689. Here’s Why Your Hamburger Just Got So Pricey | Freakonomics Radio

Key Takeaway

Treat a rising grocery price as a signal to adjust your purchase, not a mystery you must solve at the shelf. This week, compare the lean-to-fat ratio and price per pound of ground beef, choose the blend that fits your meal, and consider a substitute or smaller portion when the value is poor. The episode shows that beef supply responds over years—not weeks—so a consumer’s most practical lever is flexible buying rather than waiting for a quick price reversal.

Episode Overview

Freakonomics Radio examines why U.S. beef, especially ground beef, has become expensive despite persistent consumer demand. Economists, ranch operators, an antitrust scholar, and a food historian trace the issue through cattle biology, the long cattle cycle, ground-beef blending, imports, industry concentration, retail margins, and the declining number of small ranches.

Full Transcript

Transcript of 689. Here’s Why Your Hamburger Just Got So Pricey | Freakonomics Radio from Freakonomics Radio. Auto-generated from episode audio; may contain minor errors.

Okay, let's start with the quiz. I have come up with an industry and I want you to guess it. This is an industry that many believe takes up too much space. This industry is land-intensive. We use a lot of land. Did you guess— AI data centers? Great guess, but that's not the industry I'm talking about. Here's another tip. This is an industry where prices are rising even faster than inflation, but consumption is not falling. We have very high demand, really high demand. Did you guess—gasoline? This is another great guess, but also wrong.

Here's another tip. This should lead you to the correct answer . It's about the workforce in this industry. We still have 35 employees whose job title is cowboy. Okay, now you know what industry I'm talking about? I mean, we are a beef-eating nation. That's right. The industry I'm referring to is the beef industry. Jin- jin-jin. And America is a beef-eating nation. The average adult consumes about 60 pounds per year, four times the global average. The US is also the world leader in beef production. So why has your burger suddenly become so expensive?

This is just one of the questions we'll be asking today as we explore an important field that, let's be honest, is quite strange. You know, if cows gave birth in litters, it would be a completely different conversation. That would be a completely different conversation. Today on Freakonomics Radio—everything you always wanted to know about the beef industry, and maybe a few things you didn't know. This is Freakonomics Radio, a podcast exploring the hidden side of everything, with your host, Stephen Dubner. A few years ago, we did an episode called "The Future of Meat," episode number 367, if you want to listen.

The premise was simple. Global demand for meat was high and continuing to grow , and since meat production is very resource-intensive, it seemed like meatless meats like the Impossible Burger were poised for a big breakthrough. But that didn't happen. Why not? One of the best explanations is also the simplest. Many people really, really like eating meat. When there is real demand, supply will find a way to meet it, and when there is n't, prices will do their job. So, let's start today's episode with the demand side of the beef equation.

We talk about the demand for beef, as it is, but it's not really one thing. These are thousands of different things. This is Darryl Peel. I am a professor in the Department of Agricultural Economics at Oklahoma State University. Peel also writes for the cattle industry newsletter published by Oklahoma State University. It's called Cow-Calf Corner. His writing style is precise and pleasantly direct. Here, for example, is a line from a recent article. Cattle prices are likely to recover significantly if politicians shut up and stop proposing actions that will help neither cattle producers nor beef consumers .

Perhaps the best thing to say is that there is simply a catastrophic lack of information in the beef industry. So, here's what you said recently, and it just shocked me. You said, "I have argued for many years that the U.S. cattle and beef industry, as it operates, is probably the most complex system of markets on the planet." No offense, I'm sure you can justify this, but I thought, "Wait a minute. " Hamburger vs. iPhone?" You know, when you think about all the things that go into making an iPhone, there are a lot of different components, a lot of engineering, manufacturing, and so on.

But in the end you get one product. So selling an iPhone is pretty easy. Most industrial goods are assembly products. So, we take a bunch of input components and get one final product. This is a disassembly, isn't it? This is a disassembly process. All livestock markets operate on the principle of disassembly , but beef is the pinnacle of this approach. This is the largest animal. These animals have over 4,000 muscles. And potentially each of these muscles is a separate product. Do they continue to discover new types of steaks?

I never heard of a Denver steak 15-20 years ago, or a flat iron, or a bavette? In fact, the flat iron was one of the first, and, frankly, probably the most successful. Someone noticed that in the shoulder of an animal, when you start to take apart the muscles, there is one muscle on the top side of the shoulder blade, which, if you isolate it separately, is actually the second softest muscle in the animal. After which one? After the meat of the middle part of the carcass, tenderloin, etc.

