They were healthy beasts with curious noses and swashbuckling tails, and all still worth a pretty penny per pound in the beef aisle at the grocery store. At auction Wednesday, however, they were worth about half the price of two years ago to the ranchers who had raised them, even though the costs of raising them have gone up.
Cattle ranchers have not benefitted from the grocery store prices for beef. Their continued low prices at auction were food for thought all around the room at the Sidney Livestock Market as cattle ranchers gathered to talk shop and buy and sell their cattle. Many conversations were tuned into the continued low market prices and what it’s doing to producers in the industry, as well as whether the lifting of China’s ban on U.S. beef would help.
“That China deal isn’t going to help us for a long time,” one of them said.
And even then, another pointed out, lifting the trade ban won’t be enough to shore up prices on its own. There are deeper issues at work.
Over supply has been widely blamed for continued low prices in the industry, but area ranchers said it was puzzling to them that retail prices have continued to climb higher and higher, if there really is so much over supply.
J.D. Anderson said prices today are about half what they were two years ago.
“You weren’t getting rich at that price,” he added. “You were making things work. You were making a living.”
“Our inputs and expenses have all continued to go up,” Kevin Guenther added. He was at the sale barn to sell a few bulls.
Guenther has questions about the oversupply, too. He points out it takes about two years for a heifer to produce. To suddenly be over-supplied like this isn’t possible, he suggested.
“You just cannot make that many that fast unless you already had them waiting,” he said.
Many in the room had questions for the packing industry, and suggested they are playing a large role in the imbalance, despite claims to the contrary.
“Stockyard packers are not supposed to own cattle,” Anderson said. In his view, however, the way things are arranged these days, they all but own the cattle except in name.
Zane Panasuk is ranching north of Culbertson. In his view, packers have been pushing retail prices up even as they’ve pushed producer prices down to feed their profit margins — all at the expense of consumers and cattle ranchers.
These comments echo concerns aired at a recent Cattle Ranchers roundup in Billings, where deep suspicion was expressed about both the Chicago Mercantile Exchange and meatpacking companies, suggesting there is price manipulation at work. These types of claims have been flatly denied by industry trade groups like the North American Meat Group, which says its industry has been reviewed and analyzed and investigated over and over again without substantiation of any such claims.
Kristin Larson is president of the Montana Beef Council, which helps manage check-off dollars. She says the biggest problem for producers has been instability in the markets.
“No one knows what they are going to do because of that,” she said. “You don’t know whether to feed cattle, wean cattle, process cattle. It is hard to make a plan with the instability of the market. There’s no real driver behind that other than the unstable economy we are in.”
As a producer, she too would like to see more stability in the Chicago Mercantile Exchange.
“I think we have got to get back to a point of where there is a sort of system that can gauge the market better,” she said. “And I know there is work being done on that. You can talk about it and it sounds easy to do, but there are a lot of things going into it. And I know it is very frustrating for cattle ranchers right now. It is a difficult time in the cattle business. We have a lot of feed lots we sold to in the past that are not going to be in business any longer. They lost too much equity the past few years. It’s hitting all sectors of the industry.”
Larson said the lifting of the trade ban would eventually help the cattle markets, but there’s still some red tape to work through first.
But when it does, she points out the population of China is huge, and its middle class is growing. “They like the grain-fed beef that the U.S. provides, so they’ve been demanding from their government to have access to U.S. beef. I am glad we are seeing China move ahead and go with a science-based approach rather than just fear.”
Panasuk, too, is hopeful the lifting of China’s ban will help U.S. cattle ranchers like himself find a better price, but he remains skeptical that it will prove a large boon.
“I’ve heard there were already back door sales to China through Vietnam and Hong Kong,” he said, “So how many of the sales to China now will be new ones? Is it just front door now instead of back door?”
Many in the room talked about a time when cattle ranchers could sell their beef through mom and pop slaughterhouses, and pointed out if they could sell directly to their customers, they would have alternatives for finding a fair price in situations like this, where retail prices are so much higher than the prices producers are getting. Anderson recalls a particular cafe in Froid that sold meat through its business back in the day.
“Then they came in with regulations that drove those business out, and now you can’t do that any more,” Anderson said. “We have no direct access to markets now like we did then,” he said.
Panasuk also lamented the situation.
“In the interest of public safety, they’ve taken away our power to market meat, milk and eggs,” he said. “Our farm commodities now have to go through these huge corporate food companies. They’ve taken away our right to market to people directly.”
To Panasuk, what needs to happen in general is what he describes as full price disclosure.
“I’m not against cattle coming in from Mexico and Canada,” he said, “because those are job creators. So that is fine.”
What he’d like to see is something like federally approved sale barns in the state, where foreign cattle are sold with a standard presentation.
Referencing Brazilian beef that he had just read were being imported right before he came to the Sidney Livestock Market on Wednesday, he said he wanted to know whether it was in a container and what kind and whether it was boned in or out.
“It should be done at an auction,” he said. “We should be able to bid our cattle just like Brazil cattle. I think the way to succeed is more price disclosure.”