Why America's Cattle Ranchers Keep Getting Squeezed

from Argentina. It is very much in the news. There's also the whole soybean drama with China.

we should be very disturbed. So setting aside, I'm very fortunate. I could probably afford to these as much beef as I want. But the price of ground beef, I'm looking it up on the terminal now it's like tripled since ten that there's like four dollars around the pandemic. Now it's of over six dollars. I think these are extremely serious issues.

Were the single largest segment of American agriculture. That cattle industy generates about one hundred billion dollars a year in cash receipts, so it's it's larger than any other commodity corn, wheat, cotton, dairy, and we rely on competitive market forces. But we have not had competitive market forces until very recently. And that's where we need to get into the history of why beef prices are high.

these things can move in different directions? What is the added factor in the price of beef that is not the price of cattle.

the industry, controlling thirty six percent of the industry. So if we think about how the beef industry works, it's the consumer beef dollar that has to be allocated along

the entire supply chain. So back in nineteen eighty, every time a consumer spent a dollar on beef, that dollar was allocated by competitive market forces, and over sixty cents of that dollar went back to the live cattle producer, the farmer and rancher and the cattle feeder, and less than forty cents went back to the processing part of the beef industry, and that's to the retailer and the packer.

So the producer was receiving the majority shared which made sense because they kept that animal for fifteen to eighteen months before it was slaughtered and converted to beef, and the beef packer only kept the animal for about seven days and the retailer kept it for the shortest amount of period possible. So but the point was is that when consumers were paying two dollars and forty cents per pound for beef, sixty cents of that dollar was going back to the producer and only less than forty cents

was going back to the processor and the retailer. Now jump ahead. Today, we've wiped out over half of all the beef cattle operations in business. Just over a generation ago, we've lost fifty two percent of them. We've wiped out twenty five percent of our Mother Kyle beef herd, and the four largest packers controlled today about eighty percent of

the marketplace. And consumers in twenty twenty four paid about eight dollars in twenty three cents per pound for beef, and now in twenty twenty one, just a couple of years ago, the allocation that the competitive market was making in the marketplace was completely tipped on its head. In twenty twenty one, the packer and the retailer received over sixty cents of every consumer beef dollar, and the producer received less than forty cents. So here's the question, how

would a competitive market could that have happened? How could a competitive forces in the marketplace completely reversed the competitive allocation of the consumer beef dollar within the entire beef supply chain. The answer to that question is it can't. If our market was competitive, that could never have happened. That raises the concerns that we've been struggling with for

the past several decades. Our industry is in a state of crisis and it has been and what has happened is is because of industry concentration and consolidation, the ability of the multinational meat packers and retailers to exert buying power upstream in the supply chain, and the fact that we've entered free trade agreements that have allowed the meat packers and retailers to access beef from around the world

and displace domestic production. Because the beef that we import from Argentina, Brazil, Uruguay, Nicaragua, Costa Rica, Australia, New Zealand, Canada and Mexico, it's a perfect substitute for domestic product. So the more we import, the less we have the ability and capacity to maintain domestic production of this very important protein source, which is beef. And so what we see today is a dysfunctional marketplace. As I described before, since twenty seventeen, we saw beef prices going up that

consumers were paying in the retail store. We saw cattle prices going down. SENSU shows that just in the five year period from twenty seventeen to twenty twenty two, we lost one hundred and six thousand beef cattle operations, farmers and ranchers exited the industry during that period. And the reason that that's happened is because they've suffered long term

lack of profitability. It's because their market is dysfunctional. It's because imports have displaced our domestic production and our opportunity to expand. And now we've hit a huge market shock, an economic shock to the market, and that was the latest drought that occurred in the latter part of twenty twenty.

