Addressing Meat Prices through Policy not Populism

By Julian Dierkes

A very curious spectacle recently to see meat warehouses raided by the General Intelligence Agency. I have seen little discussion of the legality of such raids which look a bit like the action taken against a mining company by a GIA SWAT team some months ago. Economic interest and populist pandering are not strong justification for action by security forces in countries where the rule of law governs.

But what about the meat market? What about price fluctuations and how can they be addressed?

Analyzing Meat Prices

Fortunately, Robert Ritz has provided a data-driven analysis of meat (beef and mutton) prices. One of the most obvious patterns that is visible across the different graphs he provides is the regularity of price fluctuations year-to-year. Basically, beef and mutton prices rise for the first half of every year to later take a dip again. As Ritz also argues, this is a cycle that most likely has its roots in herders strategies to maximize their herds. He writes

In the Fall before winter sets in herders will slaughter or sell those animals which are likely to die in the coming winter. Then in the Spring during breeding season herders often restrict the amount they sell so as not to limit their potential growth that year. In the Summer the productive animals are known and herders are more willing to sell or slaughter those animals that are not pregnant.

Underlying meat prices thus is a “natural” cycle that unfolds over the year and Ritz shows this quite convincingly in his analysis of past prices.

Ritz also provides indications that it is not exports nor losses due to dzud conditions that seem to be driving prices.

It is speculation about the impact of exports that is fuelling populist demands for price controls and actions like those taken by the GIA, purportedly directed at hoarding which I cannot imagine to be an illegal activity.

Building Infrastructure for a Meat Industry

Instead of simplistic and – given the annual cycle – ineffective populist measures, the government should pursue broader policies around the production of meat. This is an important area of policy-making because it has an outsized impact on countryside livelihoods and thus – directly and indirectly – on migration to Ulaanbaatar.

Meat production is mentioned regularly, of course, in the context of the diversification of the economy. Three aspects about the potential for meat exports stand out:

  • Plenty of potential supply in Mongolia
  • A nearby market in China with growing consumptions of meat
  • Branding opportunities around perception of Mongolia as remote, and thus isolated from pollution, etc.

The main obstacles seem to lie in the infrastructure for an industrialized meat business including distributed slaughter facilities, health inspections, shipping infrastructure.

If these infrastructure needs could be addressed, they might also lead to a flattening of the price cycle by increasing the overall volume of meat that is available for supplying Ulaanbaatar as well as for export.

Currently, it seems that most meat sold in Ulaanbaatar originates in nearby aimags. This has been an important aspect of migration to Ulaanbaatar and to surrounding Töv province in that herders have moved their animals closer to market centres, especially Ulaanbaatar but also aimag centres.

If meat production could thus be industrialized in the Western, Northern, and Eastern aimags, for example, that infrastructure would not only allow for exports to China (primarily), but also for shipment within Mongolia. While this might not address the seasonal calculus that herders make regarding their investment in animals, it might flatten the price fluctuations somewhat simply by making more of a supply available to Ulaanbaatar.

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