Meat Prices Will Go Up

Biden Proves His Administration Is a Bunch of Morons Again

Meat prices have been on a tear higher. I bought some stuff over Christmas. Fine cuts of meat. They were 30%-40% higher than last year. All grocery prices have increased. They increased the most since 2008. Up 6.4% in sum. But, that includes everything. Gee, who was elected into office back in 2008? Morons from the Obama Administration.

Democrats are totally disconnected from real-world economics.

I traded Lean Hogs for a long while at CME. When I got into that market, I decided to at least try and understand the fundamentals of what made it tick. I also had a friend who was a factory farmer. He raised mountains of pork.

Today, Slo-Mo Joe announced new labeling rules to alleviate the increase in prices.
“Under current labelling rules, meat can be labelled “Product of USA” if it is only processed here — including when meat is raised overseas and then merely processed into cuts of meat here. We believe this could make it hard for American consumers to know what they are getting,” the White House said on Monday.

This will do nothing except add costs to production. That means higher prices at the meat counter for you.

Let’s assume this statement is correct: The White House on Monday said just four companies controlled 85 percent of the beef market, 70 percent of the pork market, and 54 percent of the poultry market.

Why is this the state of competition in the meat industry?

You can look at two agencies in the federal bureaucracy, the FDA and USDA. They are rife with anti-competitive regulations that incentivize the centralization of production. It’s financially impossible to economically build a new slaughterhouse to increase competition.

Combine the doofuses at the FDA and USDA with 50 different states that each have their own state regulators for farming and processing and you have laid out a minefield for companies to try and get food from the field to your plate.

Wisconsin for example heavily regulates the dairy industry. It’s impossible to innovate. You want beautiful cheeses like they have in France? No can do with the way the dairy industry is regulated in the US.

Remember, these are all commodity goods. The real value is in post-production. Artisan sausages and artisan cheeses bring a much higher profit margin to producers than just growing an animal and taking it to market.

It extends to what farmers can plant as well. The USDA regulates how much of one crop gets planted. There are price supports, and in most crops, there are price subsidies. They totally screw the marketplace up. Americans wind up paying higher costs than they should with all the government intervention.

The government also has rules on vertical integration in the meat industry. The rules are different for beef, pork, and poultry. Notice that at futures exchanges, there are no futures contracts for poultry. The reason is that the government so totally regulates that market there is no reason for a price discovery mechanism to guide the market. The government regulation allows companies like Tyson to dominate.

Another interesting undercurrent in the meat markets is the environmentalists hate factory farming. Yet, they want cheap meat. You cannot have it both ways. In California, the socialists changed the rules on pork production. That’s increasing the cost of pork to everyone.

Hey, I want animals treated well just like everyone else. I invested in a “humane” grass-fed beef operation back in 2003. It failed. It failed because they couldn’t get time at the slaughterhouse. It also failed because it was hard to scale production. It also failed because the USDA went after the company on a technicality. There is a question of who owns and insures the beef as it passes from rancher to feedlot to slaughterhouse. The company I invested in took ownership of the cattle in order to alleviate the risk for ranchers. The USDA said this little teeny company was vertically integrating the cattle market and it was a no-no. $400k fine.

The reality is poor people want to eat too. They don’t want to eat lab-grown meat or bugs any more than anyone else. If we want to supply protein to the most people at the lowest price, factory-farmed animals have to be part of the equation. I guess I don’t understand why the morons in the Biden (and other Democratic administrations) keep pushing policies that lead to higher prices which breaks the backs of the poor.

It’s not just farming. It’s energy, it is banking, it is virtually any major industry.

The answer to higher prices is simple. We need more competition. You get more competition by deregulating industries. If we want lower prices in food, we have to create an environment where there is loads of competition. It has to become cheaper to enter the market to compete.