November 22, 2025 • 43 mins
The country's cattle herd has shrunk to its smallest size in decades and beef prices have been soaring this year, with hamburgers and steaks becoming the latest flashpoints in the political debate over higher food prices. In this episode, we untangle the roots of declining domestic beef supply — from drought and surging feed costs to the lasting impact of consolidation in the meatpacking industry. We speak with Bill Bullard, CEO of R-CALF USA, a trade association for independent cattle ranchers, about the forces shrinking America's cattle industry and what can be done about it. (Editor's Note: This episode was recorded Oct. 30)
Subscribe to the Odd Lots Newsletter
Join the conversation: discord.gg/oddlots
Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. bloomberg.com/subscriptions/oddlots
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the All Thoughts podcast.
I'm Tracy Alloway.
Speaker 3 (00:22):
And I'm Joe. Why isn't thal Joe?
Speaker 2 (00:24):
What do you eat more of eggs or beef?
Speaker 4 (00:28):
You know?
Speaker 3 (00:28):
I was just thinking I want to eat more beef
in my life. I probably you eat more eggs ultimately,
but like, beef is just so good. Beef is the
best food there is in the entire world. I truly
believe that. And every time I eat beef, I think about,
why don't I eat this all the time. It's so good,
It's so satisfying and all these nutrients. I don't have
(00:49):
this impulse to snack and eat garbage afterwards. I want
to eat more beef.
Speaker 2 (00:53):
I'm pretty sure I eat more beef than eggs at
this point. I will have the occasional omelet and I
mix a lot of eggs into like Asian noodle dishes
and things like that, but not.
Speaker 3 (01:03):
That I aspire to live. They to have the Tracy
Alloy diet.
Speaker 2 (01:06):
Okay, Well, speaking of beef except expensive these Yes, this
is exactly it. So I'm sure everyone listening to this
podcast at this point has heard about rising beef prices
in the US. There are a lot of headlines flying
around constantly in recent days about this. So, for instance,
we're recording this on October thirtieth, and earlier this week,
(01:29):
President Trump was tweeting about how he wants beef prices
to be lower. He's also been talking about buying beef
from Argentina. It is very much in the news. There's
also the whole soybean drama with China.
Speaker 3 (01:43):
Yeah, there is a I think it's funny because in
that Trump post he said cattle rancher should appreciate how
good things are going because high beef prices, but bring
them down. There's just a lot, and I've said this
before on the show, which is that I think the
ultimate marker of civilization is the amount of beef or
protein that you can buy with an hour's work, that
(02:05):
the median person or the average person can buy with
an hour's work. And I think when it's going backwards,
we should be very disturbed. So setting aside, I'm very fortunate.
I could probably afford to these as much beef as
I want. But the price of ground beef, I'm looking
it up on the terminal now it's like tripled since
ten that there's like four dollars around the pandemic. Now
it's of over six dollars. I think these are extremely
(02:26):
serious issues.
Speaker 2 (02:27):
I will say I don't think we need to be
quite as obsessed with protein Americans especially, we already eat
a lot of protein. Say eat more fiber.
Speaker 3 (02:35):
I'm not saying we need to be obsessed. Actually, I
do think the protein craze may be a little out
of hand. I just think this is like a very
good measure of the advance of sort of a wealthy
society that protein gets more affordable.
Speaker 2 (02:47):
I'm going to get you a cow share for Christmas.
Speaker 4 (02:49):
Thank you?
Speaker 2 (02:50):
All right, Well, I am happy to say we do,
in fact have the perfect guest. We're going to be
speaking with Bill Bullard. He is the CEO of our
calf USA. So Bill, thank you so much, Thanks for
coming on.
Speaker 4 (03:00):
All thoughts, glad to be here. Thank you.
Speaker 2 (03:03):
Thank you also for actually looking the part of a
cattle rancher. We really appreciate it.
Speaker 3 (03:07):
No one can deny that we're talking to the perfect guest.
Speaker 2 (03:10):
All right, So why don't we start really simple? What
have you observed about beef prices just in the past
few months or so.
Speaker 4 (03:19):
Well, we've seen beef prices increasing as you've indicated, and
we see cattle pricing also increasing as you indicated. So
we now have a positive relationship between the price of
beef and the price of cattle, and we are a
competitive industry. We do not rely on government price supports.
Were the single largest segment of American agriculture. That cattle
(03:41):
industy generates about one hundred billion dollars a year in
cash receipts, so it's it's larger than any other commodity corn, wheat, cotton, dairy,
and we rely on competitive market forces. But we have
not had competitive market forces until very recently. And that's
where we need to get into the history of why
(04:01):
beef prices are high.
Speaker 2 (04:03):
Can I ask very quickly, you said there's now a
positive relationship between cattle prices and beef prices. Is that
not always the case?
Speaker 4 (04:10):
That certainly has not been the case, especially since twenty fifteen.
We saw an inverse relationship. We saw beef prices heading
skyward beginning in twenty and seventeen, and while beef prices
were increasing, cattle prices were falling. And this is really
odd in an industry where the only ingredient in beef
(04:32):
is cattle, so you would expect there to be a harmonious,
synchronous relationship, a positive relationship between beef prices and cattle prices.
Speaker 3 (04:41):
One of the things I discovered on the terminal back
during the pandemic, I learned all these things. We actually
have an index on the terminal, the Hedger's edge beef
packer margin, which I imagine to some extent reflects that spread,
and we do see it rise generally up really through
twenty twenty one, actually started to compress quite a bit.
(05:01):
But just actually why is that? Like, what explains why
these things can move in different directions? What is the
added factor in the price of beef that is not
the price of cattle.
