Imports Bad: For some in the business, the narrative surrounding trade is straightforward: imports bad. They argue the U.S. is absorbing too much imported beef, and current trade policies are hurting ranchers. The outcome being: “…hundreds of millions of dollars in economic injury inflicted on America’s ranchers by the USDA’s trade policies have contributed greatly to what we learned in the 2022 census – and that is that during each of the past five years, on average more than 21,000 American ranchers have quit ranching, with a total loss of ranchers of 107,000 during that short period.”
My previous column highlighted the narrow discrepancy between import and export tonnage while emphasizing the ever-widening advantage to U.S. producers in trade dollars. But you won’t often hear the trade-doubters talk about dollars, because it doesn’t fit the protectionist narrative.
The emphasis is always on tonnage – and the subsequent perceived damage to U.S. producers. Let’s address that thinking from two different perspectives.
Fed Price: Imported beef is often portrayed as a direct (and competitive) substitute for domestically produced beef. Typically, the rhetoric goes something like this: “Cheap beef from foreign countries is flooding the market and driving down cattle prices for U.S. farmers and ranchers.”
However, the majority of beef imports are NOT direct substitutes for domestic beef – and thus, don’t really compete with domestically produced beef. To the contrary, those imports, consisting primarily of lean trimmings, actually create value for domestic production. In their absence, 50/50 trim would be severely discounted and subsequently reduce the value of fed steers / heifers in the marketplace as we know it today.
The first graph below addresses the question: does increased import tonnage negatively affect fed price? It details year-over-year changes in average fed price (inflation-adjusted) vs. marginal change in imports. The relationship between imports and fed prices is flat-to-positive (versus the “imported beef drives down prices” narrative) – and year-over-year differences in imports explain very little of the variance (~5%) in annual price.
Cow Inventory: The protectionists also cling to the notion that imports are driving ranchers out of business. Per the quote above: cow numbers are declining as a result of the, “…economic injury inflicted on America’s ranchers by the USDA’s trade policies.”
The second graph addresses the question: does increased import tonnage negatively affect cow numbers? It details year-over-year in beef cow inventory vs. marginal change in imports. The correlation is essentially ZERO (.07).
Back to RCALF’s claim about keep / cull decisions being tied to imports. There’s no there there. Producers are not being influenced, nor affected, by import volume as it relates to cow inventory. (Last, but not least, it’s also clear that COOL wasn’t effective in terms of influencing herd expansion; to the contrary, beef cow inventory declined 1.63 M cows between ’09 and ’15.)
Limestone v Brimstone: I get it - international trade is an emotional issue – and per my previous column, that’s why it’s often one-sided. Dr. Lori Kletzer explains it like this (see her work here):
To a general audience, imports are a palpable threat— they can be seen on store shelves (or car lots), and their mere presence suggests [emphasis mine] an American good, and therefore worker, displaced [emphasis mine]. Exports are much less visible, except to the workers who produce them. With transport, these goods leave the country and are more elusive to the general public.
Emotion and business usually don’t mix very well. That’s especially true in this instance. The Henny Penny “beef imports bad” story (emotion) does nothing to shore up the industry (business). There’s simply no evidence that “suggests” beef producers are being “displaced” by beef imports – nor being unduly damaged in the marketplace.
Given that reality, to borrow a phrase from Henry Hardin Cherry, what producers really need is “…more limestone and less [protectionist] political brimstone.”
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.
