Fixing cattle markets

Beef producers have always lived by the philosophy of enjoying the prices while they are high, because they will always find a way back down.  Most often it has been the market correcting itself after peaking at an unsustainable level, but recently the US government has indicated its intent to manipulate the market to drop beef prices.

October 16, President Trump commented that his administration was working to “bring beef prices down,” that “prices were higher than we want them...”  Just days later, he informally announced that they would be importing beef from Argentina, hoping the competing international beef at lower prices would incite a drop in beef market prices.

It didn’t take long for the markets to reflect the sentiments of the president's comments, the prices for a number of cattle weights dropping before the weekend was over.  Of course, it could have been a natural drop as prices usually begin to dip come fall but the timing can’t be coincidental.  These comments have landed poorly on cattle producers for a number of reasons and they hope that in the end, US beef will rise to the challenge.

The cattle markets have always fluctuated, reflecting the size of the national cattle herd, the effects of drought, input costs and the like.  Ranchers and cattlemen have navigated the waves with success, taking both the risks and rewards that come with the gamble of raising cattle.  

In some regards, the fluctuations are almost consistent, marked in ways that producers can anticipate and prepare for.  I can’t help but wonder if they can similarly handle a sudden, fabricated drop in prices.

 The high market prices have been a pleasant surprise for beef producers as they have watched it continue to trend upward to all new highs, a relief to combat the high interest rates and increasing input costs.  Finally selling their cattle at a profit, they have had a little comfort where their pocketbook is concerned.  

Interestingly enough, the price producers sell their calves at really has little to do with the final price at the grocery store.  Yes, everyone down the food chain has to make their buck so it would seem it all begins at the initial selling point but the reality is that the consumer is the driving force for the actual price at the supermarket.  The demand for high quality beef, a lean protein filled with essential nutrients coupled with a mouthwatering savory flavor, is as high as it has ever been because consumers recognize its value and are willing to pay for it.

Since President Trump's comments, producers and advocates alike are crying out that the market manipulation is unnecessary and putting US producers at a further disadvantage.  U.S. Cattlemen’s Association quickly issued a statement saying, “Increasing imports under current rules ultimately benefits foreign suppliers and multinational packers, while putting U.S. ranchers on the losing end and depriving American consumers of honest transparency at the meat counter.

“USCA supports affordable food prices for American families. But we do oppose policies or loopholes that manipulate the market to address a solution that will be solved through natural market behavior. This approach weakens our industry’s foundation and undermines rural America.”

Zippy Duvall, president of the American Farm Bureau Federation commented, “We know America’s families face challenges when food prices rise, but it’s important for President Trump to remember that farmers are facing an economic storm as well, and a vibrant U.S. cattle herd is at stake.  Weakened cattle prices are the last thing needed in farm country, where farmers are being paid historically low prices for crops across the board while expenses remain high.” 

“Lowering beef prices for consumers starts with restoring fairness in the marketplace, not by importing beef from Argentina and undercutting American ranchers,” stated National Farmer’s Union President Rob Larew. “Years of drought, depressed cattle prices, and unchecked corporate consolidation have already pushed many family farmers and ranchers to the brink, all while consumers pay more at the grocery store.

The scenario of importing beef raises a number of questions.  First- are there alternative reasons that President Trump is looking to supplement US beef with Argentinian products?  Is this a diplomatic trade tactic that hurts producers in an attempt to strengthen foreign ties?  

Second- will the ploy actually reduce consumer prices like the administration hopes or will it only serve to limit US producers take-home? It is possible that the imports may not meaningfully lower retail beef prices as the president expects because the US market is so large and imports from Argentina are comparably quite small. Experts calculate that a reasonable expectation of Argentinian exports to be 20,000 tons in contrast to the approximately 12 million tons domestically produced in the US, a drop in the bucket in comparison.

Questions of marketing, labelling, and transparency are swirling around as producers look for a way to stand apart from their international competitors where their products hit the shelves.  Will Country Of Origin Labeling (COOL) finally be instituted?  Will international beef be fairly marketed in comparison to US beef?

Finally, will this only impact cattle producers or will the lowering market affect the packers?  For years, ranchers have pointed out that prices at the grocery store don’t reflect what they earn. They argue that the supply chain—dominated by four major packers—captures most of the margin, not the cow-calf or feedlot sector. Importing beef doesn’t solve that imbalance, it perpetuates it.  In fact, the recent proposal could depress cattle prices by widening packers’ supply options while leaving producers squeezed.

President Trump’s informal announcement to bring in Argentine beef to lower retail prices was truly a devastating blow to producers.  While he might consider it a win to lower prices like they “brought down oil” is hardly showing support to those farmers and ranchers that feed this country.  Cattle producers have always taken pride in the work they do.  If the administration is forcing a fix, they should be sure to make it a fair fix, not a foreign one.