What's causing record high US beef prices?
A meatpacker is the plant that slaughters the animal and breaks the carcass down into the cuts that reach shops or restaurants. Four companies
A meatpacker is the plant that slaughters the animal and breaks the carcass down into the cuts that reach shops or restaurants. Four companies - Tyson, JBS, Cargill and Beef - control around 85% of American beef processing. That high level of market concentration has drawn accusations of price-fixing, even from President Trump. So you might expect that those four firms are currently making huge profits from high beef prices. Yet the opposite is happening.
Tyson, the biggest of the four, reported in May that it had lost more than $500m, external on beef in the first half of its financial year. Again, it might be selling its beef for record highs, but it is also buying the cattle at all-time peaks. Jamie Crumley owns one of the remaining smaller meatpackers - Harpley's Meatpacking in central North Carolina. She says the price companies like hers have to pay for the live animals has gone up by as much as 60% over the past three years.
And while meatpacking companies have increased the prices they charge for their beef, there is a limit. This is because supermarkets, restaurants – and US consumers – can, and will, simply switch to buying chicken or cheaper imported beef instead. Then there is the inefficiency of running the meatpacking plants at much less than full capacity. For example, Harpley's is built to handle 425 to 450 cattle a day. But it is currently running at just 350 because it cannot get the additional animals.
The building, the line and the staff cost the same either way, so those fixed costs now spread across fewer animals. On any given day Crumley says she can lose anywhere from $100 to $400 on a single head of cattle. This helps to explain Tyson's giant losses.
The BriefWire