689. Here’s Why Your Hamburger Just Got So Pricey

Stephen Dubner (0:05)

Okay, let's start with a quiz. I'm thinking of an industry, and I want you to guess it.

This is an industry that many people feel takes up way too much space.

Derrell Peel (0:17)

The industry is land intensive. We use a lot of land.

Stephen Dubner (0:21)

Did you guess AI data centers?

Great guess, but it's not the industry I'm talking about.

Here's another clue. This is an industry where prices have been rising even faster than inflation, and yet consumption isn't falling.

Robert Hodgen (0:38)

We have really strong demand, 40-year high in demand.

Stephen Dubner (0:42)

Did you guess gasoline? That's another great guess, but also, wrong.

Here's one more clue. This should get you the right answer. It's about the labor force in this industry.

Robert Hodgen (0:54)

We still have 35 employees whose job title is cowboy.

Stephen Dubner (0:59)

Okay. So now do you know which industry I'm talking about?

Derrell Peel (1:04)

I mean, we're a beef-eating nation.

Stephen Dubner (1:07)

That's right. The industry I'm thinking about is the beef industry. Ding, ding, ding. America is a beef-eating nation. The average adult consumes about 60 pounds a year, which is four times the global average.

The US is also a world leader in beef production. So why has your hamburger suddenly gotten so expensive? That is just one of the questions we asked today as we explore an important industry that is also, if we're being honest, a strange one.

Derrell Peel (1:37)

You know, if cows had litters, this would be a whole different conversation.

Stephen Dubner (1:41)

That would be a different conversation. Today on Freakonomics Radio, everything you always wanted to know about the beef industry, and maybe a few things you didn't.

SPEAKER_5 (2:02)

This is Freakonomics Radio, the podcast that explores the hidden side of everything, with your host, Stephen Dubner.

Stephen Dubner (2:19)

We made an episode a few years ago called The Future of Meat, episode number 367, if you want to listen. The premise was simple. Global demand for meat was strong and getting stronger. And because producing meat is so resource intensive, it seemed as if meatless meat, like the Impossible Burger, was poised for a big breakthrough.

But that didn't happen. Why not?

One of the best explanations is also the simplest. A lot of people really, really like to eat meat. When demand is real, supply will find a way. And when it can't, prices will do the work. So let's start today's episode on the demand side of the beef equation.

Derrell Peel (3:04)

We talk about beef demand, how is beef demand? But it's really not one thing. It's thousands of different things.

Stephen Dubner (3:10)

That is Derrell Peel.

Derrell Peel (3:12)

I am a professor in the Department of Agricultural Economics at Oklahoma State University.

Stephen Dubner (3:17)

Peel also writes for a cattle industry newsletter that is published by OSU. It's called Cow-Calf Corner. His writing is precise and refreshingly direct. For instance, here is a line from a recent piece.

Cattle prices will likely recover significantly if politicians will shut up and stop proposing actions that will not help cattle producers or beef consumers.

Derrell Peel (3:41)

There is just so much lack of information, I guess, about the beef industry is the best way to say it.

Stephen Dubner (3:46)

So here's something you said not long ago that just shocked me. He said, I've maintained for many years that the US cattle and beef industry as it operates is probably the most complex set of markets on the planet. And no offense to you, I'm sure you're going to justify that, but I was thinking, wait a minute, hamburger versus an iPhone?

Derrell Peel (4:05)

When you think about all the things that it takes to make an iPhone, there's a lot of different components, there's a lot of engineering and manufacturing and so on. But at the end of the thing, you got one product. So marketing iPhones is pretty easy. Most manufactured products are assembly products.

So we take a bunch of inputs and we have one final product.

Stephen Dubner (4:25)

This is disassembly, I guess, right?

Derrell Peel (4:27)

This is a disassembly process. All livestock markets are disassembly, but beef is the ultimate one of those. It's the biggest animal. There's 4,000 some odd muscles in those animals. And potentially every one of those muscles is a different product.

Stephen Dubner (4:40)

Are they still discovering new cuts of steak? I'd never heard of Denver steak until maybe 15, 20 years ago, or flat iron or bavette.

Derrell Peel (4:48)

The flat iron was actually one of the first ones of those and has been probably the most successful, frankly. Somebody recognized that within the shoulder of that animal, when you start breaking down those muscles, there is this one muscle on the top side of the shoulder blade that if you get it out separately, it's actually the second most tender muscle in the animal. After the middle meats, the tenderloin and so on, this one falls right behind that. But we never recognized it for years because we always just kind of cut across it with everything else and it wound up in a roast. If you fabricate it a little bit differently, separate it out, and get that piece of meat by itself, hey, we've got an excellent new steak here. The other thing about cattle that makes them unique to any other market is their ruminants. So they have the ability to utilize a wide range of feedstuffs. We can use lots of grain and a little bit of forage. We can use lots of forage and a little bit of grain. We can change the timing of these animals. We've got producers all over the country producing these calves. That's really tied to wherever there's grass.