This one follows right behind them. But we did n't pay attention to it for years because we just cut it with everything else and it ended up in the roast. If we disassemble the carcass a little differently, separating this piece separately, we will get a wonderful new steak. Another thing that makes cattle unique compared to any other market is that they are ruminants. Therefore, they have the ability to utilize a wide range of feeds. We can use a lot of grain and a little forage. We can use a lot of forage and a little grain.

We can change the breeding schedule of these animals. We have producers all over the country raising these calves. It really depends on where the grass is. And then they end up at a feedlot, often in another part of the country. A few years ago I visited a feedlot in Pennsylvania, I was in Lancaster, which is not far from Hershey, and as we drove past the feed hoppers, I looked out the window and said, “This is very colorful. "What's in those bunkers?" And the man replied, "Well, that's Reese's Pieces, and uh..." No.

You're kidding. "... crumbs from, you know, candy production ." Cattle can consume it. You have to be careful with nutrients . Of course, you can't feed them only this, but you can use all of it . All of this takes at least 24 months from start to finish . That's why I call it the miracle of the beef industry. You walk into a grocery store any day of the year and there's a piece of fresh meat that was probably a live animal no more than three weeks ago; but the process that makes this piece of meat available to you today started 2.5 years ago or more with some farmer or a few people who don't even know each other, and, you know, how does that work?

Sorry to interrupt Darrell Peel's excellent story, but I want to emphasize a more important point he's making. How does it all work? The miracle of the beef industry is really the miracle of any industry. So many different players come together at many different stages and somehow create a coordinated market that has essentially coordinated itself. We once also made an episode about this idea. This is episode 236, titled "How Can This Even Be True?" Okay, back to my conversation with Darrell Peel. Let's talk a little about ground beef.

I see you wrote a few things. One is called the " ground beef paradox ." Record demand is being met with a reduction in domestic supply. I don't know what proportion of Americans eat a hamburger or ground beef at least once a month or maybe even once a week , but I'm guessing it's a very high number. I think so too, yes. I guess few people think about what it is, other than as some variation of chopped cow. I think that's probably the case . Yes.

Although it's all a bit more complicated than it seems, isn't it? Well, there are a lot of nuances here, and it's not a play on words, I think. Minced meat has become a very popular product in the United States. It is so versatile and has historically been very economical. I estimate that about 47-48% of all the beef we consume on average in the United States is ground beef . Okay, so what's in it? Ground beef is lean beef of some type, muscle mixed with fat. There is a legal definition of minced meat.

It must contain at least 70 % lean meat. It could be a 70/30 ratio. Now we don't necessarily see that often anymore. This was in times past; 10- pound packages of very cheap ground beef might be 70/30, but it can range from 70/30 all the way up to 95/5 in lean to fat ratio, so it all depends on the specific market and individual preference. Okay, if it's 85% lean, where does that beef come from and, I don't know if "competition" is the right word, but where would it go if not into ground beef?

And I also want to know where the fat comes from and how easy it is to make such a mixture. Is this a naturally occurring mixture , or do you have to work hard to create it? So, about 85% of all our beef production in this country is from feedlot cattle . This is livestock that is raised on special farms. When these animals are processed, they naturally produce a significant amount of trimmings during the carcass development process. They can be in different proportions, but consider it to be approximately 50% lean and 50% fat.

We just said that this is not minced meat per se. This doesn't even meet the legal definition. So you need to add some lean meat to the mix. This lean meat can come from many places, but the most economical source is the other 15% of beef production: culled cows and bulls. What is a cull cow? What is it... A cull cow is an adult animal that was used for breeding. These cattle we are talking about are usually between 15 and 18 months old. But if you have a cow that you use to raise calves and she stays in the herd for about 10 years, at some point she just physically gets worn out.

It is wearing out. Therefore, it is culled and taken to the market. Nothing goes to waste, so this animal will also be recycled. They are usually quite thin. The quality of this meat is not as tender, but this lean meat is highly valued. So, if you take 7 pounds of 90% lean meat and mix it with 1 pound of 50% , you get an 85% blend, the cheapest possible. Got it. So, this is one way. Although there are a million other ways to cook minced meat, right?

All of these combinations of fat and lean meat, but that would be a kind of ground beef standard that is commonly used in fast food chains. So, if you look at ground beef prices in May 2026, consumers were paying an average of just over $7 per pound. This is about 50% more than 5 years ago. As I see it, this is ahead of the general inflation rate. So tell me about it . The U.S. beef industry is cyclical by nature . It has approximately 10-year population change cycles .

There are many reasons for this , and it is usually an economically self-regulating cycle. So there will be economic incentives at peak to reduce production a little bit. Livestock prices will drop, eventually the industry will decline, and sometimes we go a little too far. And then the situation turns around, and the cycle repeats. This has been going on for about 140 years. So this is not something new. And what is the reason for this? I assume it's not consumer demand. I think it's less elastic, right?

