Update on Meat Prices

It's been a little less than a year since I last weighed in on the change in  meat prices.  So, what's been happening?  

Below is a graph of retail prices from the  Bureau of Labor Statistics over approximately the last five years (from January 2010 to February 2015).

Beef prices (ground beef and steak) have continued their rise, while pork products (pork chops and ham) have come down a bit off their highs in the summer/fall.  Chicken prices have remained relatively steady.  

It is a little easier to focus in on changes by looking at the following graph, where I've plotted the changes in each meat's price relative to its price in January 2010 (and multiplied by 100).

Compared to five years ago, ground beef prices are 54% higher (an annual increase of over 10%) and steak prices are 43% higher (an annual increase of 8.6%).  Pork chop and ham prices are 30% and 39% higher than they were five years ago despite the recent declines.  Chicken prices today are only about 10% higher than 5 years ago (experiencing annual increases of only 1-2%).  

On at least a couple of occasions (here and here), I've discussed the driving factors behind these price changes, and none of that has really changed.  The fact that pork prices are now falling and beef isn't is likely due to the shorter life-cycle of pork relative to beef.  A sow can produce two litters per year (with about 9-12 pigs/litter) and those baby pigs are big enough for our dinner plates in about half a year.  By contrast, a cow will typically have one calf in a year, and it takes a little less than 2 years before that calf becomes our hamburger.  Both hog and beef producers want to produce more animals to take advantage of the higher prices (a move that will eventually bring down prices), but biological lags mean pork producers will be able to respond more quickly.  

So, when will beef prices begin to come down?  If biological lags are the answer, I'd say wait about a year and a half.    

Credit Availability and Farm Land Booms and Busts

This according to a paper just published in the American Economic Review by  Raghuram Rajan and Rodney Ramcharan about bank failures and farm land values in the 1920s:

“How important is the role of credit availability in inflating asset prices? Our evidence suggests it matters. Of course, the influence of credit availability on the asset price boom need not have implied it would exacerbate the bust. Continued easy availability of credit in an area could in fact have cushioned the bust. However, our evidence suggests that the rise in asset prices and the build-up in associated leverage were so substantial that bank failures (resulting from farm loan losses) were significantly more in areas with greater ex ante credit availability. Moreover, the areas that had greater credit availability during the commodity price boom had depressed land
prices and lower credit availability many decades after the bust, probably because farm loan losses resulted in the failure of banks that lent to farmers, and altered banking market structure in subsequent decades.”

Assorted Links

This story from NPR covers an academic paper, which claims watching food TV causes people to gain weight.  Couldn't it also be the other way around?  People who are overweight (or have some other characteristic increasing susceptibility to overweightedness) are more likely to watch food TV?

A press release from Iowa State University discusses consumer research by Wally Huffman and others suggesting that consumers might be willing to pay a premium for GMO potatoes that reduce cancer risk

Wendell Berry opines about the lack of farmers overseeing farmland in the Atlantic.  He seems to overlook the advances in precision ag technology that give farmers more knowledge about their land than they ever had before despite the fact that farm size has grown.

Really nice discussion by Andrew Kniss (a weed scientist) on the kerfuffle over glyphosate (aka Roundup) and the recent announcement by the the International Agency for Research on Cancer (IARC) 

Obesity policy

“This commentary argues that lack of knowledge in both the scientific community and popular press regarding possible solutions carries over to public health advocates engaged in proposing government policies attempting to lower population weight. Market-based solutions are argued to be imperfect, but continued experimentation and scrutiny from paying customers interested in weight loss ensures progress toward developing effective solutions.”

That's from Michael Marlow in the Journal of American Physicians and Surgeons

Economists weight in on sugar tax

Tamar Haspel has another sensible article in the Washington Post, this time on the potential effects of a soda tax.

She interviewed a slew of top food and agricultural economists, and by and large, I agree with most of what they had to say.  There were three points I would have added.

First, Haspel discusses the potential of sugar (rather than soda) taxes without mentioning the fact that sugar is ALREADY taxed (indirectly via various government programs).  Here's what I wrote in a short piece for the Congressional Quarterly on the issue:

“Should the government tax sugared soda? It already does. Farm policies make U.S. sugar prices two to three times higher than elsewhere. Moreover, ethanol policies have led to a more than doubling of the price of high fructose corn syrup since 2005. It’s no wonder that per capita sugar consumption has fallen precipitously over the last decade.”

Second, while Haspel mentions a quote from the industry that the taxes are "unfair", she doesn't mention that they're regressive -meaning  the costs being born relatively more by those who can least afford to pay them.  Yes, we need to raise government revenue some way, but as I've noted before, even some good economists seem to miss the fact that we should choose taxes in a way to minimize dead weight loss, not how taxes feel or appeal to a particular cause.

Finally, despite acknowledging that soda taxes are likely to have very little benefits, Haspel concludes,

“If the choice is to do this or do nothing, I choose this. ”

I'm sorry, but if my choice is between nothing and a policy that is paternalistic, regressive, will create economic distortions and deadweight loss, and is unlikely to have any significant effects on public health, I choose nothing.