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New data from the Bureau of Labor Statistics shows that inflation in the US has continued to cool from its pandemic era. Peak Inflation rows zero point two percent in January from December, according to BLS data released on Friday. That's lower than Wall Street expected. The report also showed drops in energy costs, used vehicle prices, and the cost of eggs, which are down thirty percent from a year ago. But it's a different story in one corner of the economy.
To backstory has been the consumer prices have been coming down for the last couple of years. David, that's great, but there are pockets of the grocery store where prices are stead raising like it's a pandemic. One of those is beef.
Beef costs have risen faster than most other items in the Consumer Price Index, with the broad beef and veal category of fifteen percent over the past year as of January. Bloomberg's end Occurrent says it's a price that runs counter to the broader trend of cooling inflation, and that is why it's worth paying attention to.
So we took a look to see at what's going on there and the reason beef prices are going up at the rate the r It's pretty complicated.
That's because the price of beef is driven by a lot of overlapping factors. The US is the world's largest consumer and one of the largest exporters of beef, but it's facing an historically low cattle herd and soaring production costs that are putting a squeeze on American ranchers.
My family landed in Oklahoma in the early nineteen hundreds and we've been farming and ranching on the same land ever since.
Casey Schirler is a fifth generation cattle rancher who runs a ranch with her husband called Refarm.
I think a lot of people assume that when cattle prices are high, it must be really good for ranchers right now, but it's actually a really challenging and volatile time, she says.
The inflationary environment in the cattle industry is putting pressure on their business.
It's getting really, really hard to continue operating a profitable business. We can't continually depend on government bailouts, for example, for farmers and ranchers. We have to think like business people. We have to make decisions that are better for our bottom line, and we have to be willing to adapt.
That squeeze is being felt all along the beef supply chain too, from ranchers and meat processors to consumers.
I think it's a reminder, David, that the inflation story hasn't fully gone away. It just demonstrates that there are parts of the economy where prices remain quite persistent, remain quite high, and that's what's feeding the whole cost of living story, that's feeding into the whole political cycle ahead
of them in terms. That's one of the reasons why the Federal Reserve hasn't brought down interest rates maybe as fast as some people would hope, certainly as fast as President Trump would hope, because they continue to warn there are pockets of inflation still in the economy. Beef prices
are not the be all and end all. Not everyone wants to buy beef, of course, but it's just an illustration of how fragile the overall supply lines do remain in the me that there are still these pockets of food that are increasing like just like it's a pandemic.
I'm David Gerret, and this is the big take from Bloomberg News today on the show Beefflation, what rising beef prices show us about the state of the US economy and what it could take to bring them down. And when you look at beef, the broad beef and veal category, it's gone a fifteen percent over the last year as of January. At a high level, what is going on with beef prices.
There's a lot happening all at once. So on the one hand, you've got the cattle herd in the US shrinking. You have issues like drought. You have issues like the cost of production for the ranchers, so they're juggling high interest rates, high labor costs, high costs associated with their equipment and the like. You've other factors too, structural factors like retiring a ranchers retiring not being replenished. It's a
tough job. And of course now we have the latest issue with disease in cattle herd coming in from Mexico. That's a top concern for ranchers.
Dangerous flesh eating parasite, the New World screwworm has been spotted just mouths from the Texas border in northern Mexico. That's raising alarms for Texas livestock producers, pet owners.
So there's a whole series of issues there that I'm complating into one sentence. But the net takeaway when you speak to ranchers is that that's what's hammering production. They can't get cattle to meet factory and then to the store in time to meet consumer demand.
How dire is the situation for ranchers, for producers, and for consumers.
