Price is a function of two things, supply and demand. Right? Everybody's been saying, these high prices are because supplies are record low. Guess what? They're not. Cattle supplies have been drifting lower. The cow herd peaked cyclically in two thousand nineteen. It's bottomed in here in this twenty four, twenty five, twenty six period where, statistically, those numbers really aren't any different. The when you look at the errors the government publishes in their cattle inventory reports, it's drifted a little lower, but it's within the statistical error error of those all three being the same inventory essentially. But what really moves prices, and you alluded to this to some extent, is per capita beef supplies. And that's a fancy number that there's a few things that go into it. One, it's domestic production, slaughter times pounds, carcass weight equals production minus exports. We can't consume in the US what we don't have, plus imports, which usually those two are offsetting. They haven't been recently. Imports have been exceeding exports. And then we divide it by the number of mouths to feed in the United States. What nobody's talking about is that per capita supply number, while we can talk about the mix shifting a little bit, and you rightly identified that, per capita supply has been almost flat since two thousand nineteen, between fifty eight and fifty nine pounds a person. And so if supply is flat and prices are record high, you hit the nail on the head, Wayne. It's demand that's driving the record high prices today. Demand is the highest it's been this past year, twenty twenty five, since nineteen eighty three, but numero uno is we improve marbling. Today, you buy beef. As a consumer at the retail store, it's the highest quality beef on average you've ever had in your lifetime. We produce it's, like, six it's over six pounds of prime and choice beef in the US for every one pound to select. Back up to two thousand and five, it was one and a half pounds of Prime for one pound of Select. And one of the problems that we all have when we talk about price is we wanna talk about it in isolation. And I wanna shake people when they do that. Because here's the problem. You and I, none of us, darn well, better be making the same amount of money today as we did ten years ago. Right? It's not a good trend. Beef prices have actually when you convert retail beef prices, not just brisket prices, but retail beef prices to a minutes worked per pound of beef, it's creeping up towards the highs when you look at those metrics. The highs we would have seen both during the pandemic and back in twenty fourteen and fifteen, but it's not outrageous. And the other part of it is and this is where your guys' struggle really becomes, how should I put this, a challenge. Retail's whooping restaurants butts right now in terms of value delivery. Mhmm. And so if you're Jill or Jane consumer, and I'm gonna use a steak as an example, you wanna buy a nice upper two thirds choice prime strip steak at a white table cloth restaurant, your starting point is probably seventy five bucks for the steak. You're probably still buying the sides at a really good restaurant. You're certainly still buying the drink, and then you have a twenty percent tip if the the staff does their job well. Right? Maybe more if you're a generous tipper. That same steak cost you twenty five bucks at the grocery store and a little bit of time. Then you go buy ten dollars a side. You have you a nice lowball, with with some bourbon over an ice cube in it.

Oh, yeah.

You're probably talking a thirty five dollar meal at home. Thirty five dollars versus what's easily a hundred hundred and twenty five dollar total bill per meal at restaurant, relative value. Retail is kicking restaurant's butt at the steak level. And so what I tell folks in your guys' shoes, quit worrying about price because we're not selling lead today. We're selling gold when we put it on a plate, and it's justifiable. And the consumer's saying, yeah. Dang it. Beef is more expensive than that pork butt, which I love a good pork butt done well. I love smoked chicken wings. We do them here at my home. The most underrated protein to cook on the smoker is boneless skinless thighs. But beef is king. And it's expensive, but the consumer says it's worth it. This isn't a supply issue yet. You guys are hitting on and eluding on the supply issues yet to come. Right now, it's just record demand.

So whereas Wayne asks really super smart questions, I'm gonna ask the really dumb question here.

No dumb questions, Nick.

But How do you measure demand?