And yet you've got incredible consumer demand for beef, and so we have seen a spike in prices because of that strong demand. Consumers continue to be willing to pay more for beef. But that is not how our market has been functioning for the past decade.

fifteen to eighteen months. And so in order for our industry to begin an expansion phase, we would need a price point that incentivizes producers to make the investment to build a herd, and unfortunately that price point occurred back around twenty twenty three. We should be in an aggressive expansion phase now, except that instead of domestic consumers relying on US producers, we've increased the volume of beef imports to record volumes in twenty twenty four. That's displacing our

domestic production. And that increase of imports is not distinguished in the marketplace. Consumers can't tell if the beef they're buying is four and beef for domestic beef, and so that puts the power and control in the hands of the packers and the importers the retailers and not in the hands of producers. So your question was how much

of this had to do with increase in input costs. Well, the increase in input costs reduces the margin that US cattle producers receive at any given price point, and we've seen increased production costs certainly. But the point is is that cattle producers do not set the price of beef. The price of beef is set by the packers and the retailers who sell to the consumer. The producer is a price taker in this market and has been for decades.

They have cattle, they offer them for sale, they accept or reject a bid by the packer, and they're producing a perishable product. So when an animal is ready for slaughter, ready to be fabricated into a beef product, the producer who fed that cattle has a two to three week

window in which to market the animal. Otherwise it degrades in quality, it adds fat instead of muscle, and as a result, the producer has very limited bargaining power and a highly concentrated market as we have now, And when they're selling into a market that's controlled where four packers control eighty percent of the market, they are victims of the abuse of market power that emanates inherently from such

a highly concentrated marketing structure. So the increase production costs reduce the profitability of producers, but it doesn't affect the producer's ability to market cattle. That would be the demand for life cattle, and the demand from my live cattle is offset and undercut by increased volumes of import.

the dairy industry. But here recently, as we've increased our technology and genetic abilities, we have begun to raise more male dairy animals and are bringing them into feed lots and feeding those animals, and they are now beginning to compete with the beef cattle farmer and rancher in the marketplace. And this is a relatively recent phenomena that's been occurring in our industry.

It includes the veterinary expenses for keeping your animals healthy. It includes the land costs of maintaining sufficient forage supplies with the animal. It includes the cost of equipment to put up hay and grain with which to feed those cattle, and in many instances it includes labor. However, most of the family farm and ranches here in the United States are just that their family farms and ranches attempting to

raise cattle, and there's experiencing increase input costs. You know, we could talk about fertilizer costs too as well, but ultimately the costs have increased due to inflation, and that squeezes the margin that they receive at whatever price point that they're experiencing in the marketplace.

million dollars. So what we have in our industry is a decades long lack of enforcement of antitrust laws that allowed the meat packers back in the nineteen eighties to engage in what was called merger Mania. We saw an unprecedented amount of mergers and acquisitions in the beef cattle industry, and it was through that process and no enforcement of anti trust laws, that the meat packers were able to

achieve this extremely high level of concentration. And in addition to that, Congress realized over one hundred years ago that independent livestock producers were really vulnerable to the monopsony power, the buying power of the concentrated meat packers. So they passed what was called the Packers and Stockyards Act in nineteen twenty one, and this was to ensure that the meat packers not only could they not engage in antitrust

activities such as monopolization and price fixing. But this Act also said they couldn't engage in practices of procuring livestock from producers that was pactly unfair. And so this important act actually helped to bolster the United States' ability to ensure antitrust violations were not incurring in the marketplace, and it gave the independent producer recourse in the event that they were treated unfairly or deceptively by the concentrated market.

The problem is just like our anti trust laws that collected dust on the shelf, so to to the Packers and Stockyards Act, and yet today the US Department of Agriculture has not propagated the rules necessary in order to implement and enforce this over one hundred year old Packers and Stockyards Act that was intended to protect independent livestock producers from the abuse of market power of the dominant beef packers.

little cynical. I was like, yeah, but that daughter is going to sell the land when she gets older, so it's this like she's going to move to a big city. But are there issues in your industry of like the next generation of ranchers, Like, no, I want to sell this land to a data center. I want to sell this land to a housing subdivision so that I can like go work in finance in New York City.