Speaker 4 (05:12):
So let's go back to just over a generation. We'll
go back to nineteen eighty. Great at the time, we
had one point three million beef cattle farmers and ranchers
in the United States. We got about thirty seven million
cows in our mother cow herd. Beef Prices that consumers
paid were about two dollars and forty cents per pound.
At that time, we had the four largest packers in
(05:34):
the industry, controlling thirty six percent of the industry. So
if we think about how the beef industry works, it's
the consumer beef dollar that has to be allocated along
the entire supply chain. So back in nineteen eighty, every
time a consumer spent a dollar on beef, that dollar
was allocated by competitive market forces, and over sixty cents
(05:57):
of that dollar went back to the live cattle producer,
the farmer and rancher and the cattle feeder, and less
than forty cents went back to the processing part of
the beef industry, and that's to the retailer and the packer.
So the producer was receiving the majority shared which made
sense because they kept that animal for fifteen to eighteen
(06:18):
months before it was slaughtered and converted to beef, and
the beef packer only kept the animal for about seven
days and the retailer kept it for the shortest amount
of period possible. So but the point was is that
when consumers were paying two dollars and forty cents per
pound for beef, sixty cents of that dollar was going
back to the producer and only less than forty cents
(06:39):
was going back to the processor and the retailer. Now
jump ahead. Today, we've wiped out over half of all
the beef cattle operations in business. Just over a generation ago,
we've lost fifty two percent of them. We've wiped out
twenty five percent of our Mother Kyle beef herd, and
the four largest packers controlled today about eighty percent of
(07:00):
the marketplace. And consumers in twenty twenty four paid about
eight dollars in twenty three cents per pound for beef,
and now in twenty twenty one, just a couple of
years ago, the allocation that the competitive market was making
in the marketplace was completely tipped on its head. In
twenty twenty one, the packer and the retailer received over
(07:22):
sixty cents of every consumer beef dollar, and the producer
received less than forty cents. So here's the question, how
would a competitive market could that have happened? How could
a competitive forces in the marketplace completely reversed the competitive
allocation of the consumer beef dollar within the entire beef
(07:43):
supply chain. The answer to that question is it can't.
If our market was competitive, that could never have happened.
That raises the concerns that we've been struggling with for
the past several decades. Our industry is in a state
of crisis and it has been and what has happened
is is because of industry concentration and consolidation, the ability
(08:05):
of the multinational meat packers and retailers to exert buying
power upstream in the supply chain, and the fact that
we've entered free trade agreements that have allowed the meat
packers and retailers to access beef from around the world
and displace domestic production. Because the beef that we import
from Argentina, Brazil, Uruguay, Nicaragua, Costa Rica, Australia, New Zealand,
(08:30):
Canada and Mexico, it's a perfect substitute for domestic product.
So the more we import, the less we have the
ability and capacity to maintain domestic production of this very
important protein source, which is beef. And so what we
see today is a dysfunctional marketplace. As I described before,
(08:51):
since twenty seventeen, we saw beef prices going up that
consumers were paying in the retail store. We saw cattle
prices going down. SENSU shows that just in the five
year period from twenty seventeen to twenty twenty two, we
lost one hundred and six thousand beef cattle operations, farmers
and ranchers exited the industry during that period. And the
(09:13):
reason that that's happened is because they've suffered long term
lack of profitability. It's because their market is dysfunctional. It's
because imports have displaced our domestic production and our opportunity
to expand. And now we've hit a huge market shock,
an economic shock to the market, and that was the
latest drought that occurred in the latter part of twenty twenty.
Speaker 2 (09:35):
This is what I was going to ask, so just
to we're going to talk more about industry consolidation, for sure,
and you know, I'm looking, for instance, at a headline
right now about Walmart tightening its grip on the beef
market by setting up a new plant. But just to
play devil's advocate for a second, how much of this
is just down to pure input costs like grain going up,
(09:58):
or you know, the drought that you just mentioned, or labor.
Speaker 3 (10:01):
Costs at least, especially the move that we've seen over
the last year, which I'm sure which cannot obviously be
explained by multi decade trends.
Speaker 4 (10:10):
So what we've seen is our cattle supplies that tightened
to the lowest levels than seventy five years. So we
have extremely tight supply situation, but we have incredibly strong
beef demand. Consumers willingness to pay for beef appears unbounded
as prices of increase, consumers that still cleared the grocery
store shelves with the product. And so the latest drought
(10:32):
that occurred had accelerated the ongoing liquidation of our US
beef cattle inventory. And that's why our supplies are so tight.
And yet you've got incredible consumer demand for beef, and
so we have seen a spike in prices because of
that strong demand. Consumers continue to be willing to pay
(10:52):
more for beef. But that is not how our market
has been functioning for the past decade.
Speaker 3 (10:58):
Let's say the rain code, there's no drought, et cetera.
What are we talking about for a timeline again, setting
aside the structural things, what do we talk about for
a realistic timeline for getting back to where we think like, oh,
we are comfortable with the level of cattle stock that
we are happy with the level of cattle stock that
we have in this country.
Speaker 4 (11:19):
Right, so we currently produce about three billion pounds less
beef than what is consumed in America. So large segment
of American agriculture actually underproduces for the domestic market. And
because of the long biological cycle of cattle, it takes
about three years to decide to hold back cattle to
(11:40):
breed and then to have a calf, and then to
raise that calf to slaughter weight over a period of
fifteen to eighteen months. And so in order for our
industry to begin an expansion phase, we would need a
price point that incentivizes producers to make the investment to
build a herd, and unfortunately that price point occurred back
(12:01):
around twenty twenty three. We should be in an aggressive
expansion phase now, except that instead of domestic consumers relying
on US producers, we've increased the volume of beef imports
to record volumes in twenty twenty four. That's displacing our
domestic production. And that increase of imports is not distinguished
(12:24):
in the marketplace. Consumers can't tell if the beef they're
buying is four and beef for domestic beef, and so
that puts the power and control in the hands of
the packers and the importers the retailers and not in
the hands of producers. So your question was how much
of this had to do with increase in input costs. Well,
the increase in input costs reduces the margin that US
(12:46):
cattle producers receive at any given price point, and we've
seen increased production costs certainly. But the point is is
that cattle producers do not set the price of beef.