Yes, no, it doesn't depend on demand. This usually comes from the supply side. This is a consequence of long-term production adjustments and the fact that we operate on a feed base that is inherently variable , and this is what makes the livestock breeding cycle sometimes unpredictable. Let's say you have too many animals and prices start to fall. If a manufacturer says, "Oh, the market is telling me to cut production." What will he do to reduce production? He will sell some of the cows. Cows are actually a source of supply for the entire industry.

These cows are going to slaughter. So, if we have a surplus and prices are falling, we solve it by making the situation worse by dumping even more product on the market. And if prices are low, then the motivation to have larger herds, as I understand it, decreases, right? That's right. So at the bottom of the cycle, where we are now, everything works in reverse. We do n't have enough animals, and the market demands more, but beef production is unique because, firstly, the cows are large, grow slowly, and only give birth to one calf at a time.

So if a cow gives birth to a calf , we try to do two things. We are trying to support beef production. We are also trying to rebuild the livestock. If the calf that is born is female, we have a choice. It may soon become part of the beef supply. We'll have to grow her for a couple more years, but if we want to keep her for breeding, we shouldn't send her to a feedlot. So, when we don't have enough resources and supply is limited, the only way out is to reduce supply even more, and that's the trap we're in now .

You know, if cows gave birth like dogs, we would be talking about something different, but that's not the case. When you fall into a hole like we are in now, it takes many years to get out of it. So, how deep is this hole? Cow slaughter has decreased by more than 40% over the last 4 years. So, the supply has indeed decreased significantly. Ground beef prices have increased proportionally more than other types of beef, which have also increased significantly due to the situation we find ourselves in.

And that's why Darrel Peel tells us that in recent years we've seen record beef imports in an attempt to compensate for this. Today, due to high consumer demand, especially for ground beef, one in six pounds of beef consumed by Americans is imported. This is Robert Hodgen, CEO of King Ranch in South Texas. This is because we don't produce enough beef in the United States to meet the current demand. King Ranch covers 825,000 acres. This is the largest operating ranch in the United States. It's bigger than the state of Rhode Island.

It is so influential that Ford Motor Company named a pickup truck in his honor —the King Ranch F-150. I wouldn't do anything else. We couldn't do our job without Ford trucks. But even with such trucks and ranches, the US is increasingly dependent on imported beef. Over the past 20 years, imports have accounted for about 25% of the lean meat used to make ground beef. Last year, this figure reached almost 40 %. And last month, President Trump temporarily expanded a low tariff quota on imported lean cuts, allowing an additional 300,000 tons to enter the country.

Why is US production not keeping up with US demand? Robert Gauguin has some thoughts on this . I would say that most participants in the beef value chain are only involved in one part of it. We are involved in as many as four parts of this chain. On the ranch, we have a herd of purebred Santa Gertrude cattle numbering about 1,500 head. Their mission is to be elite genetics to create the best replacement bulls and heifers. We are also a commercial calf producer. Additionally, King Ranch is involved in the fattening phase.

We own 50% of Cobalt Cattle. We are the fourth largest beef producer in the United States. So for us, as a company with an integrated model , it is important to make genetic decisions in the breeding herd. When we think about cattle DNA today, it's a field that has developed rapidly over the last 10 years. We can take a hair sample or a small skin sample from a young calf, whether it is one day old or several months old. We can submit this sample for analysis.

And thanks to markers, and also the large databases that we have today, we can identify the genes of an animal and know that if you raise it a certain way and feed it a certain way, that animal is very likely to produce a calf that will be rated "prime ," "choice," or "select." " Prime," "choice," and " select" are some of the beef grades established by the United States Department of Agriculture. A highly marbled steak, for which you pay a lot in a restaurant, is " prime." You go into a restaurant today and you still hear experienced waiters say, "Oh, only 3 or 4% of the industry is prime." Today we produce 15% of prime cattle.

There were weeks last year when we produced more prime beef than select. This is not the merit of one or two breeders, it is the result of genetic advances across the industry. When you combine King Ranch's vertical integration with the cyclical economics of beef, it means that certain parts of their business may be thriving at the moment while others may not. Livestock is one of those industries where the economic beneficiaries change every few years, more often than in any other sector I've seen. Today, economic indicators are concentrated on the edges of this "barometer." Young livestock producers are winning today, but 5 years ago we were losing.

The retailer, the food service provider, the other end of the value chain—they're all making profits today. And the middle is under pressure: both meat processors and fattening plants. And you know, at least from my personal perspective, I'm a free market advocate. Therefore, I do not consider concentration in the middle of the supply chain to be a factor affecting beef prices today. And I say this as someone who is involved in different parts of this sector. Honestly , if the four major meat processors made a little more money, beef prices would be even higher.