We can count cows. Mhmm. We can count slaughter. We can count beef production. Slaughter times carcass weight. We can even get whittled down to that per capita supply metric I talked to you about. Demand is different because it's not per capita consumption. Per capita consumption is actually a supply metric. Demand is not just price because all else equal, if supply just drops, price should go up. Right? A tighter supply should motivate a price increase. And so what demand actually is is it's asking two questions at the same time. It's saying, how much product do I want? And based on that, how much am I willing to pay for it? And so to evaluate demand, what I'm telling you, demand bottomed in nineteen ninety eight. It's grown to the highest level we've seen now since nineteen eighty three. And what we're gonna do is based on how supply changed from that reference year to the next, how should price have moved based on that supply change? And what they'll do is they'll use what we call an elasticity. And if any of you stayed awake in your macroeconomics one zero one classes, an elasticity is actually a a scientifically measured price response for how prices change based on a change in supply. If price the price response disappointed relative to that research that we have, published journal research on elasticities for beef, then it's a demand break, a demand decline. What I'm telling you is for the last twenty plus years, almost thirty years now, demand has improved. The price response has exceeded what we would normally expect based on past consumer research on beef. And I think part of that is beef's the only protein in the meat case with maybe the exception of seafood that has an inherent flavor profile. Right? Chicken tastes like what you put on it. Pork, even to some extent, largely tastes like what you put on it. Beef, you couldn't you could put beef on the smoker, not put a dang thing on it, and it's still gonna taste like beef. Right? I mean, of course, we wanna put seasonings. We wanna do some fun rubs, things like that. But at the end of the day, you could put beef on there naked, and a good cut of beef is still gonna perform after it comes off the smoker. You can't you certainly can't say that about chicken in most cases. Some pork cuts, you can get away with that. And I think that that matters. I think the other part of this that's important for us to realize that's working against your guys' clientele, and and colleagues, I should say, is we've seen a surge in retail demand for briskets. The pandemic taught everyone how to cook. And if it didn't at least teach them how to cook, they geared up. They now have a pellet smoker, a wood burning stick smoker, a black, a Blackstone, a sous vide machine, an air fryer, an instant pot. And the pandemic taught them how to use it. We can debate how well it taught some consumers how to use it.

Well, I mean, I can correlate that to to our menu. We're we're doing everything we can to provide options that are not brisket. Right? Like, we serve breakfast. We have items on our breakfast menu that start without brisket. And then below that, we have the extra price with the brisket on, which makes it much more and that's still what we sell the most of. That's the items that have brisket, they want it. But in inherently, as Pitmaster, we're still terrified of hitting a price ceiling. There's a point where we feel like this the demand for this, you know, stops working. But, I mean, are we are we just in a place where quality is gonna trump the price for good that they're just gonna keep wanting it? I mean, I just

Yeah. Great question. For now, we're okay. And what's fascinating is, I mentioned that beef elasticity.

Yeah.

There was a lot of work done with elasticities across different types of beef, cuts of beef, at the retail level, at the wholesale level, which is where you're shopping to buy your product, even at the ranch level with different types of cattle. So what happened in that twenty seventeen study is it started showing that beef, pork, beef relative to pork and poultry were no longer good substitutes. Pork and poultry were still good substitutes with each other. In other words, if pork got way too expensive relative to chicken, they'd flock to chicken or vice versa. But beef, that cross price elasticity relationship was breaking down to the point that beef was kinda standing out on its own. That would kinda get at what you were alluding to, Nick, in a real world sense being supported by the academic research. The other thing that was fascinating, which brings me to the point of, do we need to be worried about pricing ourselves out of this market, is it showed that as long as consumer incomes stayed steady or increased, they didn't care about the price of beef. When things got tough from a consumer income perspective, that's when you had to start worrying about beef prices. And so that means two things. We need to be much more sensitive to our beef pricing in periods where we hit a recession or an economic slowdown, and we need to be much more sensitive to beef pricing when we know the consumer has a lot of demands on their income. And so to your point, some of those things kind of exist today. I Definitely. But is it a perfect red herring? Probably not. There's still a segment of the population that's doing well. And so I think it's it's warranted to be sensitive to some of those challenges that the consumer's facing. But if the if we start seeing signs that the economy is really rolling again and that some of those concerns aren't necessarily what we thought they were, then we we can continue to charge ahead. But I think the biggest thing that I see, even considering that research is, if you're gonna have beef on your menu, it darn sure better be good. Like I said Right. Beef's too expensive to settle for select or settle for, you know, some imported product that doesn't deliver on quality attributes. Every study that you look at when you ask beef consumers, why they buy beef, taste and value are always at the top of the list. And everything else is secondary or even third string down the list in terms of what they care about most. Even with all this drive for sustainability and all natural and organic, those attributes tend to work their way down to the bottom of the list. They're they're distant compared to taste and value. And I think that that's where barbecue wins. It's why it's such a popular destination for consumers even today.