other than to ranch. And that's a huge problem that we have because part of this expansion phase will require us to attract new interests to attract aspiring cattle farmers and ranchers into the industry. That's not happening. And even though I said that the price point was sufficient to incentivize the expansion over a year ago, we're not expanding and we're not expanding because our cattle producers has recently

witnessed a complete collapse in cattle prices. When we were about where we're at today, and that was just as recently as twenty fourteen and fifteen. At that time, we had the highest nominal cattle prices in the history of our industry, and beef consumers were then paying the highest

nominal beef prices in history. And every analyst, government and private alike, said, the cattle producer is going to receive another three years of very strong prices because of that long biological cycle of cattle.

dysfunctional situation in the marketplace, and producers were hurting. That's the period we lost a hundred six thousand producers from twenty seventeen to twenty twenty two. And only now, after this latest drought that we shrunk the herd size to such an ultra low level, have we seen the cattle prices begin to once again respond favorably to the latent

forces of competition in the industry. They began to chase beef prices upward, and we've seen that more acutely here in the last couple few months as beef prices of increase.

But the fact is is that we have not enforced antitrust laws and what we need to do now is determined to what extent are today's beef prices caused by antitrust behavior in the marketplace, not from the cattle producer, who's the price taker in the marketplace, but by the multinational beef packers and retailers that are actually controlling the beef market here in the United States.

for the integrator. That model was then applied in the eighties and nineties to our hog sector. Back in nineteen eighty, when we had one point three million cattle producers, we also had six hundred and sixty seven thousand hog producers

scattered all across the United States raising hogs. But today we're down to sixty five thousand, ninety percent of our hog producers because that industry, the corporations involved in that industry began to follow the chicken model, and so we reduced the number of participants and they began to raise hogs under a highly concentrated situation, and it's completely vertically

integrated from birth to play. The cattle industry is the last frontier for these major global need packers, and it's because of the forage requirements and the long biological cycle of cattle that has prevented them from engaging in the vertical integration model, which we call chickenization. And we're trying to prevent the chickenization of our cattle industry. But the

reason Walmart's getting into it is because it's profitable. So Walmart has decided it's going to vertically integrate the beef cattle industry. It's going to direct what genetics of farmer rancher has to use in order to raise the animal. Walmart will dictate the production practices and feeding, and then Walmart will provide the marketing outlet for the ucers, and then Walmart will sell that resulted beef product to the consumer.

in the hog industry, and poultry producers were eliminated. And the first step in the process is you do away with you eliminate the competitive cash market that's what allows them to vertically integrate an industry, and we're seeing in that in the cattle industry, our cash market has been shrinking at an alarming rate, and as we allow this to continue, we will soon see even more vertical integration.

What this means is we're going to hollow out rural communities all across America, just as we have been doing for the past four decades. And that's because we will eliminate profitable opportunities for our independent, family scale farmers and ranchers by eliminating the cash market, by dismantling the competitive infrastructure, and simply handing the industry over to a highly centralized, highly concentrated be packing and retailing industry.

et cetera, and they're probably true. Has the current administration, you know, talking, he's been talking to you guys via history social account. You want to to lower prices, but also appreciate him for the high prices. A little unclear he has this current administration been a friend to the independent cattle rancher.

In other words, countries from which we buy large volumes of beef, but we sell to them very little. So we have been calling for tariffs and tariff rate quotas, and tariff rate quoteras, of course, are limits on the volume of beef that any country can export to the

United States. And so when President Trump took his second term, that's the first thing he began doing was imposing tariffs, and for an industry that underproduces in the domestic market, we need the tariffs to provide our industry the space

to expand and increased production. So we strongly supported the tariffs when we saw Brazilian imports absolutely explode in twenty twenty five and even last year, we were thankful that the President imposed a fifty percent tariff on Brazilian exports of beef because that was going to further keep our industry awash in these price depressing imports. But when the President announced this idea to lower consumer beef prices by increasing Argentina's beef import quota rate, we believe that he

was misguided. He was misinformed as to how the market structure work. I don't think he was aware that our industry has just gone through years of depressed prices while consumers were experiencing record beef prices. I don't think he understood how severe the lack of anti trust enforcement has adversely affected our industry and caused our industry to shrink.

