Jennings: Emotions Don’t Always Lead to the Best Solutions
SD Cattlemen’s Association President
I have been accused, and rightfully so, of being very pragmatic. I tend to not engage in being mad about an issue to the point of only seeing my side, obviously the correct one. I instead try to see the other side’s viewpoint and work toward a solution that would work for both sides. My journey to this point began several years ago when I was watching Michael Jordon play basketball. When he was playing he was always the best player on the court. I began to think about what made him be the best. He was an incredible leaper, very coordinated, fast, strong, and put the time in practice. But I doubt he was the fastest, strongest, most athletic one in the league. The same could be said for Joe Montana or Larry Bird, both very accomplished athletes but probably not the biggest, fastest, or strongest of their contemporaries. I started thinking about what sets them apart from the others that were more gifted athletically that allowed them the success they had. I decided it was their ability to set aside the emotion of the moment and focus on the play they had to make. Whether it be hitting the clutch shot or throwing the touchdown pass as time ran out, they did a better job than others of controlling their emotions to do what they needed to do.
Controlling our emotions is easier said than done. They make us put too much pressure on a cow until she tries to jump over a fence, they talk us into baling hay too wet because we really want to get it done, and they allow us to make a suggestion to our spouse that should have gone unspoken. I think we can all agree that emotions, while sometimes useful, are not always our friends.
When the prospect of Covid-19 impacting in this country became a reality in February, it sent the financial markets and commodity futures markets down in a hurry. The futures collapse pulled down the cash cattle markets even though the demand for beef continued strong and even strengthened for a time. The result was the packers were able to procure cattle for less money while the retailers bid up the box beef price resulting in very favorable packer margins. Anytime the price of cattle goes down while the retail price up is very disappointing and quickly stirs up angry emotions. So, then we are just mad at the packers for taking advantage of us and demand that something is done about it.
I don’t like the current situation with the packer concentration, and I don’t believe it is a healthy economic model. But when you strip away the emotion and look at the facts you see the current fundamentals are in their favor. We have a lot of cattle in the feedlots and the rest of the supply chain and there is good demand for beef. They are in a favorable position on both sides of that equation. In that situation, they are not doing anything different than we would. Very few of us pay retail for something we had the opportunity to pay wholesale for. I think many of us have also contributed to price collusion, whether it was formally discussed or not. How many of us have gone to a bull sale and found out a friend of ours was interested in the same bull as we were so we decide not to bid against them. We figured there were other bulls that would work for us so we passed on the bull we originally wanted. Isn’t the only difference between that and what the packers are doing the scale of the numbers?
While I would love to fix this issue, I don’t have the answer to how. There have been many ideas proposed by others but I haven’t seen one that I like yet. I truly believe in our capitalist, free enterprise system and would not want to impose mandates on an industry that infringes on our rights to do business on the free market. I know I am much more receptive to the market telling me what I should do in business than the government telling me. That being said, the Covid-19 market collapse has caused an investigation to be launched to determine if there was any illegal wrongdoing. I would also guess there will be working groups formed to research the issue and make recommendations. We do this EVERY time we have a market imbalance like this. I am often reminded of the definition of insanity: continuing to repeat the same procedure but expecting a different result. I am sure this market disruption will be explained by an abundance of cattle and a surging demand for beef…sound familiar? We could try different tactics, put some new faces on the working groups, and possibly come up with some ideas that might work. My guess is that new ideas won’t be formed and implemented for 5-7 years and by then the cattle supply numbers will have shifted and the feedlots and cow-calf producers will be in a much better position. It will be interesting to see if anyone is calling for investigations and forming working groups then.
Above all else, we need to remember the importance of every sector of the supply chain. The cow-calf producers, the backgrounders, the feedlot operators, and the packers all depend on each other to fulfill their role. We need to be careful to not let the emotion of the market situation cause us to speak of another segment of the supply chain with contempt. We need to ask for a change in a respectful and positive manner. Agriculture has enough critics that would like to change our business practices; we don’t need to assist them in their cause by bickering amongst ourselves.