Here we go again; now that President Joe Biden signed his presidential order to restore competition in various markets, I can feel it all coming back. About every 10 years we must do it all over again. We fight the same issues time after time with packers—50 years ago, grocery stores were the bad guys.
Agriculture has a long list of issues the government wants to get involved in, from labeling to concentration, to the Beef Checkoff and fixing the Packers and Stockyards Act. The list goes on. But the cattle advocate groups all have a different outcome in mind.
For instance, regarding product labeling, NCBA asked USDA for the “Product of the USA” label to be changed to “Processed in the USA.” Other groups interpret the government latching on to labeling to mean a return to mandatory country of origin labeling. I’m all for it if it can be implemented easily and not place a burden on any segment of the beef supply chain. But I think NCBA had a different idea on label clarification that doesn’t include born, raised and processed.
The presidential order says we must amend the Packers and Stockyards Act or enforce Section 202 on discriminatory or deceptive practices, or undue preference. Also, make a new poultry grower tournament system rule and withdraw the current one. And add a rule to clarify that parties do not need to demonstrate harm to competition in order to bring action. We already went through this.
Then we need to fight consolidation—we’ve already done this before too. Yes, we have four packers processing 85 percent of the fed cattle. But our industry has fought consolidation by making feeding companies larger. I contend that 20 percent of feeders finish 80 percent of the fed cattle. Small farmer feeders have a much more difficult time selling fed cattle unless they have built constructive relationships with several packers.
This isn’t just for the cattle business, but the administration wants to fix the farm equipment manufacturers to share proprietary data systems. They want to open the seed market, which also has four big companies. And don’t forget farm chemicals.
Then there are other industries they are going after, like big pharma. Biden proposes buying drugs from Canada because they are cheaper; they are also subsidized. Also, reducing regulation on tradesmen who are required to have certificates or permits, like the lady who cuts your hair. Or the tractor dealers who do not share their proprietary software to third-party dealers or “do it yourselfers.” It looks like no industry will be forgotten when it comes to competition.
Basic economics still work; the supply and demand market theory is alive and well. Size and scale in the packing business have made converting cattle into beef affordable. If wholesalers don’t like the price of brisket one week, they have the choice of buying something else.
Just recently my wife and I went to a barbeque joint and they had everything on the menu available except for brisket, and they were claiming it was a supply problem. One barbeque operator told me that a month earlier he was buying brisket for $2.75 or so, then this past week it was over $5, but he still must buy it to keep his doors open. Supply and demand, sometimes we like it sometimes we don’t, but markets are always changing.
I have no idea how all this new government attention is going to work out. One thing I’m pretty sure of is it’s going to take a long time to change anything. They go through the rulemaking process, then it inevitably goes to court, then it’s been two or three years since we thought it was a problem and the market has changed.
My rule of thumb about the federal government is the less they know about me or my business the better off I am—a simple life rule. And I think most in the cattle business would feel the same way.
As far as cattle markets are concerned, last week’s Western Video Sale in Reno was a fantastic sale. Calves and yearlings are much higher than last year and program cattle were selling for more. Sometimes it’s perplexing to see packers buy yearlings for $160 and higher when corn is as high as it is. Yes, they are betting on a better market in the fourth quarter of 2021. But they also know there are more than a million fewer feeder cattle on the market. Cattle feeders will have some leverage soon. So, keep praying for rain. — PETE CROW