The price of beef is set by the packers and
the retailers who sell to the consumer. The producer is
a price taker in this market and has been for decades.
(13:06):
They have cattle, they offer them for sale, they accept
or reject a bid by the packer, and they're producing
a perishable product. So when an animal is ready for slaughter,
ready to be fabricated into a beef product, the producer
who fed that cattle has a two to three week
window in which to market the animal. Otherwise it degrades
in quality, it adds fat instead of muscle, and as
(13:29):
a result, the producer has very limited bargaining power and
a highly concentrated market as we have now, And when
they're selling into a market that's controlled where four packers
control eighty percent of the market, they are victims of
the abuse of market power that emanates inherently from such
a highly concentrated marketing structure. So the increase production costs
(13:52):
reduce the profitability of producers, but it doesn't affect the
producer's ability to market cattle. That would be the demand
for life cattle, and the demand from my live cattle
is offset and undercut by increased volumes of import.
Speaker 2 (14:23):
What's the relationship between beef availability and the dairy industry?
Dairy cows? So the reason I bring it up, Joe's
going to get sick of me mentioning this, But I've
been reading this like seventy year old book on small
scale farming.
Speaker 3 (14:38):
I hate when people are always bringing up books that
they I know it.
Speaker 2 (14:42):
Bringing up and you know, there's a chapter in it
about whether or not you want to go into cattle
ranching for beef or if you want to raise dairy cows.
And one of the things that you learn from this
is that every dairy cow usually becomes a beef cow
at some point once it's milk production starts to dry up,
(15:03):
it usually gets sold for slaughter. So what's the relationship
or the interaction like there.
Speaker 4 (15:09):
Well, historically, what you described is true. As the dairy
animals have exceeded their production lifespan, they are marketed as
call animals into the beef supply chain. And it's a
very lean meat product that is mixed with the higher
quality trim that we obtain over our grain fed animals
(15:30):
that are fed in feed lots or is exclusively for beef.
So there wasn't much competition between the beef industry and
the dairy industry. But here recently, as we've increased our
technology and genetic abilities, we have begun to raise more
male dairy animals and are bringing them into feed lots
(15:50):
and feeding those animals, and they are now beginning to
compete with the beef cattle farmer and rancher in the marketplace.
And this is a relatively recent phenomena that's been occurring
in our industry.
Speaker 2 (16:02):
Wait, why is that happening?
Speaker 4 (16:03):
Yes, well, it's happening because there's the profit opportunity to
sell dairy cattles into the beef supply chain, and of
course that will compete directly with our America's farmers and
ranchers who not only will have to now compete with
this increase in the dairy beef sector. But they're already
dealing with this undifferentiated, cheaper, important flood that has been
(16:27):
negatively affecting their profitability in this industry.
Speaker 3 (16:31):
Say a little bit more about Okay, kettle prices have
gone up, and so in theory that, as you said,
in theory, that should incent more investment, et cetera. By this,
talk a little bit more about some of the input
costs that a cattle rancher faces. I've been making these
decisions to expand their stock.
Speaker 4 (16:51):
So one of the first factors is the availability of
sufficient land to raise the animal, because in the beef
cattle industry, the animal is primarily raised on grass. After
a calf is born and it suckles the mother for
about four to six months on grass and before it
is moved downstream in the supply chain to become a
(17:13):
yearly in animal and ultimately delivered to a feed lot
where it's fed until it's slaughter weight. And so the
input costs include the fuel with which to run an operation.
It includes the veterinary expenses for keeping your animals healthy.
It includes the land costs of maintaining sufficient forage supplies
with the animal. It includes the cost of equipment to
(17:36):
put up hay and grain with which to feed those cattle,
and in many instances it includes labor. However, most of
the family farm and ranches here in the United States
are just that their family farms and ranches attempting to
raise cattle, and there's experiencing increase input costs. You know,
we could talk about fertilizer costs too as well, but
(17:59):
ultimately the costs have increased due to inflation, and that
squeezes the margin that they receive at whatever price point
that they're experiencing in the marketplace.
Speaker 2 (18:09):
In terms of industry consolidation, the fact that there are basically,
you know, four gatekeepers to beef processing in the US.
How did we actually get here?
Speaker 4 (18:20):
Well, we got here because we were lax in enforcing
our US anti trust laws, the Sherman Act of eighteen ninety,
the Clayton Act, I think of about nineteen fourteen.
Speaker 2 (18:30):
Sherman Act, Clayton Act, those acts. Sorry, the last time
we spoke about eggs in a big series about chicken,
we talked a lot about antitrust, right.
