Let Them Eat Fish

In the supermarkets of Chicago, Carl Sandburg's "hog butcher for the world," pork chops that sold in September for 98$ per Ib. recently brought $1.19. "I'm no longer just buying meat--I'm investing in it," grumbled one typically exasperated shopper. Throughout the nation last week, food prices were a major concern. AFL-CIO Boss George Meany complained that in his favorite Mrs. Adler's matzoh-ball soup, the number of malzoh balls per can had sunk from four to three, in effect raising the price. Humorist Art Buchwald fantasized that President Nixon will lake to the TV screens and ask, as an ultimate post-Lenten sacrifice, for his fellow Americans simply to stop eating. In an ad for a Washington supermarket chain, Esther Peterson, who had been Lyndon Johnson's consumer affairs adviser, appealed to consumers to buy fish, fowl, eggs and other substitutes for costly meat.

FOR millions of American consumers, the debate over Richard Nixon's anti-inflation program will be settled at the supermarket check-out counter. Regardless of what economists and politicians can show on their cost-of-living charts, the inflation index that means most to the consumer is the cost of food. President Nixon, deeply embarrassed by a spurt in the most basic price of all during a period of wage-price controls, mobilized his Phase II machine to fight the battle of the porkchop bill.

Treasury Secretary John Connally hastily summoned top executives of a dozen food-market chains last week; they agreed to provide him with special weekly reports on meat prices, which have soared 14% in the past year. C. Jackson Grayson, chairman of the Price Commission, scheduled hearings on all food prices for next week. A growing number of economists, including at least two members of TIME'S Board of Economists--Otto Eckstein and Robert Nathan--favor placing farm prices under direct federal control. They warn that if food prices during March show anything like the February increase of 23% on an annual basis, the entire structure of Phase II may totter.

Election Trap. The furor over the cost of food has caught the President in an election-year trap very largely of his own making. He can hardly ignore the protests of consumers. On the other hand, Nixon has pledged to give the nation's largely Republican farmers a break that they felt he denied them early in his Administration. Indeed, Agriculture Secretary Earl Butz. who was hired last fall to quiet a near-revolt by farmers over low prices, has gloated over their recent levels. Farmers have benefited substantially in recent months from deliberate Government policies. Butz has budgeted a record $4 billion for 1972 agriculture programs, including $1.9 billion for feed-grain subsidies. Such payments not only jack up the price of, say, feed corn, but also of meat. Reason: when feed grains are expensive, farmers raise less livestock.

Seeking a scapegoat for high food prices, Nixon has pointed his finger at various unnamed "middlemen." The farmer, he declared, gets only about a third of the U.S. food dollar, while others--presumably packers, truckers, wholesalers, distributors and super-marketeers--swallow the rest. Nixon was being a bit casual with his statistics. In fact, the farmer gets 400 of the food dollar (see chart, page 22). He does even better on relatively unprocessed foods like meat, raw vegetables and fruit. Ranchers pocket about two-thirds of the retail price for beef, which accounted for the biggest chunk of the February price surge.

Chasing Animals. The so-called middlemen undoubtedly have pocketed their share too, and there are a lot of middlemen. In the case of beef, animals are sold by the rancher to a feedlot operator, who fattens stock for several months before selling it to a slaughterhouse. The carcasses are then sold to companies called breakers, which divide the meat into standard cuts and market it to stores.

For all that, not many of the middlemen are getting rich. Big packing companies, which traditionally operate on thin profit margins of 21 to 3% on sales, are hurt by the low supply of cattle. Says Sherwood O. Berg, dean of the University of Minnesota's Agriculture Institute: "Right now meat packers are operating under capacity. They are chasing animals to keep their manned production lines going." Nor are supermarkets in very good shape. At Chicago's Jewel Food Stores, the profit margin has slipped slightly since Phase II began. The huge A. & P. chain lost money last year. New consumer-protection laws have also boosted the super-marketeers' costs; they often have to put meat in relatively expensive plastic see-through trays and must absorb the administrative expenses of posting "unit prices" (prices per Ib.) of all goods.

In short, Nixon's search for profiteering middlemen may well prove difficult and discouraging. Price Commissioner Grayson noted that when the public gets mad about food prices, the Government traditionally blames the "middleman." After meeting with the supermarket executives, Connally added disingenuously: "I didn't use the word middleman. I don't know where it came from."

Who Gets Steak? John Connally's jawboning of food-chain executives brought some small relief. The day after the meeting, Grand Union Co. began a 30-day freeze on all fresh-meat and poultry prices. Officials of Safeway Stores and Acme Markets started to trim some meat prices. In the normal meat-producing cycle, prices should decline slightly in the next few months because farmers have been boosting production to take advantage of high prices. The price of choice beef cattle has already dropped, from a 20-year high of $36.76 per hundredweight in mid-February to $34.62 last week. Agriculture experts foresee some decline in retail beef prices--perhaps down to the level during the freeze--but warn that pork will remain in short supply and therefore expensive.

If market forces do not cause a sharper decline in food prices, especially for sensitive meat items, the President will be forced to consider drastic action. He could place raw agricultural products under the same Phase II rules that apply to manufactured goods, thus trying to override seasonal and other variations that cause price shifts. The disadvantage of any controls is that they could lead to shortages, which in turn might breed black markets or create the need for food rationing. If that happens, points out Economist Beryl Sprinkel,

Nixon would find himself in the uncomfortable position of "deciding who gets the hamburger and who gets the steak."

Probably the simplest price-paring measure the President could take over the short run would be to raise food imports. The Administration last month increased import quotas on beef by 7% --which, as Butz carefully announced, was not nearly enough to worry domestic producers.

Economist Walter Heller, a former chairman of the Council of Economic Advisers and a member of TIME'S board, recalls suggesting higher import levels to Lyndon Johnson during a visit to the LBJ Ranch. The President, who was entertaining some fellow ranchers at the time, replied with amusement: "Think what you'd do to my friends here in Texas." That, says Heller, finished the matter. Nixon and Connally also have their friends to think about in an election year, and no one believes that more imported beef alone will solve the problem. But if food prices continue to be a gut issue in the campaign, the politicians are going to have to think about the people in the supermarket as well as those back at the ranch.

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