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

Freakonomics Radio

The episode investigates why U.S. hamburger prices have surged, examining the biological constraints of cattle breeding, complex supply chain dynamics, and intense market consolidation among major packers.

Key takeaways

• Derrell Peel explains that ground beef is typically a mix of lean trimmings from fed cattle and older cull cows, creating a complex disassembly process rather than simple assembly.
• Robert Hodgin notes King Ranch operates across four value chain stages (genetics, cow-calf, feeding, commercial) to mitigate the cyclical nature of cattle markets.

Main topics

• beef supply chain dynamics
• cattle breeding cycles & biology

Notable quotes

"Cattle prices will likely recover significantly if politicians will shut up and stop proposing actions that will not help cattle producers or beef consumers."

Conclusion

The episode reveals that soaring burger prices stem from unavoidable biological lag times and

Transcript preview

Speaker 7 (0:05) Okay, let's start with a quiz. I'm thinking of an industry, and I want you to guess it. This is an industry that many people feel takes up way too much space. The industry is land intensive. We use a lot of land. Did you guess AI data centers? Great guess, but... That is not the industry I'm talking about. Here's another clue. This is an industry where prices have been rising even faster than inflation. And yet consumption isn't falling. Speaker 5 (0:37) We have really strong demand, 40 year high in demand. Speaker 7 (0:42) Did you guess gasoline? That's another great guess. But also... wrong. Here's one more clue. This should get you the right answer. It's about the labor force in this industry. We still have 35 employees whose job title is cowboy. Okay, so now do you know which industry I'm talking about? Speaker 7 (1:04) I mean, we're a beef-eating nation. That's right. The industry I'm thinking about is the beef industry. Ding, ding, ding. And America is a beef-eating nation. The average adult consumes about 60 pounds a year, which is four times the global average. The U.S. is also a world leader in beef production. So why has your hamburger suddenly gotten so expensive? That is just one of the questions we ask today as we explore an important industry that is also, if we're being honest, a strange one. You know, if cows had litters, this would be a whole different conversation. That would be a different conversation. Today on Freakonomics Radio, everything you always wanted to know about the beef industry and maybe a few things you didn't. Speaker 2 (2:02) This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. Speaker 7 (2:19) We made an episode a few years ago called The Future of Meat, episode number 367, if you want to listen. The premise was simple. Global demand for meat was strong and getting stronger. And because producing meat is so resource intensive, it seemed as if meatless meat, like the Impossible Burger, was poised for a big breakthrough. But that didn't happen. Why not? One of the best explanations is also the simplest. A lot of people really, really like to eat meat. When demand is real, supply will find a way. And when it can't, prices will do the work. So let's start today's episode on the demand side of the beef equation. We Speaker 1 (3:04) talk about beef demand. How is beef demand? But it's really not one thing. It's thousands of different things. That is Daryl Peel. I am a professor in the Department of Agricultural Economics at Oklahoma State University. Peel also writes for a cattle industry newsletter Speaker 7 (3:20) that is published by OSU. It's called Cow Calf Corner. His writing is precise and refreshingly direct. For instance, here is a line from a recent piece. Cattle prices will likely recover significantly if politicians will shut up and stop proposing actions that will not help Speaker 1 (3:37) cattle producers or beef consumers. There is just so much lack of information, I guess, about the beef industry is the best way to say it. Speaker 7 (3:46) So here's something you said not long ago that just shocked me. You said, I've maintained for many years that the U.S. cattle and beef industry as it operates is probably the most complex set of markets on the planet. And no offense to you. I'm sure you're going to justify that. But I was thinking, wait a minute, Speaker 1 (4:02) hamburger versus an iPhone. You know, when you think about all the things that it takes to make an iPhone. There's a lot of different components. There's a lot of engineering and manufacturing and so on. But at the end of the thing, you've got one product. So marketing iPhones is pretty easy. Most manufactured products are assembly products. So we take a bunch of inputs and we have one final product. This is disassembly, I guess, right? This is a disassembly process. All livestock markets are disassembly, but beef is the ultimate one of those. It's the biggest animal. There's 4,000 some odd muscles in those animals. And potentially every one of those muscles is a different product. Are they still discovering new cuts Speaker 7 (4:42) of steak? I'd never heard of Denver steak until maybe 15, 20 years ago, or Flatiron Speaker 1 (4:47) or Bavette. The Flatiron was actually one of the first ones of those and has been probably the most successful, frankly. Somebody recognized that within the shoulder of that animal. When you start breaking down those muscles, there is this one muscle on the top side of the shoulder blade that if you get it out separately, it's actually the second most tender muscle in the animal. After the middle meats, the tenderloin and so on, this one falls right behind that. But we never recognized it for years because we always just kind of cut across it with everything else and it wound up in a roast. If you fabricate it a little bit differently, separate it out and get that piece of meat by itself, hey, we've got an excellent new steak here. The other thing about cattle that makes them unique to any other market is their ruminants. So they have the ability to utilize a wide range of feedstuffs. We can use lots of grain and a little bit of forage. We can use lots of forage and a little bit of grain. We can change the timing of these animals. We've got producers all over the country producing these calves. That's really tied to wherever there's grass. And then they go to a feedlot, oftentimes in a different part of the country. I visited a feedlot in Pennsylvania a few years ago, and