaker 3: But it certainly build into the picture that the inflation

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Speaker 3: story in the US has not yet totally gone away.

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Speaker 3: It's headed in the right direction, but it still remains

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Speaker 3: above target.

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Speaker 2: So with meaty pockets of inflation still showing up in

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Speaker 2: economic data, what is the White House doing to turn

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Speaker 2: things around? And will it be enough to shift the

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Speaker 2: picture before midterms? That's after the break, and we've got

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Speaker 2: the mid terms coming up, and that the key issue,

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Speaker 2: of course is cost of living or affordability. How is

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Speaker 2: the higher cost of beef shaping that that conversation among

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Speaker 2: voters and between voters and politicians.

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Speaker 3: It clearly has bubbled up to the White House, David,

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Speaker 3: because the White House has made several pronouncements on beef prices.

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Speaker 3: President Trump has spoken about the need to import more

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Speaker 3: beef from Argentine for example. He has brought down tariffs

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Speaker 3: and imported beef, and we know that they're taking actions

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Speaker 3: to boost competition among meat processors, and he trust a

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Speaker 3: DOJ investigation. Have all been floated and spoken about by

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Speaker 3: the White House. So you know, when you consider that

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Speaker 3: they're the experts, they're the politicians, they know what people

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Speaker 3: on the ground are thinking. So it's obviously bubbling up

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Speaker 3: enough to the level that the White House is having

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Speaker 3: to put levers on it now. They do cite example

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Speaker 3: of eggs. Egg prices were soaring when they came into office,

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Speaker 3: and they brought those prices down through a mix of

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Speaker 3: insuring supply, for example. So they're talking about doing the

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Speaker 3: same with beefoot Beef obviously is a much different kettle. Offici,

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Speaker 3: it's going to take a lot longer to get more

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Speaker 3: beef supply in the mix than it takes to get

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Speaker 3: more chickens on the supermarket calendar. And in fact, according

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Speaker 3: to some experts, they say that even if the US

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Speaker 3: heard was to increase this year. It will take several

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Speaker 3: years before you start to see that flow through the

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Speaker 3: whole food production line to the point where it starts

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Speaker 3: to offer relief. So near term, White has pulling levers,

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Speaker 3: boosting imports, cutting tarffs, and it's clearly a hot political

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Speaker 3: issue for them.

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Speaker 2: Trump signed a directive earlier this month to boost the

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Speaker 2: amount of beef imported from Argentina to the US under

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Speaker 2: a new trade agreement. White has Press Secretary Caroline Levitt

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Speaker 2: talked about that at a briefing last week.

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Speaker 5: Beef prices are coming down slightly, and the President wants

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Speaker 5: to see that continue. He believes that a minor import

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Speaker 5: to the country with cattle might be a short term

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Speaker 5: solution with respect to bringing down prices. But of course,

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Speaker 5: protecting our American cattle and rancher industry is a price

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Speaker 5: already for the president.

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Speaker 2: And is that an easy solution here? What do ranchers

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Speaker 2: say about that?

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Speaker 3: Well, one would assume, I mean for the consumer on

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Speaker 3: the ground. If beef is coming into the country and

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Speaker 3: it's hitting the super market shelves and it's you know,

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Speaker 3: at a competitive price, you can imagine how the consumer

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Speaker 3: will see that's an option for them, but certainly within

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Speaker 3: the system ranchers will care. They're not especially sure their

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Speaker 3: solutions that are issues is import a beef Margentina. You know,

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Speaker 3: they want support and bringing costs down. They complain about

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Speaker 3: high interest rates, They complain about the drought and that

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Speaker 3: kind of thing. So you've got political sensitivites around that.

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Speaker 2: Then there's the meat processors. Trump ordered a federal probe

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Speaker 2: of the meat packing industry, blaming the companies for soaring

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Speaker 2: beef prices. The Meat Institute, a lobbying group representing more

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Speaker 2: than three hundred and fifty meat packing and processing companies,

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Speaker 2: pushed back on the probe in November, saying the companies

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Speaker 2: welcome a fact based discussion about beef affordability. Meanwhile, those

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Speaker 2: meat packers are also feeling the strain. The beef side

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Speaker 2: of Tyson Foods posted cans executive quarterly losses since twenty

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Speaker 2: twenty four, and Tyson, along with Cargill and JBS, have

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Speaker 2: closed beef plants or announced plans to close them. As

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Speaker 2: you talk to ranchers ende, what did they say would

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Speaker 2: help policy wise, could make a difference in their lives

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Speaker 2: and getting those beef prices down well.

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Speaker 3: So one message from the ranchers is that this will

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Speaker 3: take time. When you consider that drought as part of

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Speaker 3: this story, cost of labor, cost of equipment, cost of

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Speaker 3: renting land for example, the level of interest rates. Now,

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Speaker 3: of course you have the story of the threat of disease,

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Speaker 3: you have structurally higher demand among consumers. I mean, you're

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Speaker 3: lining up a lot of issues there that you're not

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Speaker 3: just going to solve with a press release overnight. It's

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Speaker 3: going to be a long road back before you know,

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Speaker 3: it can get to a point where this crunch is

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Speaker 3: evened out and there's beef supplying to the supermarket stores

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Speaker 3: in the way that can sate consumer demand.

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Speaker 4: You know, a lot of ranchers out there are essentially

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Speaker 4: paying for the privilege of working eighty hour weeks, and

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Speaker 4: this math is really sobering. So essentially, you know, when

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Speaker 4: people ask, well, the cattle herd's small, so why aren't

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Speaker 4: ranchers investing in expansion? I think a big part of

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Speaker 4: this answer is just, you know, the capital requirements are

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Speaker 4: huge and the returns are not, and eventually something's got

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Speaker 4: to give here because it's becoming just harder and harder

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Speaker 4: for ranchers to stay afloat.

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Speaker 2: This is the Big Take from Bloomberg News. I'm David Gura.

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