Well, I I think we can definitely see in a a real world perspective how what demand looks like, what at least in in the socioeconomic brackets that we that we draw, we can gauge based on just traffic and demand. I mean, if we're cooking enough food, if we're cooking enough briskets such that we don't sell out every day, then we can get a true measure of how how many pounds we will sell per day per cap. Yeah. And and year over year, we can we can trend that as well based on what that traffic looked like last year, what those demands were. And so by following this curve, we we operate in cycles. Annual there's annual seasonal cycles that we deal with. And so we and and so we can project those. What is tough and what you were talking about is that disposable income level by which those who can afford, where where is the break point for them? Because as as the disposable level is lies flat, people's income has been flat now since it it spiked. You know, shortly after COVID, we saw an increase just to try to get people to go back to work. Right? I mean, we saw it in our industry. Our our hourly rate jumped up almost double. So, but it's not keeping pace with the inflationary cost of these items.

Correct.

It's flattened out, and so we're losing purchasing power over time.

Yes and no. I mean, you gotta remember, pricing is relative. You know, I mentioned it earlier in two different ways. Right? I mentioned, let's not talk about just beef price. Let's line it up with incomes and talk about how many minutes does the consumer have to work to pay for a pound of choice beef. And I told you, those are pretty comparable today versus what they were at some other highs, but not beyond that.

Right. But I was really looking at it from what we're offering at a per at a per pound price versus what our consumer, our guest is willing and able to pay on a recurring basis. So I what I'm seeing is people I live in a poor a poor area of our of our county, and, you know, this makes us you know, pricing then becomes a bigger issue. Right? Yeah. They still wanna come. They still eat beef, but they're are they coming once or twice a week? Yeah. They're coming once or twice a month. So this is how I I know that we're at that threshold where I also know that pea people in my area, their incomes have been fixed. And we've we've had to increase pricing over the last eighteen months, especially this last twelve months. Yeah. Nobody likes that, and we hear that. And so we get direct feedback from people either through reviews or direct one on one conversation saying pricing is too high. Yeah. It's just too high. So I I I think that it's relative. The the price and elasticity of an individual is relative to not only their income level, but the the community in which they live. That's fair. So if you're in if you're in a, say, if you're in a suburb or you're in some more high level, high income areas of of a a city, a larger city, being located at, in, or near those those those pockets is beneficial because you're you're locating people both with the disposable income and the time to come see you. And the I think that, you know, I was when I talked about, you know, what's driving demand earlier, especially for our our product line. And you talked about, well, marbling. It's the fat. It's the fat, stupid. Well, yeah. It's the fat, stupid.

That should be it. Sure. Right? Should offer the merch.

And and so if you're how this is affecting people in small towns, small town barbecue restaurants versus people in larger urban areas, there's I think I'm beginning to see a a fleshing out difference in what demand looks like and how how it's not it's very elastic. You know? They're bouncing all over the place. They're not they're not willing, I don't think, that that line, the point of differentiation of we'll go once a week versus we'll go twice a month is it's a sliding scale based on on that disposable income tree, and that's less dependent on, you know, your hours or minutes work per per pound of brisket sold or your whichever variable you were using. Only only because when you're they're flat. They're just flat in the poor areas. In the in the high income levels, their income is rising at almost an increasing rate. It becomes less of an issue. Yeah. I think that there has to be there almost has to be different pricing strategies with within the the industry itself depending on where their where their regionally or or where their community is located.

But at the end of the day, Wayne, it comes back to the cost of production. Right? We can we vary price based on demographics? The the I'm not that that becomes a political argument. Right? I mean, at the end of the day Oh,

I wouldn't want to.

I wouldn't want to. Would pay. Right?

Right. But if you but if you're if you're if you're resident total, the nominal number of people continues to shrink at a certain at a price level, then you price yourself out. If you have to go into that price zone and there's only seven people in your entire county that can afford it, then you're just not gonna make it. Yeah.

