Record beef exports, depressed cattle prices, what gives?
CEO, R-CALF USA
The breaking news is that 2018 U.S. beef exports hit new records. The U.S. Meat Export Federation (USMEF) wrote that 2018 beef exports “shattered the previous value record and achieved a new high for volume,” and, “Export value soared to $8.33 billion, breaking the 2017 record by $1.06 billion – an increase of 15 percent.”
Just a few weeks ago, the Beef Checkoff Program announced it had achieved a 15 percent increase in beef demand.
Amidst this great news, the USMEF further proclaimed, “Beef export value was also record-shattering on a per-head basis, averaging $323.14 per head of fed slaughter in 2018.”
This must be tremendous news for cattle producers. After all, the entire meat lobby has worked diligently, if not exclusively, to convince every cattle producer that they need not worry about such trivial matters as enforcing antitrust laws, writing rules to implement the Packers and Stockyards Act, reforming trade policy, or restoring country-of-origin labeling (COOL). The meat lobby’s tireless drumbeat has been that the only thing cattle producers want and need is more beef exports and increased beef demand.
Congratulations! You did it!
And the trophy for those that sell domestic cattle –born and raised in the United States cattle – is depressed prices. The U.S. Department of Agriculture (USDA) reports the 2018 average 5-area fed steer price was $117.26. That’s less than what cattle producers received six years ago in 2012.
Six years ago, when the average steer price was higher than in 2018, the beef export value was only $5.5 billion dollars, which was $2.8 billion less than the record $8.3 billion dollars in 2018. And, the 2012 volume of beef exports was 219,000 metric tons less than the 2018 record.
So why did cattle producers earn more money in 2012, when export value, export volume, and beef demand was much less than in 2018?
Well, look at who’s capturing the lion’s share of the value of live cattle. The producers’ share of the retail beef dollar was 52.2 percent back in 2012. In 2018, with record exports and increased beef demand, the producers’ share shrank to less than 44 percent.
Geez, someone is making windfall profits from record beef exports and increased beef demand.
If you are a producer, the important thing for you to know is that that someone ain’t you!
In 2018, record exports and increased beef demand helped the multinational beef packers earn a phenomenal average gross margin of $385.20 per head for every fed cattle you, the producer, sold them. (Based on a 1,408 lb. average live steer with a 905.91 dressed weight.)
Imagine how many of your children and grandchildren would be clamoring to become U.S. cattle producers if the live cattle producer earned just half of that.
So, what about the USMEF’s claim that the beef export value on a per-head basis averaged $323.14 per head of fed slaughter in 2018?
Well, the $385.20 gross margin that went to the highly concentrated beef packers took care of that. This is perhaps the most misleading of all the beef packers’ and the National Cattlemen’s Beef Association’s (NCBA’s) propaganda campaign designed to persuade independent cattlemen that what’s good for the packer is automatically good for the producer.
All the USMEF did to arrive at its $323.14 “per head” beef export value of fed cattle slaughter was to divide the total value of exports by the number of fed cattle slaughtered in 2018. It doesn’t take a rocket scientist to realize this is a sham. This is not a “per head” outcome. If it was, that would mean that the multinational beef packers are selling beef into the export market at a value equal to the live cattle equivalent of the beef sold.
Only an idiot would sell beef into the export market at the live cattle’s equivalent price without a markup. No, those multinational beef packers sold that beef with a big markup, at least at wholesale prices and more likely at retail and higher prices. Why else would they be so fixated on export markets when 87 percent of all beef produced in U.S. packing plants is sold to American consumers?
Oh, and they conveniently omitted from their calculation that about 2 million of the fed cattle slaughtered in the U.S. were not USA cattle at all. They were cattle imported from Canada and Mexico, and many of those were imported for immediate slaughter.
It is high time that real U.S. cattle producers joined together to take back their industry. F
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