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McDonnell: The Loss of One of America’s Last Great Arenas of Competition

Beef 5 area All Fresh

Production Steer RetailPrice Choice

billion lbs. $/cwt $/lb Box Beef

2010 26,305 95.38 4.1 159.61

2011 26,195 114.73 4.44 181.29

2012 . 25,913 122.96 4.69 190.68

2013- 1st Quarter 6,175 125.52 4.91 189.5

2nd Quarter 6,513 124.95 4.89 199.16

3rd Quarter 6,609 122.3 4.95 192.51

4th Quarter 6,423 130.77 $5.01 201.37

25,720 128.89 $4.94 195.64

2014-1st Quarter 5,866 146.34 5.21 224.88

2nd Quarter 6,184 147.82 5.49 231.57

3rd-Quarter 6,179 158.49 5.75 251.28

4th Quarter 6,021 165.6 5.94 249.11

24,250 154.56 5.6 239.21

2015-1st Quarter 5,665 162.43 6.02 247.79

2nd Quarter 5,925 157.11 6.06 255.92

3rd Quarter 6,068 144.22 6.09 236.13

4th Quarter 6,109 127.71 5.97 210.06

23,767 147.87 6.035 237.48

2016-1st Quarter 5,935 134.81 5.79 210.06

2nd Quarter 6,187 127.68 5.81 223.28

3rd Quarter 6,468 113.1 5.77 218.54

4th Quarter 6,623 108.19 5.58 196.98

25,213 120.95 5.7375 212.22

2017-1st Quarter 6,303 122.59 5.52 200.73

Q2 6,407 133.31 5.66 233.79

Q3 6,736 112.3 5.77 200.83

Q4 6,742 118.17 5.64 203.61

26,188 121.5925 5.6475 209.74

2018 - 1st Quarter 6,466 124.99 5.57 215.03

Q2 6,726 116.63 5.74 221.89

Q3 6,819 111.08 5.76 207.18

Q4 6,862 116.44 5.68 212.12

26,873 117.285 5.6875 214.055

2019 - 1st Quarter 6,414 124.99 5.7 220.1

Q2 6,814 116.78 5.85 225.06

Q3 6,923 103.01 5.84 222.11

Q4 7,000 114.07 5.88 224.16

27,151 114.7125 5.8175 222.8575

3/19/2020. 112.00+ 250.51

Beef Imports and Exports do not include live cattle imports

Live cattle Imports are included in US Beef Production

Data is from USDA ERS

Pat Goggins, who was one of the greatest advocates for ranchers and preserving a competitive market based on market fundamentals, always said it takes a little government to maintain a free market. I don’t think Pat was talking about a free market where you were free to do whatever you want to whomever you want. I’m pretty sure with his love for this country, this industry and his faith, he was talking about a market that was free of oppression and one that offered opportunity. Kind of what this country was founded on. With a system of checks and balances.

What we’ve seen happen in our cattle markets starting in 2015 and by end of 2016 with a $700 increase in Packer margins has nothing to do with a free market responding to fundamental demand indicators.

While we’ve seen one of the greatest periods for retail beef demand, we’ve also seen a cattle market that has collapsed against beef demand since 2015, due to the concentration in our packing industry and the character of many of these folks. The Holcomb plant fire in August has only seemed to empower the major packers. All evidence by the price gouging we’ve seen with the Coronavirus epidemic – and they are feeling empowered.

No doubt price gouging is taking place. Choice cuts went up to $44.50/cwt in just 3 days, live cattle prices fell in the last 3-4 weeks to $112.00/cwt and this week’s kill is exceeding 2019 levels. Choice Cutout has never rallied that much in just 3 days – it’s historical and at the time of this writing is at $250.51.


That’s the highest boxed beef since March 2015 when we had fat cattle at a little over $160.00 instead the $112, we see today. On a 1,400 pound steer that’s $700/head increase in packer margins. The demand for beef is great; in fact, historical, as reported this week, “Many beef items are sold out at the packer level 2-3 weeks…and some retailers are hiring more employees, even raising wages as grocer’s strive to restock.” Price gouging is often considered, “Price increases do not appear to be supported by increased costs.”

The COVID-19 epidemic has served to magnify a trend that started in late 2015 in cattle price suppression and by 2018 & 2019 we saw annual fed cattle prices below $120.00, the first time since 2011. In fact, 2019 annual averages were $5.82 for All Retail Beef. $222.86 for Choice Boxed Beef, but only $114.70 for the 5-area steer price. Basically the same price as 2011 when we had All Beef Retail at $4.44 and Choice Boxed Beef at $181.29. Also interesting to note, that beef packers margins were pretty good back in 2011 as noted on August 31, 2011 when the CME reported, “Beef packer margins have been generally good in 2011.”

The last time we had price trends for any period of time in All retail and boxed beef that close to these 2019 prices was in the first half of 2016, after the spread in feeder/packer margins had started expanding. For that period fed cattle averaged $131.25. Interesting during this period from 2011-2019, U.S. Beef Production had increased only by 3.4 percent over those 9 years while beef export demand expanded, the number of consumers increased, and U.S. consumer spending hit a record high in 2019.

This is not a fairness issue this is a corruption issue. With the concentration we have in the Beef Packing business, it’s important to note that collusion doesn’t even require these packers talking to each other or making side deals. Concentration at this level takes on a completely different set of collusions dynamics. That’s why a large group of us from across the U.S. are putting pressure on the Justice Department to put opportunity and greatness back into the rancher’s and independent feeders’ hands. When you look at the impact of production agriculture in our U.S. economy and all the downstream entities we impact and support entities behind them it’s huge.

I’m not going to confuse this issue with what’s going on in the retail sector or the CME, but along the way those discussions need to happen also. Don’t leave the cow and bull plants out, as since late 2015 I believe it’s even worse.




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