So it's a difficult situation. It depends where you are on the supply line, and there are some different views on this. If you're at the very start of a supply line, whereby you're in count calf territory and you're producing those calves, calves are in hot demand right now. You know, one of the ranchers we spoke to said, for example, he gave example of a bottle calf that's
a calf rared by bottle. At once upon time wouldn't be considered a premium buy, but you know, a few years ag that might have fetched you a couple of hundred dollars now can be anywhere up to fifteen hundred. So if you're producing calves getting them out the door hot demand, you should be making money. But the further along this ply line you go, and if you want to keep those cattle and fatten them up as you would traditionally and then send them off to the market,
send them off to the meat factory. That's where it's getting a lot harder. They're feeling a squeeze. And of course the processors, the meat processors, they're under a lot of scrutiny from the White House firm what the White House says, they want to promote more competition in the sector, They complain of their own high processing costs. So, as I say, if you're at the very beginning, you're maybe doing okay, but along the rest of that supply line, you're facing all those issues I spoke about.
Like the issues threatening the supply of beef in the US. The supply chain itself is complicated. Cattle rancher Casey Schuler says the process of raising and prepping cattle is long and expensive. Coming out of a downturn in the industry is not something that can happen overnight.
A cow is pregnant for about two hundred and eighty three days. When she has a half you raise that calf to wean for another nine months and then if that calf is a heifer, a female, and you decide to keep her, she's not going to have her first calf for about two more years. So you're talking about a four year production cycle right before it adds any sort of meaningful value to the beef supply. There's no
quick fixes to fixing this. Part of the reason this is happening is because the number of cattle in the US is at an all times seventy five year low, and the cattle cycle naturally goes through these periods of
expansion and contraction. We're in a period of contraction and can't we can't legislate our way into a bigger calf crop next quarter or even next year because biology is slow, and so we just we have to focus on things outside of strictly policy, I think, to fix these things, and we have to be really careful about what we say and what we do, because it does cause some
fallout for farmers and ranchers. You know, we are a country who loves beef, and if we want to keep doing that sustainably, then ranchers have to have a way to make a viable living.
Got problems around the cost of land, problems around the cost of equipment, problems around the levels of interest rates, issues with the drought, and so on and so forth. And it's this classic example of a young rancher family clearly getting squeeze at the very beginning and facing very different circumstances of what ranchers in previous times would have faced.
Then you spoke to another rancher, Patrick Montgomery, who runs KC Cattle Company outside of Kansas City, Missouri. He said something astonishing that there were no cattle left in America to set out for us.
He's illustrating the point that the herd is at the smallest since in the nineteen fifties, and that's because production cannot keep up with demand. David, Let's not forget demand. The mon consumers is another part of the story. It's not just a drought. It's not just the impact of disease. It's not just the issues around costs. As wife ranchers kind of produce to beef. Also that Americans want to
eat more beef. They're moving up to value chain in their own diet, and that's why we're having this crunch. And he wanted to replenish his herd. The genetic line in his herd last year, so he sold a chunk of his cattle and he wanted to come back to market this year and to buy new cattle to replace those.
He does specialize in maygu beef. I should say, so he's maybe a little bit up to value chain compared to others, but when he came back to around thirty percent more expensive to buy, so it was an economical for him. He's yet to replenish the cattle he saw last year, so he's pretty frustrated. He's among the ranchers I spoke to who has a pretty downbeat view and where things are going at the moment.
When you're not wandering around ranches or feed lots, your day to day's job is that the Federal Reserve. You're following what the FED chairman and other policymakers have to say. How interested are they in this facet of the American economy, In the fact that beef prices are going up.
I think it's fair to say that the price of a hamburger is not going to change the trajectory for US monetary policy. I don't think the FED policy makers are sitting around talking about ground beef prices. But when we do hear officials command and when they use the official jargon and when they say listen, inflation remains persistent in some areas. They're not fully comfortable with where it's at.
And they have this inflation target that they said, and one of the reasons is not back to that target of two percent is because of pockets like this, And don't forget, of course, they're very aware of the staples that people buy and the cost of those staples, and putting food on the table is one of those. So they're not setting monitor policy based on the price of beef. But it certainly build into the picture that the inflation story in the US has not yet totally gone away.
