10/23/2007

Burgers Beware

This article here states that Cargill is recalling 850,000 pounds of hamburger that may have E. coli contamination. The news of this bacteria possibly being in the market may disrupt hamburger and other meat sales in the short-run. One company, Topps Meat, has completely shut down due to the costs associated with taking back 22 million pounds of ground beef.

The market scare will reduce the demand (shifting it back) and the suppliers will suffer. Strangely enough, the price may actually increase since the supply of uncontaminated meat will be more scarce and hamburger is an inferior good. A main factor that may deter the possible price increase will be the availability of substitutes, but their price may increase because of the sudden increase in demand.

5 comments:

Timothy said...

I wonder if the contaminated supply of meat was significant enough to really move the price of beef higher. It seems to me that it would have to be a significant portion of the hamburger market to really increse the price. Plus, who doesn't like a good Ball Park Frank instead?

Dr. Tufte said...

-1 on Timothy for a spelling error.

I'm not sure about the short-term effects on prices, but my guess is that the long-term one will be upward: we're really talking about increasing the marginal cost to get an adequate product to market.

William said...

Dr. Tufte,
I agree with you and feel that I did not really feel the effects of this shortage. Maybe in the long-term if meat continues to have problems it could affect it and cause a higher price. But, for now it seems that there hasn't been much change.

Trinity said...

Dr. Tufte's "wait and see" approach is usually wise and conservative. I also think this problem could be combatted with some informational advertising and an increased emphasis on thoroughly cooking the burgers, which kills the bacteria outright.

Dr. Tufte said...

I wonder in the big scheme of things if what we really need is better public education. When you look at how some people prepare food it's a wonder we're not all dead.