Trouble on the Hoof

The Nixon Administration has suddenly been forced to consider making yet another fast economic about-face, this time in response to the rapidly rising price of meat. The Government had refused to impose strict price controls on raw agricultural products even during last year's freeze. Last week, though, the President's Cost of Living Council (COLC) got a warning that rising meat prices, especially of beef, could by themselves foil Nixon's desire to lower the inflation rate to 3% by year's end. The bearer of those bad tidings was C. Jackson Grayson, chairman of the Price Commission, who, in a memo, urged the Administration seriously to consider putting meat on the hoof under price regulation. His concern, though not his conclusion, was echoed by Herbert Stein, chairman of the President's Council of Economic Advisers. Says Stein: "The most immediate cloud over prices is named food, or more precisely meat."

The President himself still seemed reluctant to attempt regulation of any food prices at the farm level. During an informal session with newsmen, he reiterated previously expressed fears that such controls, including meat-price ceilings, would lead to black markets. As a guide to the current "direction of my thinking," Nixon suggested that "a temporary lifting of the quotas on imported meat" might increase the supply, and thus drive down prices. That plan would doubtless pose the fewest political problems for the Administration, but Nixon himself admitted that there is currently a world shortage of meat. A lowering of quotas thus might have little effect on domestic supplies. The President carefully left the door open for much more drastic action, like controls on wholesale meat prices.

Ironically, the latest crunch on meat prices came only a day after the consumer price index for May showed that at retail they had fallen .7% below April. However, since it was based on a survey taken in the first week of May, the report was obsolete before it was issued. Over the past several weeks, wholesale beef prices have literally broken through the graph used to record their ups and downs by the Agriculture Department, and these increases are now pushing through to retail meat counters.

Agriculture economists are somewhat baffled. They point out that on-the-hoof prices for pork, which is beginning the normal seasonal upswing in production, are easing just about on target. Yet prices for beef, which is also in a higher production period, are reacting entirely differently. The reason, apparently, is that cattlemen are convinced that demand--fueled by rising incomes, growing confidence in the economy and the food-stamp program, among other things--will increase further, driving prices above their already record levels. They are thus keeping unusually large numbers of steers in feed lots and on farms, waiting for a yet-un-reached market peak. Agriculture Secretary Earl Butz is encouraging this game by conducting a campaign against "cheap-food advocates" that borders on rabble-rousing.

New Outcries. The Price Commission can only recommend farm-price controls, but there are less drastic steps that it could take on its own, and members listed some in a private memo. For example, the commission could step up surveillance of supermarket profit margins, try harder to detect possible attempts to sell low-quality meat at premium prices, and insist that stores post more detailed price lists. As a last-ditch measure, the commission could clamp a temporary freeze on retail meat prices, hoping that store owners would then exert anti-inflationary pressure on their supply lines to the farmers.

But Grayson seems to doubt that any of these steps would be sufficient. In his memo to the COLC, he said that profit margins of processors and retailers whose prices are now regulated "appear to be lower than normal"--indicating that that is not the place to try exerting a squeeze. In short, the problem lies squarely with the uncontrolled raw-food prices. As retail prices continue to reflect wholesale increases, the nation's consumers are certain to begin raising new outcries for action--cries that the Administration may find it hard to ignore as Election Day nears.

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