And so producers are very very concerned right now because we're at the price point where we should be expanding, but we're not expanding as we should be because of the concern for the market failure in our industry that

has not been corrected. It's because we're not certain anymore whether the President is in fact going to begin to manage these imports or if he was just going to let these packers continue to import whatever volume of beef and cattle they want to displace our domestic production, and they do this without informing consumers where that beef is from. There is no country of origin label on the imported beef product, so consumers can't choose to support the domestics

supply chain versus the foreign supply chain. And that's why we urge in Congress to pass mandatory country boards and labeling immediately. And I think this will help to at least mitigate the negative impact that increased imports from Argentina will have on our industry, because then we can go to the consumer and ask them to choose the higher quality USA produce beef and support US cattle farmers and ranchers.

no benefit from higher beef prices. Why shouldn't we want the either imports channel or the Walmart, which frankly has a long history of driving prices down in almost any category enter. They're sort of famously a low cost seller. Why shouldn't we support these trends?

The meat packers are importing this beef from Australia, New Zealand. In these twenty different countries I talked about earlier. They're importing them cheaper than what we can produce it here, but there's no label on it. What there is on it is a US inspection sticker, leading and suspecting consumers

to believe, well, that must be a domestic product. And so because the consumer can't choose between the cheaper foreign product and the more expensive USA produc product, there's no price saving for the consumer because the packers and the retails will price it identical because they don't have to distinguish it, so they pocket the increased profitability of buying low and selling high. And the most affluent beef consuming market in the world, and that's the United States of America.

That's an example of our dysfunctional market. Consumers have not benefited from these increased volumes of imports. Instead, these increased volumes of imports have reduced demand for our domestic cattle, driving hundreds of thousands of cattle producers out of the industry over the past four decades.

to market your beef? When you're marketing into such a highly concentrated, consolidated market where the retailer has long term contracts with the largest dominant global beef packers, how are you going to access the marketplace? So we've had lots of smaller meat packers try to start up that it requires a huge capital outlay to do so. Nevertheless, the government actually during the past administration, has been encouraging their

growth and development. But they're struggling. They're struggling because they have difficulty in marketing their product. Even if they're marketing a high quality product, they're marketing into a commodity structured marketplace and the advantage falls to the meat packers. So until and unless we enforce our antitrust laws and our fair competition laws, we will continue to see these upstart experiencing severe difficulty in finding a profitable marketing outlet for their product.

I don't know if that's true, but a lot of people would say that how much of the prices that we pay, whether it's for the price of cattle or the end price of our ground beef, for whatever steak is about the secular trend towards people wanting to have more animal protein in their diets.

consumer demand, and we would see prices subside. In fact, if consumers are unwilling to pay current prices for beef, they would shift to other protein sources like lamb, chicken, and pork, and you would see the price point from the retailers begin to fall, and you would see the

high beef prices subside. Actually, but if the government causes us to happen, if the government interferes and forces the demand for live cattle to decline, we're not going to increase the size of our US cattle herd, and America will become increasingly dependent on foreign sources for the beef. Right now, at twenty twenty four, about twenty two percent of all the beef available in the US market was

imported product. And if we look at our sister industry, the sheep industry, would who is the direction our cattle industry is going. In twenty twenty four, seventy three percent of all the lamb consumed in America came from Australia,

New Zealand. We've decimated our domestic sheep industry. Now we're now government has its sights on the cattle industry, and the increasing imports without any product differentiation in the marketplace will simply exacerbate the ongoing shrinking of our cattle producer in terms of the number of participants, number of cattle, and the number of marketing outlets.

The market has just gotten more competitive. I think it's an interesting gut check for people who want to think about like market competition that when you read the headline Walmart is going to get into beef processing, do you read that as like bad or good? Because you asked, why aren't there more interest? Well, here's a new entrant coming in. I have to say.

the country. The US used to run a very big trade surplus and food stuff. Only very recently, in the last couple of years, has that turned into deficit. It's probably a source of some concern to me that like we no longer can domestically satisfy all of our food needs.