Where’s the Beef? The Economic Ravings of an Insatiable Statistical Lunatic

beef Brent Hofacker/Adobe Stock

Full disclosure: I am a below-average consumer of beef. But the continuing increases in beef prices and the recent change in country of origin labeling — not to mention the confusion around grass fed, vegetarian fed, no hormones, no antibiotics, and organic labeling — have me miffed, have made me crazy.

So, where to begin?

A Brief History of Beef: The Raw Truth, With No Preservatives or Additives

Our history of beef begins in the early 1900s. Upton Sinclair had published “The Jungle,” which depicted the sleazy practices of the meat packing industry in Chicago. Teddy Roosevelt almost fell off his horse. In part, the exposé led to the 1906 passing of the Pure Food and Drug Act, which set production and labeling standards.

Since that time, according to USDA statistics, per capita U.S. beef consumption increased about 75% until 1976 but then started to decline. The beef industry had a problem on its hands.  

In the early 1990s, the “Beef: It’s What’s for Dinner” ad campaign was rolled out. Total beef consumption leveled off until about 2006 (it dipped in 2003 during the Mad Cow Disease scare and then went back to previous levels in 2004).  However, per capita consumption continued to decline.

Beef consumption

In 2007, total U.S. beef consumption started a steep decline (correspondingly, per capita consumption started to decline at an even faster rate). If Mark Twain were alive today, he’d probably write something like, “Things are getting so healthy around here, it’s killing me.” Or killing the U.S. beef industry?

But no. While economics predicts that when demand decreases, prices will decline until supply adjusts, U.S. beef prices continued to increase over the period, even as the industry managed to more than offset flagging U.S. demand through increasing exports. In many foreign markets, U.S. beef could be very price competitive, so the industry did not have to reduce its prices while continuing to increase and scale its production.  

Fat times — until the U.S. beef industry was skewered in 2010, when the World Trade Organization (WTO) found that the 2002 Farm Security and Rural Investment Act provision for mandatory country of origin labeling (COOL) constituted an unfair trade practice with respect to signatories Mexico and Canada (countries with price competitive beef). Congress was compelled to revoke COOL for beef and pork in December of 2015. Since then — in case you didn’t notice — country of origin labeling has disappeared from beef sold on your supermarket shelves.

It’s developments like this that, though never discussed explicitly, provide fodder (shall we say) for presidential candidates who argue that open market U.S. trade deals are bad deals and protectionist policies should be pursued.

So What Does it all Mean?

Well, which do you prefer? Price competition (potentially lower prices) or knowing where your beef comes from?  

Personally, I would like both. But I am totally ambivalent about whether or not there should be country of origin labeling.  

  • On the one hand, I’ve relied on country of origin labels prior to 2015 and would like to have that information. Furthermore, I question whether country of origin labels create unevenness in the level playing field (after all, it’s just factual information that should enhance market efficiency). And over 90% of Americans like country of origin labeling, according to Consumer Reports.
  • On the other hand, when I examine my own consumer behavior, I do see that country of origin labels have influenced my beef purchasing decisions. Truthfully, over the last two years, I have tended to shy away from purchasing imported beef (in fact, I didn’t purchase any); however, I had no qualms purchasing fruits and vegetables from the same countries I didn’t feel comfortable purchasing beef from. My rationalization: the Mad Cow scare and my lack of understanding of beef production practices in those countries raised and still raise doubts for me (even though the USDA claims it that inspects U.S. and imported beef equally).  

The fact remains that my own purchasing decisions have been influenced by country of origin labels. But at the same time, I have to confess that as U.S. beef prices increased over 2015 and the price differential between U.S. and imported beef widened, I became a rational economic decision-maker,  increasingly tempted to try the imported beef (and I actually anticipated doing so at some point).

The Final Cut

So here’s my beef.

We now know less about our beef, or at least where it comes from, and it’s confusing. Supermarket shelves are arrayed now with different “lines” of beef with different labels and prices. Some labels say USDA Inspected and have red, white and blue colors and considerably higher prices than the generically packaged beef. Now what? Well, I can visit my local butcher shop, where the butcher will assure me that the beef is local or produced in the U.S. — but then I am looking at an even higher price tag for a juicy rib-eye steak.

So where are we now in this new, not-so-COOL world? We have an inefficient market, now with more imperfect, asymmetric information (even insider information that you can buy). But it is a globalizing market, which should be good for consumers, though perhaps not the U.S. beef industry. And do I really trust the U.S. beef industry, which has possibly been price gouging U.S. consumers, the same way some pharma companies have done prior to the arrival of generics? It’s all totally confusing for consumers in what should be a simple commodity market.  

Finally, what should I do? Grill it, broil it, chicken fry it? The irony is that all of this is causing me to consume less beef, and that’s probably a good thing that maximizes my total welfare. So perhaps the invisible hand is at work in this mayhem? Or maybe the man upstairs is now a vegetarian or vegan? All I can say is bon appétit.

Please follow Andrew Karpie on Twitter @andrewkarpie. Read more of our contingent workforce and services procurement coverage.

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