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TABLE 4.--Cattle feeding operations, Iowa, Illinois, and Nebraska-Specified
NOTE.-These 3 States normally account for about 40 percent of the United States total number of cattle finished in feed lots.
MEAT PRODUCTION REDUCED SHARPLY IN 1951 The amount of meat available for domestic consumption in 1951 was sharply curtailed as a result of the OPS regulations and accompanying uncertainties affecting livestock producers and feeders. Striking evidence of this fact is the estimates of meat production and consumption for 1951, as calculated by economists of the United States Department of Agriculture at the beginning and at the close of the year.
Starting in the fall of 1950 and for several months in 1951, there was every indication that the past year would see a substantial increase in the production and consumption of meat compared with the previous 3 years. The Government forecasts, which were substantially the same as those made by other industry observers, were for a total meat production in 1951 of about 23.4 billion pounds, up nearly 6 percent from that of a year earlier. A production of this size would have permitted a domestic consumption of about 148 pounds per person, 3 to 4 pounds more than that of the preceding 3 years.
As the year progressed, however, it became apparent that this favorable outlook would not materialize. The Government estimates of meat production and consumption were lowered successively, as shown in the accompanying chart.
The official estimates (still preliminary) now stand at 22 billion pounds for production and 138 pounds per person for consumption. This is the smallest per capita consumption since 1939.
It may be noted that the original estimates of meat production and consumption failed to materialize chiefly because of the cut-back in cattle marketings. Reduced feeding operations (already mentioned), plus an unwillingness of producers to market cattle under existing conditions, were responsible for cattle slaughter falling short of the volume which normally could have been expected in 1951.
TABLE 5.- Estimates of meat production and consumption, 1950 and 1951
1 The USDA Livestock and Meat Situation.
MEAT PRODUCTION HITS THE TOBOGGAN IN 1951
Official Government Estimates for 1951
10 Pounds Per Person
[ Date of Government Estimates T
OPS UNABLE TO CONTROL LIVE CATTLE PRICES The most clear-cut evidence of ceiling-price violations are to be found in the case of live cattle. As has been mentioned, ceiling prices for cattle and beef were announced by the OPS in late April. After some postponement, the live-cattle ceilings became effective on June 4. The purpose of this order (CPR 23) was to roll back cattle prices to the early January level. However, this was more easily said than done.
As already noted, cattle marketings were sharply curtailed during the 4 months June-September, and the strong competition for the reduced supply of cattle drove prices for most grades well above the compliance levels permitted by the OPS. This situation worked an extreme hardship on packers who chose not to violate the live-cattle ceilings, since all they could do was to sit by and see the livestock siphoned off by slaughterers who were finding it profitable to ignore the regulations, or who were in a position to profit from the inequities inherent in such regulations.
Table 6 shows the disparity between compliance prices and actual prices for 1 day, September 4, 1951. Actually, until very recently, there has been a consistent record of overcompliance prices paid for all kinds and grades of cattle.
TABLE 6.- Live cattle prices (per hundredweight), Chicago versus OPS compliance
prices Sept. 4, 1951
OPS REGULATIONS VIOLATED WITH IMPUNITY While some effort apparently was made by the OPS to crack down on price violators during the early fall of last year, the situation described above did not improve until cattle marketings increased seasonally later in the year.
The OPS reported that 1,849 violations of meat-price orders were uncovered in its enforcement drive which was carried on last September. However, only 89 of these cases have warranted injunctions and just 2 have warranted criminal charges. Thus, because of the ease with which regulations can be evaded, it is doubtful if these efforts were any more than nominally successful.
One way in which ceiling prices on meat are easily evaded is the tie-in sale. For example, in this device the evader sells 2 carloads of scarce product at the ceilings, provided the buyer takes a carload of slow-moving product at more than the market price. Tie-in sales are difficult to detect and more difficult to prove, yet they provide a tremendous advantage over the packers who observe the regulation, as regular, established packers must do.
Other violations of price regulations which are almost impossible to police in the meat business include upgrading, short weighing, and false billing.
REASONS WHY MEAT PRICE CONTROLS CANNOT BE ENFORCED While most people are honest and obey the law, the number of meat transactions which take place (and the potential violations) are so great that it is physically impossible for the Government to recruit and train an enforcement staff capable of policing price regulations in this field.
According to careful estimates, the are more than 11 million livestock transactions annually, about 431 million wholesale meat transactions and nearly 18 billion retail transactions.
If only 5 percent of these transactions were in violation of price regulations, the number of violations would be staggering. With as many as 95 percent of the people refusing to buy or sell in the black market, there would still be well over a half million illegal livestock transactions, about 2142 million illegal wholesale meat transactions, and nearly 900 million illegal retail meat transactions. The 1,849 cases of evasion uncovered by the OPS last fall, after an intensive enforcement campaign, illustrates the impossibility of actually enforcing these regulations.
