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Chapter 1: What factors contributed to the rise in beef prices?
Omaha, Nebraska, 6 o'clock dinner reservation. The Thomas family, party of six, is settling into one of the great old-school steakhouses in the Midwest. It's the kind of place with low lighting and heavy chairs. The room smells like brown butter and seared beef fat.
It's old-timey. It's kind of got the wooden exterior. The floors are creaking when you walk in.
That's our colleague Patrick Thomas, as in the Thomas family, party of six.
You've kind of got that brassy Sinatra type of music, old-world type of steakhouse.
I'm going to go from the most tender all the way up to our most heavily-barbled cut. So our most tender cut here will be the filet.
So what brought you to that steakhouse in Nebraska?
My family still lives out there. My brother was actually graduating high school.
Oh, wow. Congratulations. I heard his name is Ryan. It's another Ryan. What a great name. How's your steak?
My steak's delicious, very tender and juicy.
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Chapter 2: How has the cattle auction scene changed recently?
The reason beef is so expensive right now has everything to do with the animals.
Our colleague Patrick grew up in Nebraska, aka the beef state, and recently went to a cattle auction about four hours outside Omaha. If you've never been to a bull sale before, there's one thing Patrick says you need to watch out for. Flying poop.
You have the bull running into the ring, who kind of trots out right away, he's kicking up some of the manure, and sometimes, you know, he runs by and the manure will kind of fly up a little bit, so you got to be careful if you're in the front row.
Yuck. Right now, the best cattle in America are worth a fortune.
Here at the T.D.
Angus bull sale, ranchers pay astonishing amounts of money for breeding bulls, the fathers of future herds. Some will sell for as much as a new Cybertruck. On this spring day, all eyes in the room were on a hulking bull named the Man in Black. His breeders call him a, quote, man amongst boys. In the end, he's sold for $75,000. No bull.
Sold the bull, $75,000, $75,000.
The man in black is basically the start of the supply chain. He'll go on to father potentially dozens of calves each year, calves that will make up part of the nation's cattle herd. But the cattle herd in the U.S. has dramatically shrunk. It's now at its smallest size in 75 years. There simply isn't enough cattle. And America wants beef. The shortage is making the auctions really competitive.
You have guys been described as vicious because you'll have, you know, sometimes personal vendettas take place if they want to drive the price higher on somebody.
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Chapter 3: What impact did COVID-19 have on the beef supply chain?
A 500-fold increase in profit margins... With all that cash, ranchers have been able to hire more staff, pay down some of that debt they racked up during the pandemic, and upgrade old equipment.
We have unprecedented times here in the cattle business right now. I mean, it's just, this business has just turned upside down overnight. I mean, it's unbelievable.
For the people raising cattle, these are boom times. Ranchers are riding high. But for everyone else in the beef business, not so much. That's next. If ranchers are finally on the winning end of cattle economics, there are a few folks who are losing.
The biggest loser right now is the meatpacker.
Remember that during COVID, there were lots of cattle and not enough capacity at meatpacking plants. As a result, the meatpackers were able to buy cattle for dirt cheap, and they were making lots of money.
But now that the meatpackers are back up to full speed and cattle herds have shrunk... The meatpacker is losing about $300 per animal that goes through their plant.
Ouch.
Well, you have some of these big packers. I mean, JBS, Cargill, Tyson, they have plants that process 6,000 cattle a day.
Wow.
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