And who are these four big meat processing companies? Economist Darrell Peel is back with us again. The "big four" right now are JBS, Tyson, which is a big chicken company, but they also own the former IBP, National Beef, and Cargill. Just four companies control approximately 85% of the beef processing industry. So at first glance it looks suspicious, or at least it's a big target. With such concentration comes the potential for someone to intervene in the market. This is not a very technical economic term, but it is understandable to us.

And the beef industry has been accompanied by concern and meticulous control for many, many years. The last 100 years, and especially the last 50 years of academic research, show that yes, the "Big Four" have some market power, and they use it very little to influence livestock prices. This is offset by the fact that there are probably 10-15 times more cost savings due to cost efficiencies due to their large scale. So, in the end, the consumer wins and the farmer loses? No, both win. They both benefit when we save on costs in the middle.

And meat processors still get a small margin, and they achieve it mainly through the greatest possible cost efficiency. Do you know if Walmart has market power? Of course , it has. But we tolerate them because overall prices for consumers are lower because they are very efficient. It's true that large meat processing companies are currently losing money, some by hundreds of millions of dollars. How can this be if the demand for ground beef is so high? The most important thing your listeners should know about the skyrocketing price of ground beef right now is that it reflects this whole dysfunction.

After the break: " beef trust" and antitrust legislation in this area. This is Freakonomics Radio, and I'm...you probably know my name by now. We will be back soon. As of July, there were 28.5 million beef cows in the U.S., which sounds like a lot, but historically it hasn't been . The USDA publishes a lot of data on beef cattle numbers and the cattle breeding cycle that Darr Peel previously talked about. The number of beef cows peaked in 1975, and since then, despite ups and downs, it has only been decreasing.

With us again is Robert Hodgen, CEO of King Ranch. We talk about how cattle farming goes through cycles: we increase the number of cattle in the country, profits fall, and because of drought or economic reasons, we have fewer cows and reduce the supply. And today we believe we are at or near the bottom of the overall cycle in terms of cow numbers and beef production volumes. In livestock farming, it takes 2 to 4 years to implement changes. It's not like with chickens, where we can achieve change in a matter of months.

So today we see price signals for beef producers to keep more heifers to produce more meat in the future. We are at a point in the cycle where we have high demand and are supplying fewer cows to market. We leave them at the ranch . The situation may get a little worse before it gets better . We can't change the American livestock population in a few months. We change it over the years. So biology is as much a factor as drought. The U.S. Department of Agriculture rates more than half of U.S.

rangelands and pastures as poor or very poor. But critics of the beef industry see other problems. Usually at times like these, when profits are good, you breed more cows. You are increasing the livestock. You do n't see it now. This is Austin Frerick. I am an expert on antitrust law in agriculture and recently published the book "Barons: Money, Power, and Corruption in America's Food Industry." Frerick grew up in Iowa, where his family has lived for seven generations. His grandfather worked in a slaughterhouse. Austin was the first in his family to graduate from college.

He then earned a master's degree in public policy and worked for a time at the Ministry of Finance. It was then that he became interested in antitrust activities. I was just curious about this topic until I came across an article about chicken monopolies. It was written by a journalist who was studying law at the time , Lina Khan. Lina Khan later headed the Federal Trade Commission, where she began implementing an aggressive antitrust agenda. We interviewed Khan last year, in episode 625. It was titled " Biden's Policies That Trump Didn't Touch." So I went to have coffee with her , and she explained the whole history of antitrust law to me, and I was like, " Oh, that explains what happened in Iowa." When he says “what happened in Iowa,” Ferrick is referring to the economic consequences of years of consolidation in the agricultural industry.

It was a sort of " purple" state in a political sense, located in the center of the country, with a very strong middle class. But what we have observed in recent decades has led to complete decline. Ferrick believes this collapse is due to changes in the agricultural system, especially the beef production system. One of the biggest battles in the cattle industry over the past few decades has been the issue of " Made in America" ​​labeling. Under the old rules, livestock raised and slaughtered in, for example, Brazil could be sold with the label “product of the USA” if the meat underwent certain processing here.

This rule was changed a few years ago, and companies had until the beginning of this year to bring their operations into compliance . Austin Ferric sees other shortcomings in this area . Some large meat processing companies have realized that it's not just about processing beef. And in the processing of all other types of protein. For example, JBS is number one in beef production, number two in pork production, and number one in the world in poultry production. It has also recently entered the egg industry. She also produces lamb.