Speaker 4 (18:40):
Well, and that's a huge problem. In fact, it's no
coincidence that as beef prices are increasing, we just saw
a settlement in a national class action suit in which
two of the largest packers, Tyson and Cargill, have purportedly
agreed to settle the consumer's complaints about beef price fixed
to the tune of about eighty seven and a half
(19:02):
million dollars. So what we have in our industry is
a decades long lack of enforcement of antitrust laws that
allowed the meat packers back in the nineteen eighties to
engage in what was called merger Mania. We saw an
unprecedented amount of mergers and acquisitions in the beef cattle industry,
(19:23):
and it was through that process and no enforcement of
anti trust laws, that the meat packers were able to
achieve this extremely high level of concentration. And in addition
to that, Congress realized over one hundred years ago that
independent livestock producers were really vulnerable to the monopsony power,
the buying power of the concentrated meat packers. So they
(19:46):
passed what was called the Packers and Stockyards Act in
nineteen twenty one, and this was to ensure that the
meat packers not only could they not engage in antitrust
activities such as monopolization and price fixing. But this Act
also said they couldn't engage in practices of procuring livestock
from producers that was pactly unfair. And so this important
(20:11):
act actually helped to bolster the United States' ability to
ensure antitrust violations were not incurring in the marketplace, and
it gave the independent producer recourse in the event that
they were treated unfairly or deceptively by the concentrated market.
The problem is just like our anti trust laws that
(20:31):
collected dust on the shelf, so to to the Packers
and Stockyards Act, and yet today the US Department of
Agriculture has not propagated the rules necessary in order to
implement and enforce this over one hundred year old Packers
and Stockyards Act that was intended to protect independent livestock
producers from the abuse of market power of the dominant
(20:53):
beef packers.
Speaker 3 (20:54):
Do the children of ranchers want to become ranchers? There
was a popular country song that came out in twenty
two three by Cody Johnson called Dirt Cheap, and the
entire premise of the song is about this dad. There's
real estate developer offers them all this land and he's
about to take the money and then he gets sad
thinking about his kids will never be running around on
this And when I hear the song, I got a
(21:15):
little cynical. I was like, yeah, but that daughter is
going to sell the land when she gets older, so
it's this like she's going to move to a big city.
But are there issues in your industry of like the
next generation of ranchers, Like, no, I want to sell
this land to a data center. I want to sell
this land to a housing subdivision so that I can
like go work in finance in New York City.
Speaker 4 (21:34):
When you have an industry like ours that has lost
over half its participants in the course of just over
a generation. Yeah, it's not unsurprising that the average age
of the US farm and rancher is now somewheres north
of fifty eight years of age. And we hear anecdotal
information all the time about ranch families who have struggled
(21:57):
under an economic cost price squeeze for decades their children
have watched, They've encouraged their children to do something else
other than to ranch. And that's a huge problem that
we have because part of this expansion phase will require
us to attract new interests to attract aspiring cattle farmers
and ranchers into the industry. That's not happening. And even
(22:18):
though I said that the price point was sufficient to
incentivize the expansion over a year ago, we're not expanding
and we're not expanding because our cattle producers has recently
witnessed a complete collapse in cattle prices. When we were
about where we're at today, and that was just as
recently as twenty fourteen and fifteen. At that time, we
(22:39):
had the highest nominal cattle prices in the history of
our industry, and beef consumers were then paying the highest
nominal beef prices in history. And every analyst, government and
private alike, said, the cattle producer is going to receive
another three years of very strong prices because of that
long biological cycle of cattle.
Speaker 3 (22:58):
This is this strange me as a very important data point,
the fact that the rancher has been trained essentially to
expect that high prices won't necessarily sustain themselves.
Speaker 4 (23:10):
Right.
Speaker 3 (23:11):
You could see the boom bust, Ye yah, the boom bust.
And we talked about this across industries. It's like, great
that the price is there, but is the price going
to be there in three years when that cow is
ready to be sold for meat. It's not enough to
just have temporarily high prices.
Speaker 4 (23:26):
Well, that's right, and that's exactly what happened at the
end of twenty fourteen. In twenty fifteen, when everyone believed
that our cattle prices would stay strong, they inexplicably collapsed,
and they collapsed further and faster than any time in history.
And they collapsed until we hit that point in twenty
seventeen when suddenly consumer demand was driving beat prices higher
(23:48):
and the meat packers were paying less and less for
cattle prices, and so we had this in verse, completely
dysfunctional situation in the marketplace, and producers were hurting. That's
the period we lost a hundred six thousand producers from
twenty seventeen to twenty twenty two. And only now, after
this latest drought that we shrunk the herd size to
(24:08):
such an ultra low level, have we seen the cattle
prices begin to once again respond favorably to the latent
forces of competition in the industry. They began to chase
beef prices upward, and we've seen that more acutely here
in the last couple few months as beef prices of increase.
But the fact is is that we have not enforced
(24:30):
antitrust laws and what we need to do now is
determined to what extent are today's beef prices caused by
antitrust behavior in the marketplace, not from the cattle producer,
who's the price taker in the marketplace, but by the
multinational beef packers and retailers that are actually controlling the
beef market here in the United States.
Speaker 2 (24:52):
Well, speaking of that end expansion, one thing we have
seen is new entrants, new corporate entrants moving into the
beef and history and I mentioned Walmart earlier, what's the
thinking behind that? Is it just a vertical integration play
or what's the additive for a company like Walmart to
get into beef.
Speaker 4 (25:11):
Well, you think about all of our livestock sectors. So
we'll start with the poultry sector. That sector was vertically
integrated in the sixties and seventies from egg to play.
It's the corporations, what we call the integrators, were controlling
the production. The farmers owned their farms and ranchers they
invested in the capitol, but the integrators dictated how the
(25:33):
farmers would raise those chickens. In fact, the integrator owned
the chickens and essentially hired the farmer to raise them
for the integrator. That model was then applied in the
eighties and nineties to our hog sector. Back in nineteen eighty,
when we had one point three million cattle producers, we
also had six hundred and sixty seven thousand hog producers
(25:54):
scattered all across the United States raising hogs. But today
we're down to sixty five thousand, ninety percent of our
hog producers because that industry, the corporations involved in that
industry began to follow the chicken model, and so we
reduced the number of participants and they began to raise
hogs under a highly concentrated situation, and it's completely vertically
(26:17):
integrated from birth to play. The cattle industry is the
last frontier for these major global need packers, and it's
because of the forage requirements and the long biological cycle
of cattle that has prevented them from engaging in the
vertical integration model, which we call chickenization. And we're trying
to prevent the chickenization of our cattle industry. But the
(26:38):
reason Walmart's getting into it is because it's profitable. So
Walmart has decided it's going to vertically integrate the beef
cattle industry. It's going to direct what genetics of farmer
rancher has to use in order to raise the animal.
