Cornett: Stewardship and Sustainability Will Influence Price Discovery
George Will: “In government, every serious mistake is a matter of disproportion."
Saw that last week and thought it might be appropriate for our discussion about value discovery for beef. About whether the government should adopt a law requiring the beef industry to continue basing fed cattle prices on cash bids. We started out talking about whether that might stop the evolution of cattle marketing.*
Whether it might be a matter of disproportion.
I want to detour a bit into how all this plays into the subject of stewardship and sustainability. As I suggested earlier, a profitable steward is more likely to be a good steward. That’s the bottom line of where we all want to go, right?
So, I sat through the “New Paths to Sustainability and Productivity Growth” panel in USDA’s Outlook Forum. It was all virtual, so the panels were all in their home turf with their little computer cameras fixed on their faces for the whole world to scrutinize for two fascinating hours. Imagine how hard it would be to go that long without scratching your nose.
They talked like consumer demand for more sustainability is a foregone conclusion. I’m not sure I agree. Some of the things of which they speak sound expensive and I keep thinking of how important prices are to consumers who tend to forget their polling answers when they can save a bit of money.**
Even if I’m right this time, it may be that consumers aren’t the real decision makers. It may be that the Burger Kings and Krogers and CostCos—the gate keepers, so protective of their reputations—are the drivers. Investor Carl Icahn, for instance, is badgering McDonalds to hurry its process of eliminating sow crates. And McDonalds says they’re getting there as fast as they can. Forget the cost of pig meat. It’s the stock price. It’s the “we’re doing something” halo.
What, you thought they were selling McPlant burgers because of runaway demand?
So, anyhow, I’d suggest you invest a little time to go see the webinar.
They talk about some new technologies that will help agriculture—animal husbandry especially—to reduce its carbon footprint and environment impact. I know. Me, too. What does my little deal need to worry about that?
My answer is that Carl Icahn and every celebrity I can think of worries about it. Just as they are now force-feeding crate-free farrowing to swine growers despite public apathy, they have an outsized influence on how beef marketers and buyers view our business.
And, like it or not, to play in the game in the future, we’ll have to play by the rules they dictate and, increasingly, be able to demonstrate it. It’s going to cost us more than a few electronic ear tags and we’re going to have to get paid for it.
Wait, I just launched into that like I know what I’m talking about. It’s an opinion, a fear maybe, and one I don’t much like having. You see me manage a cow herd and you’d say, “I always figured that’s how a journalism major would do it.” If I’m right, and if I live long enough, I’m going to hate the hoops all this is going to make us jump through.
We’ll be documenting our crop production practices. Our animal care practices. Our genetics. Or we’ll see discounts that would make Russian stock sellers blanch. Those of us*** who aren’t with the program are already leaving pretty big bucks on the table every time we sell a calf.
My question is whether we’re going to be able to pay for it with our current marketing practices or are we going to need more—not less--intra-industry cooperation? Why would I forego implants If I wasn’t assured of a market, for instance? Why would a buyer pay me extra for those calves if he wasn’t sure I’d done what I promised?
Nevil Speer argues that there are efficiencies in contracts for cattle feeders as well as packers. Efficiencies mean lower costs in the post weaning phase. Less cost in the post weaning phase means higher prices for feeder calves and/or lower prices for consumers.
Providing, of course, nobody has her hand on the scale. Hey, that reminds me. Anybody heard from the Packers and Stockyards folks or Department of Justice on that price fixing settlement?
I’m still gathering personal experiences and knowledge on this price discovery thing. I started out leaning toward saving mandates as a last resort. I have this mental picture of a jowly-faced Senator Grassley with one of those Thor hammers raised. I'm still leaning that way. Trussing the industry into a government-regulated value discovery system just sits uneasy. Kind of like venison instead of beef. However, I still don’t know what we can do BUT count on cash negotiations. Every other option I run onto has its own problems. Scornett9163@yahoo.com
*Actually, we started talking about whether such a freeze-in-place policy would constitute a “techtonic” shift. Yes. That is how I spelled tectonic. I blame two things. One is spellcheck. What kind of spellcheck lets a guy put an “h” in tectonic? The other is I was working on a very small screen with very old eyes. Plus, when I was in school, tectonic plates were a new theory. Never had it in a spelling test. So, that’s three things to blame. Plus: It was the wrong word, anyhow. Tectonic plates are always moving around, not freezing in place like mandates could do to cattle price discovery.
**Note the prices of beef, pork and chicken I shot in the Walmart meat coffin this week. Chicken breasts, $3.37 a pound; pork loin “ribeye chops,” $3.68 a pound; strip steak, $12.47 a pound. Consumers poll strongly in favor of beef, yet the pig and poultry keep eating market share. It’s price. They just make the lesser meat so cheap people mix up gravy and sauces and buy it anyway. How much efficiency can beef forego in the face of that?
***Yes, “us.” I haul ‘em off and see what they bring just like most guys my size do. I’d like to not do that, but what program can I get into? I can wean and background and try to keep my genetics black and marbly-looking, but not much beyond that. Somebody needs to develop a program for me. If you’ve got any ideas, holler. Scornett9163@yahoo.com
