AgriTalk: Ranchers Sound Off on Pandemic Response
As the nation grapples with the COVID-19 pandemic, the cattle industry has faced huge disruption. There’s tension in every segment, between producers and packers, between producers and commodity groups, and even between producers and other producers, AgriTalk host Chip Flory says.
It also affects the relationship with consumers as higher prices hit, AgriTalk Farmer Forum guest, Casey Schuhmacher, a rancher from Nebraska, says.
“None of us have ever seen as much tension as we've got now, as you look across this. This is highlighted kind of where the choke points are in our industry. And I think as we've progressed, we've kind of forgotten some of the simple stuff of what we're doing,” he says.
“You notice we're not having these discussions about the sale barn down the road at a cash feeder cattle auction. I've sat at a feeder cattle auction, I've sat at numerous cow auctions, where there's only two buyers in the stands, maybe three. And those markets stay competitive and stay honest. So, we have to really kind of think about, ‘oh, why is that?’” he continues.
It’s affecting producers on every level from the feeders, and stockers to the cow-calf operators.
“If you look at the feeder side right now, guys that were supposed to be pushing cattle to the packing houses just watched a major bottleneck happen. I have friends out here in California, and guys I know throughout the Midwest are going, ‘Hey, what's with the volatility in the market right now? We can't do anything. We can't buy as many cattle as we'd like to buy,’” adds Farmer Forum guest Jack Lavers, a cow-calf operator in California.
“That hits the stockers, that hits the cow calf guys like myself. What are we going to do with our calves? I’m fortunate my biggest paycheck comes from my calf sales in the fall. So, I'm not there yet. But I have bred heifers to market right now, and it’s scary,” Lavers says.
Consumers see the bottleneck and start to worry about their food supply as well. Lavers says he’s been getting calls from his wife’s coworkers at Adventist Health, asking to buy a side of beef because they’re worried that they won’t know where their food is coming from.
“I try to tell everybody, ‘Hey, you just need to relax. There's not a beef shortage, we have a bottleneck. It's slow getting out. Everybody needs to take a deep breath. Take a step back and really look at what's going on,’ And I think ultimately, we see people on all sides going, this is how we fix it,” Lavers says. “And I want people to know there is no one thing that is a silver bullet, there's not a single thing that is going to fix the market today, tomorrow, or next week. It's going to take a lot of different things. And we really got to think this through because we can really screw up our markets even worse if we're not careful.”
There’s no one thing that will fix it, but even if all the suggested fixes out there now were implemented tomorrow, it still wouldn’t be an immediate fix, Schuhmacher agrees.
Both producers have been approached by neighbors in their community, wanting to buy meat directly, but the wait at meat lockers is so long that many can’t get an appointment to have it processed locally until next year.
In terms of the proposed Fed Cattle Set Aside Program, Lavers disagrees with its implementation.
“I don't like any of these programs that are coming out. And I'm not going to say that I'm not going to use them. And I'm not going to criticize anybody that's using any kind of Federal program right now,” he says. “We don't as individuals know exactly what's happening to those individuals. And so, if people need help, and they got to figure out what's best for them, go for it, but I really do not like just money running out there and blowing up our deficits and doing anything like that.
“What we really need to look at is why we have the issues at hand. And, you know, in my opinion, one of the major issues that we have, and I think most people would agree, is that we have an overconcentration of the size of the packers—the Big Four. And we saw it last fall with the Tyson fire at the packing plant. That hit me hard last year. So, I'm getting really a double whammy here again with the COVID-19. And we see these bottlenecks happening and what it really does to our industry. We need to look at that and address it, but we need to address why the packer concentration truly happened,” Lavers says.
Schuhmacher also doesn’t have optimism for the set aside program as a fix. He feels that it will prolong the problem as the cattle will be stuck in the feedyard anyway and the feeders have the ability to choose what type of ration to feed on their own.
“Just let the market work through. Besides this, I hope we'll bring enough stakeholders together, not just the concentration of packers, but we've been preached to about efficiencies and these big plants like Holcolmb and all that are the way to extract all the value we can, well, the difficulty to build a new one of those plants because of the regulations, because of the effects they have on the communities, is just a wall you can't get through,” Schuhmacher says.
“I think if we can get stakeholders involved, we can move. The thing that will be interesting, as you've seen this boxed beef climb to astronomical heights is what are the retailers thinking? Costco came into Nebraska with their chicken program because of what they were having to pay for the chickens from a major packer.
“It'll be interesting to see what the big retailers do. But I think if you can get somebody like that on board you have to be careful to stay away from the them controlling the whole process. But if we can get the technology and the logistics are available to have some smaller plants that are good operators,” Schuhmacher continues.
It will take widening the mouth of the funnel, Flory notes. Everything has to go through a processor at some point, but the mouth is too narrow as it is.
“With just one major plant shut down with the Tyson fire last year, we already saw what was coming. And we need to be thinking not only for my market as cattle producer, but we really need to think about this issue of our food safety national security, because I mean, if I'm a terrorist, the president should really be looking at that. What keeps us safe is that we have the safest and most nutritious products throughout the world from the Central Valley of California throughout the Midwest, Texas. Our beef, our vegetables, our fruit —We are the best and we need to make sure we keep it running into our people,” Lavers says.
So, the set aside program may not be of interest to the Farmer Forum guests, but what about Senators Grassley and Tester’s 50/14 proposal?
Schuhamacher supports it. He says that while he’s heard the argument that it’s another government mandate, but if you look at banks or any other industry, there’s requirements to be in the market, he says.
“A lot of these folks are getting their prices from the cash market but not participating. The small amount of people can't do the work for a large amount of people for a long time and you have any sort of success at it,” he says.
Some state groups are pushing for a 30/14 proposal, Flory says. What does Schumacher think of that?
“I think it's a move in the right direction where it's a per plant deal. It's going to affect the South more than it's going to affect Nebraska and Iowa, it's a move in the right direction, but I still don't know if that would be enough. I support more cash negotiation, because I'm a big believer in livestock auction barns and we have to look to at why auction barns work. It's because they're transparent. They're open to any and all bidders,” he says.
Lavers says that while he’s in support of a robust cash market, and the need for more, he’s not sure if 50/14 is the right percentage. But he can’t say what the right percentage is. He’s worked hard over the last 10 years to improve his genetics on the calves he sells, and he sells them on the cash market.
“I also want to be careful that if we get too high, those packers are not going to be paying on the formula, those feeders are then not going to be willing to go out and buy my high-end calves and pay me the premiums for all the work that I've done. It kind of lumps us together. But I do believe there needs to be more. And I agree with Casey [Schuhmacher] on this, but it's troubling, in my opinion as a constitutional conservative and a free market principle person. But at some point, we’ve got to realize if we're going to invoke an antitrust laws on the size of the packers, if we're looking at a new labeling system, if we're looking at anything with the cash market, increasing it through government regulation, there is going to be some government involvement and we need to think, are we truly anti-government, or do we just want a small efficient government? That's where I’m at, I want a small efficient government, and we need do need some oversight,” Lavers says.
The big thing, Schuhmacher says, regardless of whether you support one plan or another, is coming together to speak to all segments of the industry at this time.
“Unless you are involved with all the segments, that's why there needs to be that cross discussion because sometimes the rancher doesn’t understand what the cattle feeder is going through. And the other way around,” he says.