Walmart will dictate the production practices and feeding, and then
Walmart will provide the marketing outlet for the ucers, and
(27:00):
then Walmart will sell that resulted beef product to the consumer.
Speaker 2 (27:04):
Hey, it really is chickenization. It's the tournament system basically.
Speaker 4 (27:08):
And it will lead to that. So the tournament system
is a pricing mechanism that greatly benefits the integrator and
allows them to buy the chickens from the farmer and
pay less for their managerial skills and raising the chicken
for them. And that's a concern we have with the
Walmart model. Walmart wants to lock up this segment of
the beef industry and they want to eliminate all these
(27:30):
cattle producers just have been eliminated. Hog producers were eliminated
in the hog industry, and poultry producers were eliminated. And
the first step in the process is you do away
with you eliminate the competitive cash market that's what allows
them to vertically integrate an industry, and we're seeing in
that in the cattle industry, our cash market has been
shrinking at an alarming rate, and as we allow this
(27:53):
to continue, we will soon see even more vertical integration.
What this means is we're going to hollow out rural
communities all across America, just as we have been doing
for the past four decades. And that's because we will
eliminate profitable opportunities for our independent, family scale farmers and
ranchers by eliminating the cash market, by dismantling the competitive infrastructure,
(28:14):
and simply handing the industry over to a highly centralized,
highly concentrated be packing and retailing industry.
Speaker 3 (28:36):
I'm going to veer into some sensitive territory here. I
don't know, I think about how you lean politically. I
also don't particularly care is fine. All that being said,
I think that I have stereotypes, and I think I
imagine what the typical cattle rancher, how they are politically,
guy wearing a cowboy hat, speaking with a country accent.
(28:59):
I would we have a presumption about how they might vote. Again,
not you specifically, Well, you know, I have my stereotypes,
et cetera, and they're probably true. Has the current administration,
you know, talking, he's been talking to you guys via
history social account. You want to to lower prices, but
also appreciate him for the high prices. A little unclear
he has this current administration been a friend to the
(29:23):
independent cattle rancher.
Speaker 4 (29:24):
Well, what independent cattle producers needed is they needed our
imports to be managed, not to hand to the meat
packers the ability to source whatever volume of imports they
want to displace our domestic production, to prevent our domestic
production from keeping up with growth and population, which is
what has occurred here. And so what we needed was
(29:46):
the implementation of tariffs and tariff rate quoters on countries
that persistently maintain a trade surplus with the United States.
In other words, countries from which we buy large volumes
of beef, but we sell to them very little. So
we have been calling for tariffs and tariff rate quotas,
and tariff rate quoteras, of course, are limits on the
(30:07):
volume of beef that any country can export to the
United States. And so when President Trump took his second term,
that's the first thing he began doing was imposing tariffs,
and for an industry that underproduces in the domestic market,
we need the tariffs to provide our industry the space
to expand and increased production. So we strongly supported the
(30:28):
tariffs when we saw Brazilian imports absolutely explode in twenty
twenty five and even last year, we were thankful that
the President imposed a fifty percent tariff on Brazilian exports
of beef because that was going to further keep our
industry awash in these price depressing imports. But when the
President announced this idea to lower consumer beef prices by
(30:52):
increasing Argentina's beef import quota rate, we believe that he
was misguided. He was misinformed as to how the market
structure work. I don't think he was aware that our
industry has just gone through years of depressed prices while
consumers were experiencing record beef prices. I don't think he
(31:14):
understood how severe the lack of anti trust enforcement has
adversely affected our industry and caused our industry to shrink.
And so producers are very very concerned right now because
we're at the price point where we should be expanding,
but we're not expanding as we should be because of
the concern for the market failure in our industry that
(31:34):
has not been corrected. It's because we're not certain anymore
whether the President is in fact going to begin to
manage these imports or if he was just going to
let these packers continue to import whatever volume of beef
and cattle they want to displace our domestic production, and
they do this without informing consumers where that beef is from.
There is no country of origin label on the imported
(31:56):
beef product, so consumers can't choose to support the domestics
supply chain versus the foreign supply chain. And that's why
we urge in Congress to pass mandatory country boards and
labeling immediately. And I think this will help to at
least mitigate the negative impact that increased imports from Argentina
will have on our industry, because then we can go
to the consumer and ask them to choose the higher
(32:17):
quality USA produce beef and support US cattle farmers and ranchers.
Speaker 3 (32:21):
Look, I totally get where you're coming from, but I
live in New York City and I have children to feed,
and one of my children loves beef a lot. And
the vast majority of Americans are not cattle ranchers by
any strategy. So again, I understand that you have a
constituency that you represent. You want to make your case.
(32:42):
Why should the vast majority of the country, which are
beef consumers get no benefit from higher cattle prices, get
no benefit from higher beef prices. Why shouldn't we want
the either imports channel or the Walmart, which frankly has
a long history of driving prices down in almost any
category enter. They're sort of famously a low cost seller.
(33:02):
Why shouldn't we support these trends?
Speaker 4 (33:04):
Well, look at any other sector in the American economy.
