Cornett: Charity Markets
I hear now from a Corn Belt farmer-feeder who says “keep the government out of my forward contracts.” This price discovery issue has more sides than a geodesic dome, including a lot of ideas that I hadn’t heard discussed nor even thought about. But quixotic though it may be in this polarized world, I want to keep asking readers for and looking at different opinions and options.
You know what got it started. A consolidated beef packing industry and incredibly high farm-to-market spreads. We always hate on it, but it got so high the government took notice, and Sen. Chuck Grassley’s Cattle Price Discovery and Transparency Act, which would mandate by law that packers purchase a designated portion of their cattle on the spot market, got new traction. The bill seems to have widespread support in the industry.
Most of the bill, that is. But the mandate? Both the American Farm Bureau Federation and the National Cattlemen’s Beef Association, voted to get it stripped out. But in both groups, Midwestern states balked. They argue, in general, that contracts give large commercial feeders in the Great Plains an unfair advantage and that more bid-and-ask cash trading is needed to get fair value discovery.
Judging by the emails I’ve received, not all who think like that are Corn Belt farmer feeders.
On the other side are folks—not all of whom are commercial feeders, as we shall see shortly—who think mandating cash trades would stand athwart progress. Everybody seems to want more cash trade—or at least more.
So, I’m asking for input from people with, as you young ones say, “different truths.” I’m glad I asked because this is being painted as a big feeder vs little feeder schism and I’ve heard from little mandaters and big mandaters and antimandaters of all sizes.* Being a retired magazine editor I’m a bit surprised at how much serious response an internet piece can generate. I’m keeping a file of emails in a separate file and Word** which says it numbers 55,000 words as of this morning.
There’s some pretty good thinking in there.
Among those (foreign-to-me) ideas, by the way, is selling finished cattle, in load lots, in regional auctions. I don’t know much about that. I got wind of one load hauled 900 miles. And then, I guess, waddled through an auction ring. What sort of cost, what sort of shrink, what sort of impact on carcass performance must that have? I don’t know. Haven’t caught buyer or seller yet. But, my goodness. Think of all the diesel and uppers that would consume. I’d sure like to know more about that.
Don’t let me wander. We need to talk about one email in particular that came in response to my visit with A Yankee last week. A Yankee is the thoughtful Midwestern farmer-feeder who needed anonymity to, as the media might say in quoting anonymous sources, “keep from getting blackballed by his packer buyer.” He was very in favor of more cash trade and, I’d say, more-less in favor of it being mandated by law.
From my emails, I get the feeling that’s pretty common. More cash trade. More transparency. Great. There is concern about mandates. Widespread, in fact. Unless I messed up the tally at the NCBA meeting, the antimandate matter would have passed even if Texas and Kansas hadn’t voted. Other affiliates felt the same way.
Are mandates necessary to be “fair to family farmers” as Grassley said on AgriTalk last week? “Unintended consequences” pops up in that discussion pretty often. Are there other ways? Ways that might not lock the industry into a time-in-point and which would mean it would take another law to allow evolutionary change? I mean, there is an argument to be made that these are aberrant times. We’re working our way through a bottleneck of fed cattle. We’re cutting the herd, and it won’t be long until the guys in the Christian Louboutins** will have to bid up for cattle to keep their plants busy.
You know, tempting as it is, we can’t blame the packers for covid. I don’t think we can blame them because it caught them and everybody else unawares and all their (perfectly-legal, I’m sure) workers got sick and caused a meat shortage at grocery stores. Of course, we CAN blame them for paying less and charging more. But only if we’ve ended a negotiation on, say, a pickup by saying, “whoa fella. You’ve taken too much off. I know you’ve got kids to feed.”
But you’ve never done that, have you? No, the only person who has ever done that is my brother. Years ago we needed a new farm pickup. He found a used one in town and the guy wanted, as I recall, $1,700 for it. Dave got there and it was, all low milage, pristine perfect. “Wait til you see it,” he told me on the phone. “The guy didn’t know what he had. I got him up to $2,000.” I did not make that up and my brother will, somewhat abashedly, verify it. Anyhow, unless we’ve done that, who are we to blame packers for taking what is so serendipitously laid before them? It’s the American, and apparently, Brazilian, way.
Which is not to say we shouldn’t be looking for ways to prevent it in the future. But, would more cash trade have helped in that case? We had more cattle and consumers wanted more beef than the packers could get sick folk to process. Unless they’re Dave, which they darn sure ain’t, what would it matter how they bargained?
Seems to me the bigger lesson in all this is we all know there’s a bronteroc in our future. We just don’t know what it is.***
You let me wander again. Sorry. I don’t have time to write tight. That’s hard. Feel free to edit all that yourself if you’re soooo busy.