PRICE RELATIONSHIPS BETWEEN MEAT PRODUCTS ARE CONSTANTLY CHANGING
Another reason why price controls on livestock and meat are so extremely difficult to enforce is that the fixing of ceilings in itself defies the normal economic functioning of prices in this industry.
In the accompanying chart, prices of several representative cuts of meat have been plotted for the year 1950. It will be noted that these prices fluctuate
widely-from month to month (actually from day to day) and between one another. For example, during the period January-August, 1950, wholesale prices for beef ribs declined about 40 cents per pound-from $1.00 to 60 cents. At the same time prices of beef rounds advanced 10 cents per pound-from 40% to 50% cents. OPS regulations would stop such fluctuations in their tracksunless of course prices fall below ceilings, in which case the controls are not holding meat prices down anyway.
We think it is important to note that meat prices, along with some other perishable commodities, simply cannot be held at a fixed level for any length of time. Because of the perishable nature of meat products, the variable supply can only be balanced against the demand by a continual process of price changes. This is quite different from a product such as tooth paste, which is relatively nonperishable and can be produced in direct response to volume of sales. Price Relationships between Meat Products
Are Constantly Changing This is how the variable and uncontrollable supply of a highly perishable product is moved into consumption without loss or spoilage $ per
& per (Chicago Wholesale Meat Prices)
Jan. Mar. May July Sept. Nov.
1950 Source: National Provisioner USDA. Prices are as of mid-month
SUPPLY AND DEMAND, NOT CEILINGS, DETERMINE MEAT PRICES The accompanying table is a listing of recent prices for a number of typical meat items, compared with packers' ceilings and prices for the corresponding dates a year ago. It will be noted from this table that current prices for meat and other livestock products are mostly well below both ceiling and year-ago prices. This is particularly true in the case of pork and the so-called livestock byproducts.
Bellies, for example, are 26 percent below the ceilings and 25 percent below a year ago. To be noted, also, are the sharp declines which are shown for lard, tallow, hides and wool.
Most beef prices, particularly prices of the lower grades, also have dropped away from ceiling levels. But there still is pressure on the ceilings in the case of veal, supplies of which have continued substantially (10 percent) below a year ago.
We feel that these price declines are significant in that they have been established by supply-and-demand conditions in the competitive market. Price controls can claim no credit for these reduced prices.
Another point which we would like to emphasize in connection with the general price situation on meat is this-notwithstanding the fact that current market prices for meat are well below ceilings, meat processing and distribution are still hampered by innumerable regulations contained in the price control orders which have nothing to do with prices themselves. For example:
The industry is prevented from selling fabricated cuts of meat to retailers. Such regulations tend to stifle the efficient distribution of meat to the consuming public.
A further hampering feature of the regulations-even with prices below ceilings is the voluminous record-keeping and reporting requirements imposed on the meat industry. It is estimated that the industry cost of administering price control regulations within the individual meat packing companies during 1951 totaled close to $7,000,000.
MANY MEAT PRICES WELL BELOW CEILINGS-LIVESTOCK BYPRODUCT PRICES DOWN
Prime steer, 600 to 800 pounds.
Choiee, hide off, 100 to 150 pounds.
Good, hide off, 150 pounds down.. Processing beef:
Boneless bull meat.
Boneless cutter and canner cow meat..
Loins, under 12 pounds.
Spareribs, 3 pounds down..
Lard, P. S., loose
52. 30 48. 38 29. 25 25.88 39. 25 10.00 38. 50
52. 30 49. 50 35.00 35.0) 44.00 15. 20 40. 50
47.00 49. 25 35. 63 31. 50 42. 25 14.00 36. 75
1 Suspended Apr. 28, 1952.
PREDICTIONS OF RUN-AWAY INFLATION HAVE NOT MATERIALIZED One of the strongest arguments for direct price controls during late 1950 and early 1951 was the fear that this country was entering a period of intense inflationary pressures which might drive prices to fantastic levels. The outbreak of the Korean war, plus the scare buying which developed in this period, did result in an advancing price level which, if it had continued, would have proved serious to everyone.
However, as we now have seen, the predictions of run-away inflation have not materialized. As the accompanying chart shows, the price level actually has declined substantially since the peak of last spring. The wholesale price index as of late February stood at 175 percent of the 1926 base. This was 9 points (about 5 percent) below the peak of 184 which was reached in February of last year. Much of this decline occurred at the very time when Government officials were loudly proclaiming the outlook for further large advances in prices. These predictions were aimed particularly at Congress which was being requested to provide "stronger" and more far-reaching regulations upon the economy.
While we have no elaborate analyses to explain the downward course in the price level during the past 10 months, it seems obvious that price regulations themselves have had practically nothing to do with this improvement in the inflation problem. Experts seem to credit the action of the Federal Reserve