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Kenzy: ‘The Best We Can Get’ not good enough

 

The Best We Can Get

Boy have cattle producers heard this phrase over the last several months. We had the “Best We Can Get Compromise Bill” and now we have the even “Better than the Best We Can Get Compromise Bill”. Maybe we need to unpack that title just a bit. With any luck, maybe I can manage to offend into action everyone involved in this business, and rural America as a whole.

Perhaps before we begin, we should revisit the problems that led us here:



-The percent share of the consumer beef dollar has fallen from 63 percent in 1970 to 37 percent in 2021. Tell me again how efficient I need to be?

-We have lost nearly half our cow calf operations (independent small businesses) since 1980, and about 75 percent of our independent feedlots (calf and feeder cattle bidders, rural American small businessmen who rely on and are relied upon by Main Street).



-57 percent of fed cattle sales were cash negotiated in 2005, today around 20 percent are cash negotiated on a national average. Most of the remaining cattle are sold via alternative marketing arrangements (AMAs), or formula type sales.

-Producers and consumers have been harmed by record “spreads” between cattle prices and beef prices.

Real world analogy to understand formula sales:

Most cow-calf producers sell their calves through sale barns- the original source of value discovery. The large volume of sales is what creates the market. This type of sale would be considered by the modern industry to be highly inefficient: transportation, shrink and commission are some of the costs associated with auction type selling. Stay with me barn owners, I’m trying to make a point.

Some producers choose to sell “off the ranch” or direct to sellers. It would be considered highly efficient to our modern industry. The sale barn “cash negotiated” price would be used as a bargaining point for the direct sale. The buyer and seller could set a pre-determined shrink, share the commission savings, and everyone wins, right?

What happens when 80% of calf sellers decide to sell direct off the ranch? Perhaps they sell their top end and take the rest to the barn to make up the difference? The smaller cuts and dinks would then determine the “value discovery” for the 80% of direct sale calves. This is why having a majority of cattle undergo value discovery is so important. Especially when you consider that 85% of fed cattle are marketed to just 4 massive corporations. That is buyer power. Factor in also that fed cattle sellers are highly motivated- especially when corn is approaching $8/bushel and Costs of gain are nearing the per pound market price. Market access is paramount to profitability.

Now to calm the barn guys down- you know the check is good and timely from a barn, your cattle are insured and you get your cattle advertised in the barns network. Bottom line: nobody goes to the country to pay more…

Back to the “Best We Can Get”. I do not know who the omniscient being is that decided what the best we can get is? Where was this consensus formed? Is it a lobbying group’s decision for an entire industry? Is it a Senate Ag Committee motivated to close the door on this before farm bill discussions start or is it a decision made by the Secretary of Ag? Has there been open debate among ag groups? I’ve consistently asked for a “Phoenix 2.0- The Public Version” meeting to be held, I think cattlemen and Main Street need to hear some discourse about what “The Best We Can Get” amounts to? Maybe the Senators should hold listening sessions “in the country”?

Above all, I think “The Best We Can Get” is dangerous. I cannot believe that a bill that uses the cash trade averages of the 2 most tumultuous years in recent cattle history is being considered as a baseline for value discovery of the largest gross cash receipt segment of agriculture. I cannot believe that we are going to regionalize our cattle market to apply those values when it is common practice to move cattle across this country on a daily basis. ,Further, it’s hard to believe we are to expect the wholly unelected Department of Agriculture to decide after 2 years what constitutes a competitive market in terms of cash percentages going forward? I would remind everyone that the Secretary of Ag currently oversees the P&S enforcement, labeling regulations and checkoff oversight. I would consider that enough mountains to climb without Congress dumping this on his agenda.

There is further danger in the signal this will send to the DOJ, who has an ongoing investigation into the very market structure the Compromise bill accepts. Add to that R-CALF USA’s ongoing class action antitrust law suit against the big 4 meat packers. The Congressional acceptance and legalization of our current state could be detrimental to that cause as well.

The most dangerous part of the Compromise Bill- “The Best We Can Get” is summed up in the words of Will Rogers- “All farmers are optimists, otherwise they wouldn’t be farmers”. The passage of this bill will lock in place, at least for 2 years and probably more, the current market power of the packers and the lack of leverage for fed cattle sellers. If that is the case, we will see the optimism of independent cattlemen fade and the continued decline of rural America.

All of this being said, cattlemen are going to have to get involved, or this WILL be “The Best We Can Get.” Get with my way of thinking, or get against it, but let’s be able to tell our children we tried. This is the season of new life, baby calves and hopefully prayerfully green grass. The time to fight for the market for those calves is now. Please realize that no one can fight for your future better than you. We need call volume to the DC Switchboard at (202) 224-3121. Tell them to consider the new studies out of Georgetown and Iowa State. Tell them this is not the deal we’re looking for.

 

 


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