But, here we are at the point where I say I got an email last week from another farmer-feeder who lives not far from A Yankee. This fellow, goes, basically, “what you mean ‘fair,’ Mr. Grassley?” He said we could quote him, but “I’d rather you not use my name. But feel free to throw (that major packer) under the bus. Lol.” So I think that lol means he’s a younger guy. So I’m going to call him The Kid.
Not going to tell you which packer The Kid uses. No clues. I’m not sure it matters, anyhow. There’s only four of them, you know?
The Kid writes, “We hard feed Holsteins in (I told you. Just don’t ask which state).
“Our only real buyer due to freight cost is (a major packer.) We feed our own corn and forward contract 95% of our cattle and have been profitable for 20 years
“I am strongly opposed to more government intervention as it always seems to make things worse. The federal government got us in this mess by allowing the packer consolidation in the first place.
“We are 6th generation farmers on our home farm in (a) County. We have had to continuously adapt to survive. My father and grandfather were dairy farmers. Those days are long gone. I switched to dairy beef and as you can tell by the email signature below, had to get an off farm job to survive.
“Do I like only having one real marketing option? Of course not. Do we like the vertical integration happening in the cattle industry? Of course not. But we have adapted to the hand we are dealt. The same as the 5 generations before us.”
“I don’t want (that major packer) to raise their basis on my contracts because they are forced to buy a certain amount of cash cattle each week, only because certain folks in the industry don’t want to change. Agriculture has always and will always be an industry of change.
“Hell* if we could keep things from changing, I would like to go back to when we could make a living on the farm without other jobs.”
I know about you internet readers. Hurry, hurry, hurry. And I bet you skimmed right past the nut of that: “I don’t want (that major packer) to raise their basis on my contracts because they are forced to buy a certain amount of cash cattle each week.”
So, two smart, profitable, farmer feeders. Two sides of the dome.
I’m not going to argue with Chuck Grassley. I’m guessing it would be one of those things where two geezers jaw back and forth, rattling their dentures and spewing that spittle stuff we do when we get agitated, with our hearing aids screeching at each other until one of us says, “you don’t know what you’re talking about” and the other says, “what’s that? A new rule?”
But that “fair” thing. I’m sure Grassley thinks farmers feeders want what he says they want. But I wonder if maybe, he might be like me and only hear the loudest voices. It happens to farm boys of our vintage. Too many hours on those old bald tractors, my audiologist told me. TRACTOR EAR, he said.
That “fair” word gets a little worn out in political jargon, you know? Rich folks pay almost all the taxes but they don’t pay their “fair share.” Is it fair to tax them more than me?**
Good. Stopped myself before that got too far off topic.
Some speaker at NCBA said something to the effect of we can’t predict how a law—a firm, hard to change law—will fare in the future. The beef industry has moved so far so quickly in terms of productivity and beef quality and antibiotic use and ecological impact—all that sustainability stuff beef marketers want to talk about and want to sell at a premium. I don’t know how much of that is due to intra-industry cooperation. But it’s some. A lot, I think.
Is it wise to start freezing our markets in place? I mean, the mandaters have been trying to push this through for a long time. What if it turns out they have the wrong percentage? How hard will a “tweak” be then? Could this be analogous to, say, limiting the number of tractors because it wasn’t fair to folks who preferred oxen?
I’m not saying that. I’m asking.
The more people I talk to, the less firm support for mandated minimums I find. It seems to me to be more like, “if that’s what it takes, then, yeah.” But I’ve got some folks to talk to who I think will disagree.
I want to close this reiterating The Kid’s point: “We have adapted to the hand we are dealt.” Will laws make that easier in the future? Are there other options?
I’d still like to hear from folks with something to add. Send me your thoughts: Scornett9163@yahoo.com
* Don’t be juvenile. Those in favor and those opposed to mandates.
** I’m not sure that is the exact shoe, but I looked on the Neiman-Marcus website and it looks like the shoes I’ve seen Packer Moguls wear. $895. Not to wander too far, but that is a lot of mark-up on a yard or so of leather. Talk about a wide farm-to-market spread. Somebody with more time should explore how that might apply to the extra expenses packers are incurring in this post-quality-revolution in the beef industry. Plus. Bonus: They can say “hey I feel your pain. Look how much my shoes cost!”
*** That is a cultural reference. Update on the Black Swan bromide.
**** I know. Potty mouth. Potty mouth. But it’s a direct quote. And the use of that word is between The Kid and his mother, far as I’m concerned.
***** Or, for that matter, to tax a poor, packing house meat cutter to send me free money because my county was dry last year? Even though I’m out of debt and understocked? I mean I cashed the checks and signed up for more but that doesn’t make it “fair,” does it?
