Quick Review: Let’s start out with quick review of the past several columns:
1. Consumers Are The Business. The discussion highlighted the particularly strong performance thus far in ’24: “There are more dollars coming into the beef industry than ever. All that investment in better quality and consistency AND research and promotion really does matter – enabling producers to be the beneficiaries – now more than ever.”
2. ‘Fair’ a Four-Letter F-Word. The column ended by quoting John Nalivka from one of his recent columns: “Ranchers are now experiencing record-high prices in the face of tightening cattle supplies and strong consumer demand for beef [emphasis mine] and subsequently making record profits….USDA does not need to tamper with the Packer and Stockyards Act.”
Consumers and Producers: With that background, let’s turn our attention to the connection between the consumer and producer. Perhaps you’ll remember seeing a chart like the one below. It made its way around social media when RCALF released its “Farm Bill Platform” in March, ’23. (See Chart)
The ranch group entitled the chart, “Cattle prices crash while consumers pay record prices” and provided this explanation:
…the best way to illustrate the fractured relationship between the cattle and beef supply chains is to show the historical relationship between retail beef prices that consumers pay at the grocery store and cattle prices received by U.S. cattle producers…since 2015, beef prices have disconnected from cattle prices, which evinces severe market failure in the U.S. cattle market. This market failure is causing the exploitation of consumers on one end of the supply chain and cattle producers on the other.
How About Now?: Let’s run with the same ERS data series updated through June ’24. The second chart tells the real story of the industry’s success (to prevent any claims of misrepresentation, both axes were updated by the same percentage, Chart 2):
1. Stronger prices have come on bigger volume, AND
2. That’s occurred against an increasingly crowded marketplace (Chart 3)!
Humpty Dumpty: The permabears get it wrong on both sides of the rhyme:
· One, they believe the beef industry to be fragile, has fallen and is now “broken”. And yet, there are more dollars coming into the business than ever (and yet the marketplace is more competitive than ever). The only thing that could break it would be to regress back to a commodity-based industry (versus being customer-centric).
· Two, the permabears place their confidence in all the king’s horses and all the king’s men. RCALF’s Platform explains, “The U.S. cattle industry is marked for failure…unless Congress acts decisively to enact meaningful reforms…”. That is, EVEN IF the business was “broken”, the permabears portray government as being able to put it all back together again.
Free Enterprise v Government: I noted in a previous column (Yardstick of Quality) that, “…quality always pays dividends when it comes to consumers – it drives satisfaction – and in turn strengthens demand. All that in aggregate equates to more spending and better prices.”
Again, EVEN IF the business was “broken”, government is incapable of facilitating growth and prosperity. There’s simply no precedent to believe otherwise (so why start now?). The beef industry is a case study of what happens when free enterprise gets to work: more innovation and efficiency and quality and consistency – all leading to more dollars coming into the business. Government didn’t make that happen.
To that end, just this past week I received a text message that included a quote from Thomas Sowell – it’s the perfect summary for all this discussion:
“[Even if] the market is not doing what we wish it would do is no reason to automatically assume that the government would do better.”
Nevil Speer is an independent consultant based in Bowling Green, KY. The views and opinions expressed herein do not reflect, nor are associated with in any manner, any client or business relationship. He can be reached at nevil.speer@turkeytrack.biz.