It means being as a restaurant operator, being responsive to your demographic. Right? And for some demographics, what it might mean is what I would strongly say based on my experience and I've I've had the opportunity to work with, major restaurant companies all the way down to cow calf producers and everyone in between from distributors to steak cutters to processors to feed yards. What I advise folks at the end user segments is be very cognizant of making up the mind for your customer. And try not to do that as best you can, but you still have to adjust where appropriate, which I think is what your point is, Wayne. Maybe you're not taking brisket off the menu, but instead, you're gonna only offer it during your peak season or the peak days within your week. It's gonna be a Friday, Saturday, Sunday item, but we're not gonna run it on these other days. Or, you know, it's gonna be a a by request type deal, something along those lines. Or you're just gonna run lower volumes in those items, and when you run out, you run out. But, you know, I think one of the biggest things that I I I joke with folks is it's quick to tell what national casual dining chains are are the ones that are getting ready to go on life support. Because what you see is they go from a choice, Usually, it's a choice sirloin, strip loin at best, to select. So all of a sudden, they don't even put the grade on the menu anymore. And then all of a sudden, they go from let's say, it's five SKUs that have a beef cut in them. I'm gonna put ground beef in a separate category to three to two to one, and then guess what? Bankruptcy.

And But they are doing that on a national level.

National level. Those are national change in my experience.

Yeah. For sure. I'm I'm looking more at regionally at at largest than community by community.

You have to know your customer. At the end of the day, whether it's restaurant business or a rancher, you gotta know your target audience and produce to it with reckless abandon.

As best you can. Yep. Yep. And, you know, we can try to educate as much as we want. People will listen or they won't. Yep. So you're right. I mean, they look at a price. They have a price in mind. And if it doesn't meet their expectation, then, you know, everything better be perfect, or there's gonna be backlash. Absolutely.

And I think that's why marbling has been such a beneficiary to demand. When I worked for Certified Angus Beef, we often talked about marbling's like its own little insurance policy. And what I mean by that is, you're not the world's greatest cook. Marbling provides some fudge factor for you. You know, just the other night, you know, I I, you guys are gonna cringe, but I have a I have a pellet smoker because I don't have time to babysit a stick burner, and it it offers a lot of flexibility. And I had some, really nice inch and a half thick pork chops on the grill, and time got away from me. I usually have it down to a science. It's twenty minutes flipped, twenty minutes, and they're off, just grilling them on the pellet smoker. And time got away from me, and they got a little bit overdone. Instead of being one thirty five, they were about one fifty off the grill, and I was cringing. But you know what? That extra thickness provide me an insurance policy. Marbling does that for beef, and it it helps ensure that the muscle density is not as much as it is because you have that fat in there. The juiciness provides some lubrication factor and all of that, and I think that's huge, especially when we're serving up a product at retail and we're up to the consumer to do it, but even some benefits at food service. You know, one of my big concerns is a beef industry right now. To make up for some of the decline in cattle numbers, we've increased carcass weights, and we've done so in, dramatic fashion. Typically Yeah. With where cattle sizes are today, a long run uptrend in carcass weight means we'd add four to five pounds a year. Last year, we added twenty five pounds to carcass weights. The year before, it was very similar to that. The side effect of that is there's two different ways Steak houses go nuts. Yeah. There's two different ways to view beef production. One is tonnage. And tonnage is fine if you're buying chucks, you're buying round cuts, you're buying even sirloin because we're gonna fab those around, and we're gonna make the cuts we need work based on that tonnage. But when you talk about briskets, skirts, flanks, strip loins, tenderloins, and ribeyes, those six key items, they're piece count driven as much as they are pounds driven. Right? And Yep. There's only so many ways you can fab a strip loin. There's only so many ways you can fab a rib eye. In fact, I heard of some white table cloth restaurants doing what sounds like a cardinal sin to me. Some of my bankers took some clients out to eat, got rib eyes, and they landed on the plate, and the splinalis was trimmed off of the cap. And I'm like, man, I'd I'd have punched somebody if it was me, probably. Like, don't you take the splinalis. But they they were doing that because they were trying to hit, a specific ounce and keep the thickness of that cut intact. Because we all know the thicker the cut, the more forgiving it is. You have some limitations to that that you're gonna start bumping up against specifically on those middle meat items where you can't just, make them work on a plate or even make them work in a retail tray, very well to hit a a volume that you need without making them as thin as fajita steak, and that that concerns me. Yeah. It also concerns me from an animal welfare standpoint. You know, as we look at what we're doing as an industry

Do you guys mind if I jump in and and go a completely different direction here real quick?