So we do import large volumes of goods from China,
for example, and a consumer can go to the grocery
store and see a China priced product labeled as China
product or China or they could buy a USA product,
And typically the USA product is going to cost more,
But consumers have a choice. They can choose to purchase
(33:27):
the cheaper product if they want to. Now jump to
the beef industry, consumers have no choice. The product is undifferentiated.
The meat packers are importing this beef from Australia, New Zealand.
In these twenty different countries I talked about earlier. They're
importing them cheaper than what we can produce it here,
but there's no label on it. What there is on
it is a US inspection sticker, leading and suspecting consumers
(33:50):
to believe, well, that must be a domestic product. And
so because the consumer can't choose between the cheaper foreign
product and the more expensive USA produc product, there's no
price saving for the consumer because the packers and the
retails will price it identical because they don't have to
distinguish it, so they pocket the increased profitability of buying
(34:11):
low and selling high. And the most affluent beef consuming
market in the world, and that's the United States of America.
That's an example of our dysfunctional market. Consumers have not
benefited from these increased volumes of imports. Instead, these increased
volumes of imports have reduced demand for our domestic cattle,
driving hundreds of thousands of cattle producers out of the
(34:32):
industry over the past four decades.
Speaker 2 (34:35):
Can I start a beef processing plant? Why can't I
go into it? It seems like a very profitable business. Certainly,
if you're a JBS or someone like that, you seem
to be making a lot of money, why don't we
have new entrants.
Speaker 4 (34:47):
So you have four packers controlling eighty percent of the
fed cattle market, meaning they also control about eighty percent
of the box beef market, meaning they've got long term
and short term contracts with the major retailers. They have
shelf space with those retailers. So, if you're a small
packing plant trying to get started, how are you going
to market your beef? When you're marketing into such a
(35:08):
highly concentrated, consolidated market where the retailer has long term
contracts with the largest dominant global beef packers, how are
you going to access the marketplace? So we've had lots
of smaller meat packers try to start up that it
requires a huge capital outlay to do so. Nevertheless, the
government actually during the past administration, has been encouraging their
(35:29):
growth and development. But they're struggling. They're struggling because they
have difficulty in marketing their product. Even if they're marketing
a high quality product, they're marketing into a commodity structured
marketplace and the advantage falls to the meat packers. So
until and unless we enforce our antitrust laws and our
(35:50):
fair competition laws, we will continue to see these upstart
experiencing severe difficulty in finding a profitable marketing outlet for
their product.
Speaker 3 (36:02):
You know, like I said, I really like beef. Everyone's
into protein these days. That we talked about this recently
on another episode. Protein is really hot. Animal protein in
particular is really hot. There's a lot of influencers when
people have podcasts and they say things like eat more
red meat, and our attitudes about red meat of change.
When I was growing up that was scary of don't
(36:24):
cut back on your red meat. Now it's like a
red meat is like the healthiest thing you can eat.
I don't know if that's true, but a lot of
people would say that how much of the prices that
we pay, whether it's for the price of cattle or
the end price of our ground beef, for whatever steak
is about the secular trend towards people wanting to have
(36:46):
more animal protein in their diets.
Speaker 4 (36:49):
Sure, so, I think it's a huge factor. I think
there are a number of factors contributing to the consumer's
increased demand and willingness to pay more for beef, and
I think they're in life. The answer to the problem.
If we enforce our antitrust laws and let the market
signals flow in our industry, we will begin to expand
and our production will soon hit an equilibrium with the
(37:11):
consumer demand, and we would see prices subside. In fact,
if consumers are unwilling to pay current prices for beef,
they would shift to other protein sources like lamb, chicken,
and pork, and you would see the price point from
the retailers begin to fall, and you would see the
high beef prices subside. Actually, but if the government causes
(37:33):
us to happen, if the government interferes and forces the
demand for live cattle to decline, we're not going to
increase the size of our US cattle herd, and America
will become increasingly dependent on foreign sources for the beef.
Right now, at twenty twenty four, about twenty two percent
of all the beef available in the US market was
(37:55):
imported product. And if we look at our sister industry,
the sheep industry, would who is the direction our cattle
industry is going. In twenty twenty four, seventy three percent
of all the lamb consumed in America came from Australia,
New Zealand. We've decimated our domestic sheep industry. Now we're
now government has its sights on the cattle industry, and
(38:16):
the increasing imports without any product differentiation in the marketplace
will simply exacerbate the ongoing shrinking of our cattle producer
in terms of the number of participants, number of cattle,
and the number of marketing outlets.
Speaker 2 (38:31):
All right, we're going to have to leave it there,
Bill Bullard, I just realized Bullard nominative determinism. Right, you
had to go into cattle. Thank you so much for
coming on offline.
Speaker 4 (38:44):
My pleasure. Thank you very much. Joe.
Speaker 2 (38:58):
That's really interesting. I'm definitely closely related to the Chicken
series that I did, and again it seems to be
that chickenization the running through agriculture. I hadn't realized that
cows cattle ranching were basically like the last frontier agriculture either.
Speaker 3 (39:15):
And I, to be honest, I would have already assumed
it had been more or less on that. I actually
think the Walmart thing is very interesting because on the
one hand, people look at an entity like Walmart and
it's like, here's this monopsity player. It's gonna drive so
much power. On the other hand, you say, here's a
(39:36):
new market entrant. This is is like here is it?
The market has just gotten more competitive. I think it's
an interesting gut check for people who want to think
about like market competition that when you read the headline
Walmart is going to get into beef processing, do you
read that as like bad or good? Because you asked,
why aren't there more interest? Well, here's a new entrant
(39:58):
coming in. I have to say.
Speaker 2 (39:59):
I shop at on I buy beef. I buy those
big Have you ever seen the big, like long packages
of ground beef.
