The cost of food has gone up by 11% over the last year, according to consumer price index data for October. But the prices of most cuts of beef, on the other hand, are lower than they were a year ago. This is important background to Monday’s quarterly earnings report from Tyson Foods: The meatpacker said that while beef and pork prices fell, on average, its prices were up overall.
That apparent discrepancy comes down to our old friends supply and demand.
Let’s start with beef. On average, Tyson Foods is charging 8% less for it than a year ago. Tyson attributed that to people buying cheaper cuts of beef.
“Inflationary pressures have been hitting consumers, and so they’re looking for ways to economize,” said Jayson Lusk, head of the agricultural economics department at Purdue University.
At the same time, Lusk said, beef supplies have been rising.
That’s because producers have brought more cattle to market this fall.
“It’s an anticipation that they don’t have enough forage to feed those animals over the winter,” Lusk said. “And given the fact that other grain prices, corn, soybeans are high, it’d be very costly to keep those animals around.”
The supply of pork has been rising, too. Foreign demand for American pork is down, said Glynn Tonsor at Kansas State University, in large part because the dollar’s so strong.
“And that makes it harder for U.S. companies to export, which in turn leads to more pork being here in our domestic market,” he said.
Tonsor’s been researching how consumers react when prices of various pork products rise.
Take the category that includes pork chops: “Price sensitivity — consumers responding to how it’s marked down or not marked down — is growing in the pork loin category as we have higher inflation,” he said.
That kind of price sensitivity has consumers reaching for an alternative.
Chicken is generally cheaper than beef and pork for the consumer,” said Dan Sumner, an agriculture economist at the University of California, Davis.
Tyson Foods reported it’s charging more for chicken.
Sumner said chicken producers are likely to ramp up production next year.
“It’s a little easier to fine-tune that in six months. As opposed to if you want another steer, I’m sorry, you made that decision three years ago.”
The Department of Agriculture expects chicken production to grow by 2% next year. It expects beef production to fall.