She makes leather for cars. You may notice that many of these companies also own the animals themselves. JBS is now opening a nationwide chain of stores masquerading as local butcher shops , called Wild Fork. Americans like to think they are buying local products, like it's some kind of special meat . So they are essentially trying to use this image for their own purposes. What Ferrick calls exploitation, most people simply call marketing. Whether we like it or not, marketing is a fundamental component of the modern economy, especially when it comes to what we eat and drink.

But even the fanciest craft coffee shop in Berkeley or Brooklyn probably didn't grow its own beans. This is Robert Hodgen from King Ranch. Think Driscoll berries. Driscoll doesn't grow all of these berries himself. They have a brand that is trusted by the consumer and work with a large number of producers to make berries available almost year-round around the world. Look at the rise in popularity of Wagyu beef over the past 20 years. It is a differentiated product with a clearly defined consumer who likes it and is willing to pay a higher price for it.

As far as I understand, these calves are not slaughtered by the Big Four, so this is a case where the consumer wanted something different and found a supply chain that met that demand. But Austin Frerick has a different view. Remember, he is a scholar in the field of antitrust law. He doesn't see what Darryl Peel calls the miracle of the meat industry. He sees an industry that is overly monopolized. Too few firms with too much influence, especially at the packer level. Historically, there were so-called trading barns in rural America.

You bring livestock to the barn, it's like eBay , where people bid. Companies like JBS essentially want to destroy this market. They want to transfer you into contracts where you simply accept the price they set. The USDA maintains a database of these contracts, and you can see that most of them— over three-quarters— were based on the government price report, which reflects the cash sales that Frerick mentioned. However, this spring, Todd Blanch, then- acting attorney general, announced that the Justice Department was investigating the activities of four major packers—JBS, Cargill, Tyson, and National Beef— for possible price manipulation and other anticompetitive activities.

And then Blanche turned to people in the meat industry. If the information you provide helps us secure a criminal fine of more than $1 million, you may be entitled to 15-30% of the funds we recover. Whether you are a farmer, purchaser, or processor, you can help protect America's food safety by reporting such violations and potentially criminal behavior. As far as we can tell, no one in the meat industry has taken advantage of this yet. But if you think you've heard this story before—about big meatpackers accused of collusion —as Darryl Peel reminded us, yes, you have .

You heard this during the Biden administration, but it has been going on for over a century. You have extremely powerful firms that have enormous market power. But for the firms themselves, it is never a monopoly. It may be an oligopoly, but it is extremely competitive. This is Roger Horowitz. I guess you could call me a food historian. Two decades ago, Horowitz published a book called Meat on the American Table . Today, he directs the Center for the History of Business, Technology, and Society at the Hagley Museum and Library in Delaware.

So how did America become, in Daryl Peel's words, a nation of meat eaters? This is where Roger Horowitz likes to start his story. 1865, New York: You could walk around and see the animal you wanted to buy. And a few hours later it was already available at your favorite butcher shop. But here's what companies did: they built cold storage facilities in major cities to store beef . So, you kill an animal in Chicago, cut it into four 200- pound pieces, hang them —it's called " hanging beef" —in a railroad car.

The train arrives in New York City , and the meat eventually ends up at what is called a branch—a building in Lower Manhattan, in an area that was once called, and still is, the Meatpacking District. Local butchers would come to the Armour branch, buy a quarter of a carcass, take it to their shop, and there cut it up into pieces for sale. And you had some price competition, because not only Armour was there , but also Swift, Cudahy, and Morris— they were all in that network.

This network, which Horowitz describes, also included Wilson and Company. These were five large packing companies that collectively came to be known as the " beef trust." This network prioritizes scale. Because the larger the branch network, the more you can produce and the more you can reduce prices. The branch system allows the "Big Five" to dominate the industry. Eventually, in the 80s and 90s, they just bought up local meatpacking companies one by one. So the great race begins, as they strive to build their own system. They engage in what we today call vertical integration.

In fact, it is more like direct integration, as livestock is still purchased at auctions at procurement points in large centers. All the major meat processing centers are still owned by farms and the drivers who transport the cattle there. They are sold to packers in Chicago, Kansas City, Omaha, Fort Worth, Texas, and similar places. In fact, they are engaged in eliminating competition. They created distribution systems that closed off market access to other companies. Any business economist will tell you that this is a bad idea, because it means that established companies can sit back and not bother with innovation.

By 1905–1910, they already owned all these refrigerated cars. They owned all these branches. And if you are a company, you want to amortize these investments. So they are starting to switch to other products that can be sold through the same cooling network. Logically. So, in the 1900s and 1910s, Swift made a big move into the poultry business, where it would remain for the next 60-plus years. They are entering the egg market. They deal in other types of groceries. They are simply expanding their product range and were actually preparing to become, if you will, supermarkets.