Speaker 1 (40:05):
Oh?
Speaker 2 (40:06):
Yeah, they're pretty good. Actually, I am kind of floored
that there's no country of origin label on these. I
never thought about that.
Speaker 3 (40:14):
I am a little skeptical would change much like might
not like, would you spend meaningfully more or less on
beef presuming you expect that it was like healthier or whatever,
that it was safely arrived.
Speaker 2 (40:30):
Yeah, Well, what I would say is I do shop
at Walmart, but I shop at Walmart generally for bulk beef,
and if I'm looking for the really good stuff, I
will go to an independent farmer, of which there are
many in Connecticut. And I realized, like not everyone has
that luxury, and I will try to get the good beef.
Speaker 3 (40:49):
I might try to get the good beef too. It
might come from Japan. Don't they like treat their cows
really well, like they like give their cows like beer
and all that stuff massages. Yeah, No, I think I
love talking about animal industry economics. There's a lot of tension.
I will say one other thing, which is, you know,
I asked that question about like, well, why should we
care the beef consuming part of the world, which is
the of the country, which is the vast majority of
(41:11):
the country. The US used to run a very big
trade surplus and food stuff. Only very recently, in the
last couple of years, has that turned into deficit. It's
probably a source of some concern to me that like
we no longer can domestically satisfy all of our food needs.
Speaker 2 (41:32):
If you're worried about domestic semiconduct, then you probably should
be worried about food capacity.
Speaker 3 (41:37):
I think there are some some overlap issues.
Speaker 2 (41:40):
You can't eat the chips, Joe, oh, except.
Speaker 3 (41:43):
For except the other chips that we can eat. I know,
I think there are some I think there are some
things to worry about or think about with food that
are a little different, a little similar, that maybe we
should talk about more.
Speaker 4 (41:55):
At some point.
Speaker 2 (41:55):
Absolutely, all right, shall we leave it there for This
has been another episode of the All Podcast. I'm Tracy Alloway.
You can follow me at Tracy Alloway.
Speaker 3 (42:03):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow urcaf USA. It's at arcaf USA. Follow our producers
Kerman Rodriguez at Kerman armand dash Ol Bennett at dashbod
and kill Brooks at Kilbrooks. From our Odd Lots content,
go to Bloomberg dot com slash odd Lots with the
daily newsletter and all of our episodes, and you can
chat about all of these topics twenty four to seven
(42:25):
in our discord discord do gg slash.
Speaker 2 (42:28):
Odlocks And if you enjoy odd Lots, if you like
it when we do these agricultural episodes, then please leave
us a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
all of our episodes absolutely ad free. All you need
to do is find the Bloomberg channel on Apple Podcasts
and follow the instructions there. Thanks for listening in
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the All Thoughts podcast.
I'm Tracy Alloway.
Speaker 3 (00:22):
And I'm Joe. Why isn't thal Joe?
Speaker 2 (00:24):
What do you eat more of eggs or beef?
Speaker 4 (00:28):
You know?
Speaker 3 (00:28):
I was just thinking I want to eat more beef
in my life. I probably you eat more eggs ultimately,
but like, beef is just so good. Beef is the
best food there is in the entire world. I truly
believe that. And every time I eat beef, I think about,
why don't I eat this all the time. It's so good,
It's so satisfying and all these nutrients. I don't have
(00:49):
this impulse to snack and eat garbage afterwards. I want
to eat more beef.
Speaker 2 (00:53):
I'm pretty sure I eat more beef than eggs at
this point. I will have the occasional omelet and I
mix a lot of eggs into like Asian noodle dishes
and things like that, but not.
Speaker 3 (01:03):
That I aspire to live. They to have the Tracy
Alloy diet.
Speaker 2 (01:06):
Okay, Well, speaking of beef except expensive these Yes, this
is exactly it. So I'm sure everyone listening to this
podcast at this point has heard about rising beef prices
in the US. There are a lot of headlines flying
around constantly in recent days about this. So, for instance,
we're recording this on October thirtieth, and earlier this week,
(01:29):
President Trump was tweeting about how he wants beef prices
to be lower. He's also been talking about buying beef
from Argentina. It is very much in the news. There's
also the whole soybean drama with China.
Speaker 3 (01:43):
Yeah, there is a I think it's funny because in
that Trump post he said cattle rancher should appreciate how
good things are going because high beef prices, but bring
them down. There's just a lot, and I've said this
before on the show, which is that I think the
ultimate marker of civilization is the amount of beef or
protein that you can buy with an hour's work, that
(02:05):
the median person or the average person can buy with
an hour's work. And I think when it's going backwards,
we should be very disturbed. So setting aside, I'm very fortunate.
I could probably afford to these as much beef as
I want. But the price of ground beef, I'm looking
it up on the terminal now it's like tripled since
ten that there's like four dollars around the pandemic. Now
it's of over six dollars. I think these are extremely
(02:26):
serious issues.
Speaker 2 (02:27):
I will say I don't think we need to be
quite as obsessed with protein Americans especially, we already eat
a lot of protein. Say eat more fiber.
Speaker 3 (02:35):
I'm not saying we need to be obsessed. Actually, I
do think the protein craze may be a little out
of hand. I just think this is like a very
good measure of the advance of sort of a wealthy
society that protein gets more affordable.
Speaker 2 (02:47):
I'm going to get you a cow share for Christmas.
Speaker 4 (02:49):
Thank you?
Speaker 2 (02:50):
All right, Well, I am happy to say we do,
in fact have the perfect guest. We're going to be
speaking with Bill Bullard. He is the CEO of our
calf USA. So Bill, thank you so much, Thanks for
coming on.
Speaker 4 (03:00):
All thoughts, glad to be here. Thank you.