I was in Lancaster, Pennsylvania, but that's not very far from Hershey, Pennsylvania. And as we were driving by the feed bins, I looked out the window and I said, that's very colorful. What's in those feed bins? And the guy said, well, that one is Reese's Pieces. No, you're kidding. You know, the crumbles from, you know, candy manufacturing. Cattle can utilize that. You have to be careful nutritionally. Obviously, you can't just feed them nothing but that, but that stuff can all be utilized. All of this takes place over, from beginning to end, we're talking 24 months at least. So 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 in there that probably was a live animal no more than about three weeks ago. But the process that led to this piece of meat being available to you today started two and a half years ago or more. with some guy or several people along the way that don't know each other? And, you know, how does it work? Speaker 7 (7:01) I am sorry to interrupt Daryl Peel's excellent storytelling here, but I want to highlight a larger 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 so many different stages and somehow create a coordinated market that has essentially coordinated itself. We once made an episode about this idea, too. It's episode 236 with the headline, How Can This... possibly be true. Okay, back now to my conversation with Daryl Peel. Speaker 7 (7:37) Let's talk about ground beef for a bit. You've written a couple of things I see here. One is called the ground beef paradox. Record demand meets a shrinking domestic supply. I don't know what share of Americans eat a hamburger or ground beef once a month at least, or maybe even once a week, but I'm guessing it's a very high number. I Speaker 1 (7:54) think so. And Speaker 7 (7:55) I would posit that very few people think about what it is other than some version of chopped up cow. I think that's probably right. Yeah. Speaker 1 (8:02) It's Speaker 7 (8:03) a Speaker 1 (8:03) little bit more complicated than that, though, isn't it? Well, there's a lot of pieces to it because, and no pun intended, I guess, ground beef has become a very staple product in the U.S. It's so versatile. And historically, it's been very economical. My best estimate is that about 47 to 48 percent of the total amount of beef that we eat on average in the U.S. is in the form of ground beef. Okay, so what's in it? Ground beef is lean beef. of, you know, some type, some muscle mixed with fat. There is a legal definition of ground beef. It has to be a minimum of 70 % lean. It can be 70-30. Now, we don't necessarily see that a lot anymore. That would have been in the old days, the 10-pound chubs of the really cheap ground beef might have been 70-30, but it can range anywhere from 70-30 all the way up to 95-5%. in terms of the lean to fat portion. And so it just depends on the particular market and the individual preference. Okay. So if it's 85 % Speaker 7 (9:04) lean, where is that lean beef coming from? And what is it? I don't know if in competition with is the right phrase, but like, where would it go if it weren't going into ground beef? And then I want to know where the fat is coming from as well. And I want to know how easy it is to make that mixture. Is it a naturally occurring mixture or do you have to really move your assets around? Speaker 1 (9:24) So about 85 % of our total beef production in this country comes from what we call fed cattle. These are cattle that are finished in a feedlot. When those animals are processed, they produce a significant amount of trimmings naturally, just as part of the fabrication process. Those can be done in different proportions, but think of it as basically 50 % lean, 50 % fat. We just said that by itself, that's not ground beef. That doesn't even meet the legal definition. So you need some additional lean to mix with it. That lean can come from a number of different places, but the most economical place comes from the other 15 % of beef production is our cull cows and bulls. What's Speaker 7 (10:03) a cull cow? Speaker 1 (10:04) A cull cow is a breeding animal that is mature. These fed cattle that we're talking about are 15 to 18 months of age, typically. But if you have a cow that you're using to produce a calf and she stays in the herd for 10 years, roughly speaking. At some point in time, physically, she's just done. She's wore out. And so she will be culled, hauled to market. Nothing goes to waste. So that animal will be processed as well. They tend to be quite lean. The quality of that meat is not as tender, but that lean is worth a lot. So if you take seven pounds of the 90 % lean, mix it with one pound of the 50 % lean, that'll give you an 85 % combination. about as cheaply as you can make it. Got it. So that's one way to do it. Now there's about a million other ways to make ground beef, right? All these combinations of fat and lean, but that would be kind of the standard that you would think of as the ground beef for the fast food industry. Speaker 7 (11:02) So when I look at... ground beef prices in May of 2026, consumers paid on average a little over $7 a pound for ground beef. That's up around 50 % from five years earlier. That's outpacing the general inflation rate is what I'm reading here. So Speaker 1 (11:17) talk to me about that. The beef industry in the U.S. is inherently cyclical in nature. It tends to have about 10-year cycles of inventory change. Now, there's a bunch of reasons behind that. And normally it's a self-correcting cycle economically. So there'll be economic incentives at the top to, oh, cut back on production a little bit. Prices for cattle will go down and eventually the industry will come down and then we'll go a little too far. And so it'll turn around and it goes through these cycles. It's been doing that for about 140 years. So it's not a new thing. And Speaker 7 (11:48) what's it driven by? I'm guessing it's not driven by consumer demand. I would think that's less elastic, yeah? Speaker 1 (11:53) Yeah, no, it's not a demand-driven thing. It tends to come from the supply side. It comes from those long-term adjustments of production. And the fact that we're operating with a forage base that's, well, it's inherently variable, then that's what makes the cattle cycle unpredictable sometimes. Let's say you've got too many animals and the prices start to drop. If a producer says, oh, the market's telling me to cut back on production, what is he going to do to cut back on production? He's going to sell some cows. The cows are