When the Cost of Meat is a Pound of Flesh
Local restaurants are facing higher meat prices
Three barbecue days mark the beginning, the middle and the end of summer. But like much else in American life, the coronavirus pandemic will probably alter how Americans celebrate warm temperature holidays and their gastronomy for years to come.
When it became clear that the governmentimposed stay-at-home orders would be with us for much longer than anyone had anticipated, attention turned to what will happen to small businesses as Angelenos, like Americans everywhere, became a living social experiment.
Chef Shalamar Lane’s My Father’s Barbecue closed down at the start of the stay-at-home orders in March. Random Lengths News visited with the Carson business owner on the Saturday before Memorial Day to talk about meat. My Father’s Barbecue reopened May 14, fully reconfigured as a takeout restaurant with only half its staff and a hope that the publicity garnered by the COVID-19 food giveaway would jump start business ahead of Memorial Day weekend.
“We closed down for almost three months so there’s no income,” Lane said. “We lost well over half of our staff. For a lot of them, they are making more on unemployment than they were when they were working.”
Lane called the dynamic “sad.”
“With so many businesses closing, what’s going to happen when the money runs out? They are going to be looking for jobs again and it’s mostly the lower-income people doing things like that, so it’s kind of a bad situation.”
But labor wasn’t her biggest issue. Her biggest issue was the price of meat, and how it’s impacted business. She gave an example.
“One of the places I purchase meat has a warehouse the size of this parking lot,” Lane said, gesturing toward the large lot rimmed by businesses on the northeast corner of University and Avalon. “[That warehouse] was always full. I’ve been in business for five years and I have never seen them without meat. [But] right now they have probably 15% of what they normally have in their freezers.”
Lane explained that now when she goes shopping to procure food for My Father’s Barbecue at places like Restaurant Depot, she’s only able to get one or two boxes, even as a restaurateur.
“I have to go in today, go back tomorrow and go back the next day,” Lane said. “Just like how you were seeing empty shelves at the grocery stores, we experienced the same thing at Restaurant Depot…. The same thing.”
Lane doesn’t believe this is due to panic buying as much as the supply just wasn’t there.
“One of my providers said he won’t be getting any more brisket for another two-anda-half weeks and the cost of everything has just gone up,” Lane recounted. “For instance, I usually charge $22 per pound for brisket. Now I’m charging $30 per pound for brisket. They can double their price for brisket, but I can’t double my price, but they double the price of brisket for me. We buy thousands and thousands of pounds of meat per year, but even with that, the cost is just crazy.”
The Choriman, the foodie destination that’s been grabbing attention with its brand of chorizo, a flavorful pork sausage is at the south end of the 110 Freeway in San Pedro. So far, The Choriman has been able to weather the stay-at-home orders fairly well, since it has been a takeout eatery from the start. But Humberto Raygoza, the man behind the brand, says the business still gives him cause for worries.
“So far, with our brick and mortar restaurant where we are selling food, it’s not so bad,” Raygoza said. “It’s not as busy as it used to be but we’re hanging in there.
“On the wholesale side of the business, that’s very busy because everybody wants oso burritos, meaning they want prepackaged products like our one-pound chorizo, which has picked up exponentially.”
Raygoza said that, so far, he hasn’t had any trouble keeping his supply but he has seen the price of beef double in the past two weeks.
“The beef, I know, has gone up a lot,” Raygoza said. “It’s just a taste of what’s to come. If they keep closing plants down or if they can’t figure out what they are going to do with the plants that are open and they don’t have enough man power left to do the work….
The beef prices right now, it’s a little high. It’s gone up a lot for beef. I don’t know how the other companies are doing, but every time I go to the cash-and carry place, they are always out of meat. And then, a lot of times we are not even getting a lot of stuff in because it’s so high priced.”
The California Beef Council weighed in on California’s meat supply and how it is impacted by the shutdown of meat processing plants due to the coronavirus.
The Producer End
Mark Lacey, a cattle rancher near Independence (about three hours northeast of Bakersfield), is president of the California Cattlemen’s Association and a member of the California Beef Council. That places him on the producer end of the beef market.
“Everything is a little more expensive in California,” Lacey said. “Some of that has to do with regulatory costs.”
Lacey noted that major chain restaurants have raised their prices in response to rising wholesale and retail prices. He not only credits the state’s stay-at-home orders for this state of affairs, but also the panic buying that took place just as everyday citizens stocked up on toilet paper and hand sanitizers during the earliest days of the pandemic.
“This, at the very least stretched the availability of the meat supply from meat processing,” Lacey said.
Lacey blames the price increases on the meat processors, who he said have been able to ask for what they wanted.
“On the production end we are not seeing any decrease on the processing side,” Lacey said. “On the processing side, initially there were these unknowns on what the government shut-downs were going to cost. People started rushing to the stores and stocking up on meat and the retailers responded by doing the same thing with their suppliers trying to keep their shelves stocked.”