So there is significant consolidation happening, a lot of what sounds like market power. What happens next? Is anyone, activists or the government, stepping in, claiming that our prices are going up because of this consolidation? Yes, this is not the only industry in the United States dominated by just a few large corporations. And the meat trust is one of the trusts that various reformers have targeted. " The largest trust in the world," is what one book says about it. In the 1890s, they met weekly in the office of Swift's accountant, Arthur Wieder, and he would enter the sales territories into a ledger, the volumes they had, and allocate them.

You could get 25% of the market, you could get 15%, the price per quarter was this or that, and they essentially controlled the market and reduced competition among themselves to achieve greater price predictability . Was it illegal at the time or not? After the passage of the Sherman Antitrust Act, this became illegal. And they were very embarrassed when the investigation revealed this. The big blow came in 1919 when the Federal Trade Commission investigated and obtained Mr. Weider's "black book, " which had been recording this very market-sharing process for years, and they were at a dead end.

He didn't keep two accounts, as most people would do in such a case? No, everything was very decent. And what happens to the companies? Are some of them falling apart? Are they being sold out? The Federal Trade Commission is imposing sanctions on them and saying they can only do business in the meat industry. You should get rid of non- meat related items from your portfolio. So they can keep the chickens, but they can no longer trade cottonseed oil. They can't have apples, they can't have milk.

All of this was cut off from them, but it led to a huge gap in the market, where food distribution suddenly became open again. Meatpacking companies can't compete, and 10, 20, 30 years later, supermarkets, A&Ps, and all that stuff come along. This creates space for large supermarket chains. The theory behind this is a balancing force. You may not be able to stop large firms from merging because that is more efficient, but you can prevent them from dominating an entire industry by allowing other firms to compete with them for money.

And what do you think about this argument? Is he right? Well, I think it was effective in curbing their power. This really sets the stage for the 1950s and 60s to undermine this group of companies as a whole and create the basis for a new consolidation of the meatpacking industry. Which actually happens in the 70s and 80s . By 1977, the four largest beef producers controlled only about 25% of the American market . But that didn't last long . During the 1980s and early 1990s, a wave of mergers and plant closures left these four firms with 70% of the market.

This was the largest increase in any sector of American industry since the Census Bureau began keeping records. And today, as we heard earlier, these four big firms cover about 85% of the market. So, you're back, if you will, to the " Jungle". The Jungle is a 1906 novel by Upton Sinclair , an exposé of the harsh working conditions in the Chicago meatpacking industry . Antitrust researcher Austin Frerick doesn't like this comparison. It has become a cliché to say that we are back in the Jungle era.

It's getting worse. The level of power that these packers have has reached a point we have never seen before. Frerick argues that we have not learned the lessons of the past. Much of the antitrust law in America originates with Louis Brandeis, a former Supreme Court justice. And it was really rooted in the idea that we want to avoid the concentration of economic power because it corrupts the political system. So, this is where much of the structural separation of Glass- Steagall comes from. Glass-Steagall is a 1933 law that separated two different types of banking.

On the one hand, accepting deposits and issuing loans, and on the other hand, underwriting and securities transactions . The idea was that some businesses should be kept separate, even if one company could benefit from managing both. This echoed a similar move a decade earlier, when the FTC and the Department of Justice clipped the wings of the five largest meatpacking companies, forcing them out of public livestock pens and the retail meat business. After we conducted structural demarcations, we saw that the industry had indeed stabilized. People like my grandfather really benefited from this .

We saw how meat processing, previously a low-paying job, became a secure middle-class profession. We saw how pastoralists benefited from these stable systems. But what we've seen since then is a systematic attack on it. In essence, a new model, called the consumer welfare standard, took hold in the 1980s, where any merger could be approved if it could be proven to lower prices for consumers . Austin Frerick's statement here is probably an exaggeration. Lower prices did not give an automatic " green light" to any merger. But the wind has clearly changed.

In the meat processing industry, as in many other industries, consolidation has become the new norm. And now it's the old norm. After the break, we'll find out what the future norm will be. Also, if you were wondering what Roger Horowitz had to say about the creation of the American supermarket, it's even more interesting than you know. Watch an episode from our archive titled "How a Supermarket Helped America Win the Cold War." This is episode number 386. I'm Stephen Dubner. This is Freakonomics Radio. We will be back soon.

As we've heard, high beef prices are the result of a complex industry where it's difficult to quickly increase supply to meet demand, largely because your product is an animal that takes time to grow. Economist Darrell Peel has seen this cycle before and believes the market will eventually correct itself . I believe in markets quite strongly. You probably already understood that. And it's a self-regulating cycle. So it will be fixed. I'll say this, even though it's probably not worth it, but if you're an impatient politician, this won't work for the next election cycle.