It's headed in the right direction, but it still remains above target.
So with meaty pockets of inflation still showing up in economic data, what is the White House doing to turn things around? And will it be enough to shift the picture before midterms? That's after the break, and we've got the mid terms coming up, and that the key issue, of course is cost of living or affordability. How is the higher cost of beef shaping that that conversation among voters and between voters and politicians.
It clearly has bubbled up to the White House, David, because the White House has made several pronouncements on beef prices. President Trump has spoken about the need to import more beef from Argentine for example. He has brought down tariffs and imported beef, and we know that they're taking actions to boost competition among meat processors, and he trust a DOJ investigation. Have all been floated and spoken about by
the White House. So you know, when you consider that they're the experts, they're the politicians, they know what people on the ground are thinking. So it's obviously bubbling up enough to the level that the White House is having to put levers on it now. They do cite example of eggs. Egg prices were soaring when they came into office, and they brought those prices down through a mix of insuring supply, for example. So they're talking about doing the
same with beefoot Beef obviously is a much different kettle. Offici, it's going to take a lot longer to get more beef supply in the mix than it takes to get more chickens on the supermarket calendar. And in fact, according to some experts, they say that even if the US heard was to increase this year. It will take several years before you start to see that flow through the whole food production line to the point where it starts
to offer relief. So near term, White has pulling levers, boosting imports, cutting tarffs, and it's clearly a hot political issue for them.
Trump signed a directive earlier this month to boost the amount of beef imported from Argentina to the US under a new trade agreement. White has Press Secretary Caroline Levitt talked about that at a briefing last week.
Beef prices are coming down slightly, and the President wants to see that continue. He believes that a minor import to the country with cattle might be a short term solution with respect to bringing down prices. But of course, protecting our American cattle and rancher industry is a price already for the president.
And is that an easy solution here? What do ranchers say about that?
Well, one would assume, I mean for the consumer on the ground. If beef is coming into the country and it's hitting the super market shelves and it's you know, at a competitive price, you can imagine how the consumer will see that's an option for them, but certainly within the system ranchers will care. They're not especially sure their solutions that are issues is import a beef Margentina. You know,
they want support and bringing costs down. They complain about high interest rates, They complain about the drought and that kind of thing. So you've got political sensitivites around that.
Then there's the meat processors. Trump ordered a federal probe of the meat packing industry, blaming the companies for soaring beef prices. The Meat Institute, a lobbying group representing more than three hundred and fifty meat packing and processing companies, pushed back on the probe in November, saying the companies welcome a fact based discussion about beef affordability. Meanwhile, those
meat packers are also feeling the strain. The beef side of Tyson Foods posted cans executive quarterly losses since twenty twenty four, and Tyson, along with Cargill and JBS, have closed beef plants or announced plans to close them. As you talk to ranchers ende, what did they say would help policy wise, could make a difference in their lives and getting those beef prices down well.
So one message from the ranchers is that this will take time. When you consider that drought as part of this story, cost of labor, cost of equipment, cost of renting land for example, the level of interest rates. Now, of course you have the story of the threat of disease, you have structurally higher demand among consumers. I mean, you're lining up a lot of issues there that you're not
just going to solve with a press release overnight. It's going to be a long road back before you know, it can get to a point where this crunch is evened out and there's beef supplying to the supermarket stores in the way that can sate consumer demand.
You know, a lot of ranchers out there are essentially paying for the privilege of working eighty hour weeks, and this math is really sobering. So essentially, you know, when people ask, well, the cattle herd's small, so why aren't ranchers investing in expansion? I think a big part of this answer is just, you know, the capital requirements are huge and the returns are not, and eventually something's got to give here because it's becoming just harder and harder for ranchers to stay afloat.
This is the Big Take from Bloomberg News. I'm David Gura. To get more from The Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash podcast offer. If you like this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow