The opinions expressed in the following commentary are those of Kate Miller, the managing partner for IMB Cattle Company, a third-generation ranch in Southern Arkansas which just celebrated its 51st anniversary. With over ten years in protein marketing including domestic and export sales, Kate continues to try and bridge the ever-widening gap between production agriculturalist, the food production industry and consumers. She can be reached for industry related consulting or comments at [email protected].
One morning in 2014, I turned on the news and one of the headlines of that report was that ground beef had reached an all-time price high. I remember steeling myself for the day ahead, knowing my phone would begin to ring with questions on why this was happening and for how long it would continue. The questions came from the bleeding margins of the restaurant industry—but no cattleman took to social media to demand a correction in the injustice of the pricing mechanism.
Everyone was winning.
Raising a commodity is essentially gambling---and no one goes to Gamblers Anonymous for making too much money in Vegas. The same is true for commodity production if the market is good, we are content to let the tide roll in. But when the tide turns---and the market drowns us the common historical theme is to look for a scapegoat. The headlines during COVID19 make the packer an easy target. This is just the continuation of a trend 150 years running with cattlemen, and we have ramped up our aggressive efforts with keyboards in hand. We have seethed anger onto social media and into the ears of congressional offices in DC. To what end?
Pre-COVID19 we knew we would have problems this summer in terms of the supply pipeline glut. COVID19 just amplified what we already knew: too many cattle, too few shackles. It really isn’t more complicated than that at the core. As an industry, we cattlemen sacrifice leverage for independence. Cattleman have no control over the total supply of the commodity they produce---which is the oldest root of this problem. But perhaps we also should consider that we have saturated the value-add proposition with an 80% choice cut out. After all you have only two options for making money in free market commodity production: volume or differentiation. It seems on both fronts, we have problems in value creation.
And no act of regulatory capture will change that fact.
Pass the cash market bill, packers don’t care. It will not change how they go to market; it simply reduces the cattleman’s options. This idea that a return to the cash market is somehow the saving grace of the industry---is per the usual devoid of any historical context. Where are the cattlemen of the 1980’s? Why are they not standing up and saying, “Once upon a time we had cash markets---and yet we still struggled.”
I am to the point with the industry bellyaching that perhaps we should pass something. Hell, pass all of it! Stop imports. Tear up USMCA. Pass mCOOL. Fire up the DOJ. Eliminate the USDA. Erase the rules. Level the playing field. Then what? That has always been my question to the foaming at the mouth hysterics behind these ideas-----say you do all this. Then what?
The Average Joe Cattleman is going to suddenly have his revenge? This mantra that ‘death to the packer’ is somehow a win for cattleman is curious to me. Why? We rely on packer money. Without somewhere to turn cattle into beef—cattleman cease to exist. Packer cash lines your pockets. How far are you going to get breeding, calving, feeding, and killing the 20 or the 100 or the 1,000 you have on your ground?
Are you in South Dakota going to harvest and distribute the 3,000 you calve out? Are you in Iowa going to harvest and distribute the 100 you have on feed? Every year. You don’t need the packer, right? You want that margin for yourself? Then you are responsible for creating the value. You are responsible for cutting the jugular of every head in your yard. You are responsible for splitting them open and carving them up. You are responsible for taking them from the fat steer to the steak plate. Grab your knife. Get in the arena.
If it is so easy buy a plant and learn what it means to earn your seat at price discovery. This isn’t a free club where your membership ticket is merely a concrete building and a handful of shackles. Just like running a ranch is more than buying a piece of property and a few head of cows. I’d never presume to tell a cowboy that ranching is easy----so why do the cowboys feel so comfortable telling the world that the packer is unnecessary? When behind every red cent in this business is someone holding a knife and offering the consumer a finished good. If the packer is unnecessary, who wields the knife? You?
At the end of the day, the fringe margins of this industry---the disenfranchised cowboys that throw on a hat and bleed onto social media about injustice are the only noise in the void currently. They speak a narrative of half-truths shrouded in economic fallacy and devoid of supply data. If you are part of the silent masses, you too are equally responsible for whatever DC churns out in the coming months. Change will come----but it remains to be seen if it will be effective or merely a salve for a ‘phantom itch.’
Change for the sake of change won’t change anything. Packers are not dinosaurs. They are businesses capable of evolution. The question is however will the cattle industry evolve to survive? If so, how? Will we remain an independent market---functioning as a gambler in the tides of supply and demand? Or will we now clamor to the streets of DC for government intervention----and will we then be shocked when it is not the big packer that pays the price?