The midterm results will spark a whole list of issues for businesses—and agriculture.
One of the first questions is whether congressional Republicans will take advantage of the remaining weeks of their majority in the lame duck session. Tax cuts like indexing capital gains and other cuts, plus the SAVE Act/election security, for example. Accomplishing little during the second year of their majority under President Donald Trump was frustrating for some and left little to show.
Then will come the government funding continuing resolution expiring Dec. 11. There could be a government shutdown right off the bat, derailing the lame duck and jumpstarting Democrat ambitions.
In 2027, the overall atmosphere in Washington will be different. The chairmen of all committees in both houses will change, as will the agendas. The Democrats do not favor improving business conditions. They have already been circulating a 181-page plan on how to attack and harass a long list of corporations and CEOs with subpoenas and hearings. So much for economic growth and “affordability.”
It is more difficult than usual to project American immediate political future as we’ve never had this quantity of boldly radical socialist/Communist incoming legislators joining other left-leaning legislators at once. The establishment Democrat party will likely provide quite a drama on how its moderates absorb the radical newcomers or whether the radicals will take over the party.
The Republicans will have their own drama thrashing out differences between adherents of Trump’s policies and those who oppose them.
But the gap between Republican policies and Democrat policies have probably never been bigger. For agriculture, border policy could be an issue. Sources are saying the tight border policy could be threatened, as Democrats try to soften policy and deportation efforts. The cartels in Mexico are said by some to be already preparing to exploit such possibilities. The incoming governor in Texas campaigned against cooperating with ICE.
The Democrats’ opposition to big business could turn on the beef industry’s production chain and damage its ability to satisfy demand. It could boost the nascent anti-trust campaign on the major packers, in a bid—they think—to lower beef prices. As with many Democrat/socialist economic ideas, such moves would do the opposite, by harassing or breaking up the lowest cost producers, splintering national production, raising costs and complicating supply chains.
While there is a place for medium and smaller processors, in serving geographic locations far from the big packers and producing for small and niche markets, the big packers cannot do profitably in small quantities.
The economics of beef demand, as with all products and services, depend on producing a desirable product at prices target consumers can afford. Splintering the beef processing chain from a couple dozen big plants into many smaller plants and companies would put severe upward pressure on processing costs and in turn, on beef prices, thus lessening the size of the consumer market that could afford beef. It would leave cattlemen dependent on processors less able to pay top prices and survive difficult downturns.
As I’ve often said, we can’t repeal the laws of economics. Just because politicians might want to do so, doesn’t mean they can or that they realize they can’t. Even under a Republican administration, the federal government has been tinkering with the operation of free market capitalism, using taxpayer money to distort the meat processing industry. The government is funneling taxpayer money to provide competition to existing, taxpaying corporations.
The big packers produce a great product at the best, large-scale pricing available. There are some pros for cattlemen to having more small packers: additional bids, reaching into geography not near the big plants, supplying small packers serving customers that can afford to pay more and supplying niche markets some people want. Cons: using taxpayer money to support certain companies seems un-American, and possibly splitting the consumer market too many ways could hamper innovation and resiliency and raise the cost of beef to many average consumers. To be fair, the administration has done that already with some strategic industries, justifying it because of national security interests.
The big packers are stronger financially because they are—mostly—publicly traded companies with access to major capital. A couple of packers were ahead of Trump’s efforts to bring foreign capital into America, with JBS and the owners of National Beef coming in to bring capital, expertise and hire U.S. workers to serve the American market and consumers around the world. Only Cargill is still a privately owned company. — Steve Dittmer, WLJ columnist
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter. Views in the column do not necessarily represent the views or opinions of WLJ or its editorial staff.)
