The Pandemic Exposed Deep Problems in the Meat Industry
The challenge now is how to overcome them without resorting to ill-advised populist ideas.
Blake Hurst, The Dispatch
Jun 25, 2020
We all remember the shortages that defined the early days of coronavirus lockdowns. Retail outlets responded as quickly as possible to shortages of toilet paper, hand sanitizer, and disinfectants. But then the supply chain disruptions hit the meat department of supermarkets everywhere. Consumers encountered empty coolers instead of packages of chicken or steak, and what was available was more expensive. Frustrations mounted.
But customers weren’t the only angry ones; ranchers are also mad. It’s a little counterintuitive—hamburger prices increased from as low as $1.84 a pound to more than $6 a pound—so ranchers’ anger doesn’t make much sense to the average American. Why wouldn’t the producers of hamburgers benefit from high prices for hamburgers?
The answer is complex but important. The market for beef and pork isn’t just one market, but several. It is possible for the market for live cattle ready for slaughter to be in surplus, while the retail market is struggling to satisfy demand. That’s exactly what has happened during the pandemic: At the same time that retail prices spiked, farmers suffered from falling prices for their cattle. The extra money you paid for your ground beef went not to ranchers but to meat packers.
Farmers, and the groups that represent them, are very conscious of that price gap, between farm and retail. Having been here before, we have a long list of policy solutions at the ready to improve producers’ position in the marketplace. President Trump may have given renewed life to populism, but populism down on the farm has been around almost as long as cockleburs and grasshoppers. Most of the ideas presently rattling around coffee shops and convenience stores where we farmers gather have been tried before, and most have fallen by the wayside for perfectly good reasons, but we seemed destined to repeat every farm policy mistake of the past.
Today’s populists, who come to their populism by way of the New York real estate market and Yale law school, have replaced the original Prairie Populists, but their rhetoric is just as heated. 150 years ago, Mary Elizabeth Lease supposedly said that “farmers should raise more hell and less corn.” The enemy then was railroads, and now processors, but we’re still raising hell.
The contrast between farmers profits and beef packer margins has been stark. On April 2, 2020, cattle feeders lost about $25 per head of cattle, while meat packers were making about $370 per carcass. A week later, packer margins had increased to $561 per head. The farm press is full of reports from cattle feedlots of losses reaching several hundred dollars a head. A revolt in farm country has been the result. And now ranchers—and their allies in Congress—seek to remedy this situation
Iowa Sen. Charles Grassley has reintroduced a bill that would require 50 percent of cattle to be traded in open markets, so as to bring increased transparency to pricing. Presently, unlike traditional agricultural markets, most transactions between buyer and sellers of market-ready cattle are private.
Meanwhile, a large and growing contingent of farmers and farm groups would like to reinstate labeling of beef and pork by country of origin, or COOL, on the belief that the American consumer will seek out domestically produced food and willingly pay a premium for food produced here in the U.S.
An even bigger move would be to break up the large meat packers. Most farmers support dusting off antitrust laws to do just that, a little trust busting 120 years after the beginnings of the last great progressive wave. President Trump at a recent press availability spoke about ending trade agreements that allow cattle imports, remarking that we have “a lot of cattle in this country.” The trade agreement in question here would be the USMCA, which doesn’t even go into effect until July 1. That would be a land speed record for throwing out an agreement, but the White House later walked back those remarks.
Let’s look at how some of these ideas have worked out in the past.
Presently, about 80 percent of beef is traded by formula or grid pricing, with no public price reporting...
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