Lacey suggested that beef processors have not been impacted by the coronavirus to the same degree as pork processors.
“A lot of the pork plants seem to have experienced shutdowns due to employees sick with illness or employees not showing up due to fear of getting sick,” Lacey said.
Lacey explained that when the beef processing plants started experiencing employee no-shows and/or employees started to show symptoms of coronavirus, the plants went to 40 percent of capacity.
“That created additional supply issues going to the wholesalers and retailers,” Lacey said.
As to whether Californian meat consumers
were impacted to the same extent as the rest of the country, Lacey provided a mixed answer.
Lacey noted that consumers in the Western regions of the United States have significant meat processing capabilities, counting Imperial County’s One World Beef, Harris Ranch Beef in Selma, California in the Central Valley and Central Valley Meat in Hanford, California. Central Valley Meat and one other specializes in harvesting ground beef, supplying restaurant chains like McDonald’s and Wendy’s. Lacey identified a few more processing plants in places like the city of Vernon in Los Angeles County, and states such as Oregon, Washington and Arizona.
But even while these represent significant processing capabilities, Lacey admits in not so many words that it hasn’t been enough to forestall price increases.
There’s big processors like Tyson, Cargill, JBS — their big customers are large retail chains. Those are your Walmarts, wholesalers like Costco, Sam’s Club (a counterpart to Walmart), Lacey explained. Then there are the large national grocery store chains like Albertsons and Safeway. When it gets down to it, the large customers get top priority. Some of your smaller retail chains probably won’t get a high priority. That would also go for local restaurants like Ruth’s Chris, which just don’t move as much product and they take a smaller volume so it doesn’t last long.
“Just economies of scale that make up the chain and without having other processing facilities out here ... there isn’t a secondary market for these guys to go to,” he said.
The new normal going forward?
Lacey is a bit optimistic. “Higher prices could remain, but the wholesale prices you’re seeing now have already started to come down in the last two weeks,” Lacey said. “More plants have been able to get more workers online and get up to 70 to 80 percent capacity. You’ll continue to see those prices come down. The record highs [for boxed beef cutout prices] were in the mid-$400 range.”
Lacey noted the elasticity of beef prices is difficult to say the least.
“We have challenges when our product gets too high because traditionally our main competitor is chicken,” Lacey said. “[Chicken is] a whole lot cheaper. When it’s an economic decision for consumers, they will choose the cheaper option.”
Lacey admits this scenario poses a threat to the beef industry. From his perspective as a producer, with only the processors making all of their pre-pandemic profit, he believes a number of meat producers aren’t going to make it.
“Frankly, we’re going to lose some production capacity because producers are going to go broke,” Lacey said. “There’s no telling if any producers will expand to pick up that capacity if the economics on the production side is not there. So we could see some capacity loss. We could see some distraction due to competing proteins, ( i.e. chicken and pork).”
At The Choriman, Raygoza sees what’s happening with beef as a kind of canary in a coal mine.
“I know wholesale prices for beef cuts like chuck [were about] $4 a pound,” Raygoza said. “It’s now $8 per pound and it’s going to continue to go up because every week it changes. We’re wholesalers too, so I’m checking prices every day.”
Raygoza said from what he’s seen, after doubling, the prices are going to keep creeping up for beef and across the wider meat market.
“For pork and chicken, which no one is really talking about so much,” Raygoza said. “If coronavirus affects those prices then the prices for pork and chicken is going to go up as well. That’s really going to hurt.”
Steven Maxey, a member of the Certified Meat Products board, agreed to some extent with Lacey’s assessment.
Maxey reported seeing traditionally cheaper cuts of meat like the round and the chuck and some of the ground beef going at very high prices, while the middle portions of the animal, which have traditionally been the more expensive meats, like the sirloin and the ribeye, have been more value priced.
Maxey explained that in the past couple of weeks, the prices of all cuts of beef have gotten pretty high-priced. Maxey was careful to note that what is being experienced right now is not a shortage of meat but a limited supply of processed meats and that the biggest driver of this limited supply is the fact that processing plants are running at less than full capacity due to labor issues as a result of the coronavirus.
To weather this storm, Maxey suggests that consumers, restaurants and families alike may have to make some changes in the choice of meats they are buying.
“They may have to buy the brand or the cut they are not accustomed to buying,” Maxey said. “It’s probably a good time to be a little more flexible in the type of meat you’re looking at early on in this.”
Raygoza noted that he doesn’t have the option of choosing a different cut of meat because changing would mean changing everything on the production side of his chorizo product.
“I’ve talked to other people and they say, ‘Well I will just use this,’” he said. “It’s not what we use. It’s an option. But then you take that hit because your customers are like ‘Wait, this doesn’t taste like it did before.’”
A change like that could potentially put an end to the meteoric rise of a San Pedro success story.