Over the past few weeks, the Administration has focused on curing record-high beef prices. I have one comment in that regard: Record-high beef prices are the result of basic economics — supply and demand with demand being the primary driver.
Yes, the U.S. has the lowest cattle inventory since 1951 as the result of both reduced grazing due to severe drought and significant losses to cow-calf production during 2022 to 2023 with both of those situations leading to significant herd liquidation, but if consumers were not buying beef, prices would not be record high.
Prior to last year, this was the experience of the beef industry. Demand would not support the higher prices that resulted from reduced cattle numbers following herd liquidation. But, also in past cattle cycles, heifer retention began early in the period of higher prices. Cattlemen anticipated continued strong prices when those heifers calved and it is important to remember that most herd building took place in herds having less than 100 cows.
We have a different scenario this time around with heifer retention by ranchers proceeding at a much slower pace — perhaps historically slow as ranchers benefit from record-high prices. Recent market volatility as well as record-high diesel prices, which represent a large share of production costs, have increased the uncertainty regarding the short-term market while also overshadowing the longer-term outlook. A heifer’s value today certainly is a major consideration in the decision to retain heifers.
So, now the government not only has the politically driven incentive to lower beef prices, but also to create another program to encourage ranchers to build herds. I am highly pessimistic about the government’s involvement in the herd building decision. And, while I encourage ranchers to actively participate in sound risk management, risk management should be directed toward the impact of market volatility and to support the highest value for cattle to be marketed off the ranch.
Except for policy regarding global trade, the government needs to stay out of the beef market. The industry does not need any attempt to manipulate the market to anyone’s satisfaction, particularly in response to politics whether it be tariffs, country of origin labeling, encouraging small packing plants or herd building. This can only lead to unintended consequences with one of those consequences being additional government programs to compensate for the first action. It becomes one government intervention after another in response to criticism from various groups. Reducing burdensome regulations on the U.S. beef industry should always be the goal.