Unfortunately, this is the reality. There is nothing we can do about this in the short term. So it will take time to rebuild all of this. This environment we're in has essentially created margin problems for virtually everyone in the industry to some degree, but for some more than others. There are no big gaps here. There is no big place where you can come and say we have to remove all this excess from the market. After all, everyone works to live. For most of history, at least recent history, the United States has been the largest beef producer in the world.

Are you saying that it's not anymore? For the past 2 years, Brazil has actually overtaken the US as the world's largest beef producer. How and why? Was it a strategy to become number one, or did everything develop organically? What factors influenced this? The industry in Brazil is developing. Brazil has about twice as many cattle as we do, but historically their industry has been structured differently and, in my opinion, less efficiently. They had been walking this path for probably 20 years and finally reached the point where they bypassed us.

Austin Frerick, an antitrust researcher, highlights another aspect of Brazil's success story. In economics, there is talk of a development philosophy called " state champions," where countries essentially support certain companies and make them monopolists so that they can dominate global markets. And that's essentially what happened here with JBS. JBS is the largest of the " big four" meat processing companies in the United States. It is listed on the New York Stock Exchange, but is controlled by two Brazilian brothers, Joesli and Wesley Batista. Another company from the " Big Four", National Beef, is also controlled by a Brazilian firm.

JBS entered the US market in 2007 when it acquired Swift, one of the original members of the beef trust. How did JBS become so dominant? Let's listen to Frerik again. They became monopolists through bribery. I don't mean, you know, campaign contributions. They pleaded guilty to bribing politicians. In 2017, the Batista brothers' holding company admitted to paying bribes to nearly 1,900 Brazilian politicians and paid a record fine of $3.2 billion . Three years later, the firm pleaded guilty in US federal court to violating US anti- bribery laws.

The Securities and Exchange Commission (SEC) found that some of these bribes helped facilitate JBS's acquisition of American chicken producer Pilgrim's Pride. Pilgrim's Pride provided $5 million to Donald Trump's inaugural committee in 2017. Three weeks after his inauguration, Trump signed an executive order suspending the Foreign Corrupt Practices Act—a law that JBS pleaded guilty to violating. And the Ministry of Agriculture has taken steps to make higher line speeds at slaughterhouses permanent, as requested by the meat and poultry industry. Critics, such as Senator Elizabeth Warren, questioned whether the company's donation had anything to do with the administration's moves.

JBS says no. A word to Austin Frerick. You shouldn't be allowed to maintain a dominant market position through bribery, yet they do. This controversial JBS story has nothing to do with the ongoing Department of Justice investigation we heard about earlier, into possible anticompetitive behavior by JBS and the other three big U.S. meat processors. The Big Four have also been accused by American retailers of anti-competitive practices. McDonald's is the largest buyer of beef in the world. And usually in most types of businesses, you treat your biggest customer the best.

McDonald's even filed lawsuits against packers for overcharging a few years ago. Technically, the charge was for price fixing, not speculation. McDonald's alleges that the price collusion has been going on since at least 2015. They claim that packers met at conferences and trade shows to restrain supply and coordinate prices. Target, Aldi, BJ's Wholesale and Sodexo have filed similar lawsuits. Big packer Tyson has since agreed to pay more than $80 million to settle a lawsuit from grocers. JBS paid out more than $50 million. None of the companies admitted their guilt.

Are these guys completely flawless? I wo n't say that. It's economist Darrell Peele again. My opinion on such settlements: in most cases, it is simply cheaper than paying a lawyer to continue fighting. You know what? Let's just write a check and be done with it. I work with them enough to know that this is exactly what happens in many cases. I mean, they're corporations, right? But this is America . It's kind of the way of playing this game. We want to play by the rules. So we try to have rules and make sure people follow them.

And if not, you know, there could be consequences. I think the fact that these large concentrated industries get so much attention is simply because they are the obvious target. There are many very loud and accusatory statements being made that are completely unsupported by any evidence. And the research we have on beef, at least, indicates pretty clearly that the net benefit to the country, consumers, producers, everyone, is in our current industry structure. So if we broke them up, we would suffer because we would have a less efficient industry, and it would cost everyone more.

And in 25 years they would have turned into something similar again if we had let markets work. This September, the Justice Department expanded its beef investigation to eight retailers, including Costco and Walmart. Walmart now has its own slaughterhouse in Wichita, and it's partly a reaction to JBS. It's Austin Frerick again . Walmart doesn't want to completely own the beef industry, but it wants to understand the costs because it wants to know when it negotiates with these packers what the real cost structures are. The retailer mainly works on margin.