I'm okay with it if Wayne is.

Yeah.

Bring

it. If you have anything to follow-up, Wayne, I just was something struck me, and you know me. I just jump in. Both of the last guests, Bill and Sid, both were hammering on mandatory country of origin labeling, saying that this was absolutely something that has to be done to to change things. I mean, I think it's a great idea anyway just so people understand what they're what they're getting. I think everyone is more comfortable knowing, you know, that they're getting a a premium product, especially it's from the United States. But in your view, if it passes, does it actually lower brisket price, or is this just mainly reallocating margins for everybody?

Couple things. I'm not I'm not a a champion of mandating anything. Typically, when we mandate things, that comes with unintended consequences. I don't like I don't like legislating change with a stick. I'm, again, I'm a disciple of of certified Angus beef. I worked there for eight years. I raise really high quality Angus cattle on our operation. CAB did not come about in this marketplace, because somebody legislated it. Instead of being a stick, it was the carrot. And they built that brand because they felt like the Angus breed had quality attributes about its genetic base, its inherent marbling and flavor profile, that if they could identify those premium genetics that through high quality beef in the marketplace, they would create demand structure that would allow everything else to grow after that. I want to see a system that's based on demand. And instead of a mandatory system, starting on January one of this year, twenty twenty six, the government created a voluntary labeling system.

Voluntary.

And not only that, but president Trump said, I'm gonna authorize the USDA to have a hundred and fifty million dollar advertising campaign to promote made in the USA agricultural products. We tried mandatory country of origin labeling about twenty years ago, and the industry tried really hard to make it work. It was brutally expensive because it's incredibly difficult to track beef through the system. I mentioned earlier, sixty six percent of our domestic consumption is US born, raised, and processed steer and heifer beef, grain fed young cattle. About sixteen percent is US cull cow and bull beef.

Those are not the ones that are ever gonna end up inside a a box of brisket that we get anyway. The Whether it's

Canadian and Mexico and the cattle could. If those cattle came in, Canadian beef, most folks wouldn't be able to tell the difference between Canadian fed sourced beef and American fed sourced beef. Mexico, you know, we imported about a million head of cattle from Mexico a year, up until just recently due to New World screwworms, I'm sure Sid talked about. Most of that product's select grade. Not all of it, but a good chunk of it is. And so it could end up at a restaurant. The other imported product, primarily Australia, Brazil, New Zealand, Argentina, Uruguay, yeah, that's not ending up in most restaurants in whole muscle cut form. In rare instances, it might. If you're wanting a grass fed product, quite frankly, those countries can do grass fed and finish cheaper than we can in the US. And so it may be if you're purchasing for a grass fed program. But in all those cases, you're probably gonna know it because it'll be it'll be marketed as such. And so

Everything that I've seen is is that way. It'll say, you know, New Zealand grass fed beef or or whatever.

The problem becomes with that mandatory program that existed. There were a couple problems with it. So much time has passed since I was initially part of the supply chain that I may be missing some details. But the biggest problem with it was mandatory labeling was required of retail, but not food service and not further processing. That was immediately a flaw in that program because it picked winners and losers. It added a massive cost burden to everybody supplying into grocery stores. But if you were a food service distributor or selling to a food service distributor, immediately, you got a free pass. If you're a restaurant, you don't have to put anything on your menu. I don't like that. I don't like a let I don't like bad legislation that picks winners and losers based on cost.

So why do you think that it's so important to them as as a way in which to replenish the herd and to fix this?

Alright.

How was And and why did they say it is essential to to help the small rancher survive?

Yeah. We're all sitting down. Listeners, be sitting down. Import of beef in the long run. Actually, make USDA Prime Choice and select beef more expensive, not less. Most cow calf producers are selling calves that go into Prime Choice or select. Those calf prices also go up with imports. Now all of you should be asking why. How could that be? Well, guess what? Of those steers and heifers that we slaughter in the United States, is anybody Nick, Wayne, you wanna venture to guess how much of that carcass is what we call fifty percent lean beef trimmings, fifty percent lean, fifty percent fat? Any venture to guess what percent of that carcass is fifty percent lean beef trimmings?

No. Ten percent?