Cattle markets have been in a free fall the last few weeks; just when we think fed cattle inventory is matching weekly slaughter levels, something happens at the packer level and we have an instant backup. Two weeks ago, the slaughter level was only 624,000 head, and last week was around 580,000 head. We need to be processing 660,000 head a week, if not more, just to keep up with demand.
Meanwhile, beef prices at the retail level are 15 percent higher than a year ago, according to a White House report. But the cavalry is on the way: The Biden administration is preparing to throw more money at the beef industry. The administration realizes that packers are earning record profits because they can’t produce enough beef products.
They want to take action to crack down on illegal price fixing, enforce antitrust law and bring more transparency to the meat industry. They nabbed the chicken industry for price fixing, and now they are going to pursue the beef industry for price fixing.
I don’t know about you, but I think the beef industry is extremely transparent. The government reports market prices at every level of cattle and beef trade. There are more USDA market reports than you can shake a stick at. Transparency is not our problem—our problem is that beef packers can’t get enough reliable workers to operate their plants at peak levels. Tyson announced a 21 percent wage increase and many other benefits.
The White House wants to throw more money at the food system whether we need it or not. USDA plans on distributing $1.4 billion more in pandemic assistance to small producers, processors, distributors, farmers markets and small operations that haven’t received any COVID-19 aid. They will give another $700 million to Tribes and nonprofits, which can then distribute $600 in direct payments to workers. Then another $500 million to support new meat processors. More free money from my grandson’s tax bill when he is fully employed, which will be in 22 years.
Demand for nearly all commodities is great, and beef demand is still fantastic. However, we need to be careful not to price ourselves out of the meat protein market. But maybe not with all the money the government wants to keep throwing at the economy. Beef export demand is on fire: July beef exports were 45 percent higher than a year ago, according to the U.S. Meat Export Federation (USMEF). China has become a good customer, importing 1.3 billion metric tons in the first five months of 2021.
“Beef exports were really outstanding in July, especially with COVID-related challenges still impacting global foodservice as well as persistent obstacles in shipping and logistics,” said USMEF President and CEO Dan Halstrom. “Retail demand continues to be tremendous, as evidenced by the new beef value record. On the pork side, the U.S. industry remained focused on market diversity even when China’s import volumes were absolutely off the charts. That philosophy is paying strong dividends now, with exports maintaining a record pace even as muscle cut exports to China trend significantly lower.”
USDA just announced they will pay to transport hay to the folks who need winter feed to keep cow herds intact in the West. The administration is working to produce bipartisan legislation by Sens. Jon Tester (D-MT), Deb Fischer (R-NE), Chuck Grassley (R-IA) and Ron Wyden (D-OR) to improve price discovery in the cattle markets and facilitate actual negotiation of prices between producers and packers. Sens. John Thune (R-SD) and Tester have introduced mandatory country of origin labeling (MCOOL) legislation. Thune is up for reelection in 2022, so this will play well in South Dakota.
The Federal Trade Commission has proposed a new rule that will crack down on marketers who make false, unqualified claims that their products are made in the USA. Under the rule, marketers making unqualified “Product of USA” claims on labels should be able to prove that their products are “all or virtually all” made in the U.S. Looks like we could have MCOOL back.
I can’t wait to see what the Justice Department finds in their investigation into the meatpacking business. I’ve never seen the government respond to cattlemen’s accusations about foul play in the packing business, which has gone on for over 100 years.
Keep in mind the Biden administration has proven itself to be a bit reckless, so let’s hope we don’t get more than we asked for. I get nervous when the government snoops around our industry. Keep praying for rain and snow. — PETE CROW