It's Robert Gogen again, CEO of King Ranch in South Texas. They're very percentage-oriented, so, you know, the retailer takes what they buy from the packager, makes a markup, and sells it to the consumer. Retail, like food service, plays a vital role in the beef value chain and supply chain. We wouldn't be able to deliver the product to the consumer every day without them. But if they're operating at, say, a 27 to 35% margin on beef, as I've been told, then those dollars, you know, when the price of beef has doubled in the last 20 years, become much larger in absolute terms.

The Justice Department requested six years of documents from these eight retailers regarding their beef costs and margins, as well as pricing strategies, purchasing arrangements with packers, and the company's own internal analysis of why beef prices changed the way they did . In July, USDA data showed that prime beef retailed for $10.49 per pound, up from $9.69 a year earlier. But the wholesale price the store paid the packer dropped from $5.72 per pound to $5.58. Does this mean that the retailer is acting unethically ? Not necessarily.

The wholesale cost of beef is just one of the costs of selling it. Retailers have to pay for labor, energy, real estate, etc. But this discrepancy—a drop in wholesale prices while retail prices rise —is bound to attract attention, especially in an industry with a history of concentrated market power. Austin Ferry still sees many challenges in the beef industry, but he also sees opportunities. I truly believe that the best meat bill ever introduced in the U.S. Congress came out just recently. He was kind of lost in this whole Iran situation.

But Chuck Schumer introduced a bill that I think is incredible. It says that you can only work with one type of protein once you reach a certain size. So , if you slaughter pigs, you can't slaughter beef cattle. First, you're essentially breaking up most of these meatpacking companies because they deal in different types of protein. I would add something else to this . I don't think companies should own animals. I mean, in Iowa there is such a rule in the laws, we just don't enforce it.

This is called a ban on packers. I would implement this on a national scale. I don't believe a corporation should own an animal. But there is a problem. Robert Gogen of King Ranch says it's become much harder to own animals unless you're a corporation . It's almost impossible, even at these prices, to buy a ranch, start cows there, and, as they say, pay off the loan if you have to borrow 60, 70, or 80% of that money. So even at these prices, I do n't want to argue that we ranchers are making crazy profits compared to the value of land in the United States.

The American cowboy is becoming popular in culture again, which is a truly wonderful and interesting phenomenon. People who really want to do this work are hard to find. We work in rural areas in five or six different states, and I can tell you that the labor force is tight. And while it's interesting to talk about artificial intelligence, and, you know, maybe there's some potential for AI in genetic selection or things like that, at King Ranch we still have 35 employees whose job title is cowboy. Each of these cowboys has three to five horses, and they get up and saddle up almost every day .

This is not a business that we believe will be replaced tomorrow by drones or artificial intelligence. I think if you step back and look at the industry as a whole, and talk about the aging of America, you see that fewer and fewer people are producing the food that we eat every day, right? The average American farmer feeds hundreds of people around the world. We have great demand. We produce a great product, but who will continue to do so in the future? Mom and Dad want to retire.

They have several cows. Do the kids want to go home and mess with those 20 or 30 cows? No. Over the past few years, more than 100,000 cattle farms and ranches have disappeared in the United States, representing approximately 15% of the total. Most of them are small producers. The average producer has about 25 or 30 cows. So such a producer most likely has another job, works in the city, or is already retired. And even at today's income levels, is that enough money to want to keep 20, 30, 40, 50 cows on available land?

So , for me, the biggest hurdle is how do we keep supply at the same level as demand? In August, the Department of Agriculture announced a package of measures aimed at restoring the US livestock population. It includes insurance for ranchers who keep heifers alive instead of sending them to slaughter, loans for those starting out in the industry, and a program to get ex-military members into farming. I hope all this information about beef we learned today will give you something to think about the next time you bite into a burger, if you are one of those who eat them.

Thank you today to Robert Gaugin, Austin Ferric, Daryl Peel, and Roger Horowitz. And especially thank you for listening. If you have anything to say about this episode or anything else, our email address is: radio@freakonomics.com. Next time on the show : Obviously you know at least a little about podcasts because you're listening to one of them right now, but what do you know about the podcast industry? It brings in about $9 billion a year and has hundreds of millions of listeners, but one of the most knowledgeable economists in the podcasting world has a confession to make.

I don't understand the economics of podcasting. It behaves completely differently from other media industries in history. More about that next time on the show. Until then, take care of yourself, and if you can, someone else too. Freakonomics Radio is created by Renbud Radio. You can find our full archive on any podcast app. It's also on freakonomics.com, where we post transcripts and episode notes. This episode was produced by Mandy Gorodstein. It was edited by Ellen Frankman and compiled by Eleanor Osborne with assistance from Jeremy Johnston. The Freakonomics Radio Network team also includes Dalvin Aboagye, Elsa Hernandez, Jake Loomis , Pete Madden, and Theo Jacobs.

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