Speaker 2 (03:03):
Thank you also for actually looking the part of a
cattle rancher. We really appreciate it.
Speaker 3 (03:07):
No one can deny that we're talking to the perfect guest.
Speaker 2 (03:10):
All right, So why don't we start really simple? What
have you observed about beef prices just in the past
few months or so.
Speaker 4 (03:19):
Well, we've seen beef prices increasing as you've indicated, and
we see cattle pricing also increasing as you indicated. So
we now have a positive relationship between the price of
beef and the price of cattle, and we are a
competitive industry. We do not rely on government price supports.
Were the single largest segment of American agriculture. That cattle
(03:41):
industy generates about one hundred billion dollars a year in
cash receipts, so it's it's larger than any other commodity corn, wheat, cotton, dairy,
and we rely on competitive market forces. But we have
not had competitive market forces until very recently. And that's
where we need to get into the history of why
(04:01):
beef prices are high.
Speaker 2 (04:03):
Can I ask very quickly, you said there's now a
positive relationship between cattle prices and beef prices. Is that
not always the case?
Speaker 4 (04:10):
That certainly has not been the case, especially since twenty fifteen.
We saw an inverse relationship. We saw beef prices heading
skyward beginning in twenty and seventeen, and while beef prices
were increasing, cattle prices were falling. And this is really
odd in an industry where the only ingredient in beef
(04:32):
is cattle, so you would expect there to be a harmonious,
synchronous relationship, a positive relationship between beef prices and cattle prices.
Speaker 3 (04:41):
One of the things I discovered on the terminal back
during the pandemic, I learned all these things. We actually
have an index on the terminal, the Hedger's edge beef
packer margin, which I imagine to some extent reflects that spread,
and we do see it rise generally up really through
twenty twenty one, actually started to compress quite a bit.
(05:01):
But just actually why is that? Like, what explains why
these things can move in different directions? What is the
added factor in the price of beef that is not
the price of cattle.
Speaker 4 (05:12):
So let's go back to just over a generation. We'll
go back to nineteen eighty. Great at the time, we
had one point three million beef cattle farmers and ranchers
in the United States. We got about thirty seven million
cows in our mother cow herd. Beef Prices that consumers
paid were about two dollars and forty cents per pound.
At that time, we had the four largest packers in
(05:34):
the industry, controlling thirty six percent of the industry. So
if we think about how the beef industry works, it's
the consumer beef dollar that has to be allocated along
the entire supply chain. So back in nineteen eighty, every
time a consumer spent a dollar on beef, that dollar
was allocated by competitive market forces, and over sixty cents
(05:57):
of that dollar went back to the live cattle producer,
the farmer and rancher and the cattle feeder, and less
than forty cents went back to the processing part of
the beef industry, and that's to the retailer and the packer.
So the producer was receiving the majority shared which made
sense because they kept that animal for fifteen to eighteen
(06:18):
months before it was slaughtered and converted to beef, and
the beef packer only kept the animal for about seven
days and the retailer kept it for the shortest amount
of period possible. So but the point was is that
when consumers were paying two dollars and forty cents per
pound for beef, sixty cents of that dollar was going
back to the producer and only less than forty cents
(06:39):
was going back to the processor and the retailer. Now
jump ahead. Today, we've wiped out over half of all
the beef cattle operations in business. Just over a generation ago,
we've lost fifty two percent of them. We've wiped out
twenty five percent of our Mother Kyle beef herd, and
the four largest packers controlled today about eighty percent of
(07:00):
the marketplace. And consumers in twenty twenty four paid about
eight dollars in twenty three cents per pound for beef,
and now in twenty twenty one, just a couple of
years ago, the allocation that the competitive market was making
in the marketplace was completely tipped on its head. In
twenty twenty one, the packer and the retailer received over
(07:22):
sixty cents of every consumer beef dollar, and the producer
received less than forty cents. So here's the question, how
would a competitive market could that have happened? How could
a competitive forces in the marketplace completely reversed the competitive
allocation of the consumer beef dollar within the entire beef
(07:43):
supply chain. The answer to that question is it can't.
If our market was competitive, that could never have happened.
That raises the concerns that we've been struggling with for
the past several decades. Our industry is in a state
of crisis and it has been and what has happened
is is because of industry concentration and consolidation, the ability
(08:05):
of the multinational meat packers and retailers to exert buying
power upstream in the supply chain, and the fact that
we've entered free trade agreements that have allowed the meat
packers and retailers to access beef from around the world
and displace domestic production. Because the beef that we import
from Argentina, Brazil, Uruguay, Nicaragua, Costa Rica, Australia, New Zealand,
(08:30):
Canada and Mexico, it's a perfect substitute for domestic product.
So the more we import, the less we have the
ability and capacity to maintain domestic production of this very
important protein source, which is beef. And so what we
see today is a dysfunctional marketplace. As I described before,
(08:51):
since twenty seventeen, we saw beef prices going up that
consumers were paying in the retail store. We saw cattle
prices going down. SENSU shows that just in the five
year period from twenty seventeen to twenty twenty two, we
lost one hundred and six thousand beef cattle operations, farmers
and ranchers exited the industry during that period. And the
(09:13):
reason that that's happened is because they've suffered long term
lack of profitability. It's because their market is dysfunctional. It's
because imports have displaced our domestic production and our opportunity
to expand. And now we've hit a huge market shock,
an economic shock to the market, and that was the
latest drought that occurred in the latter part of twenty twenty.
Speaker 2 (09:35):
This is what I was going to ask, so just
to we're going to talk more about industry consolidation, for sure,
and you know, I'm looking, for instance, at a headline
right now about Walmart tightening its grip on the beef
market by setting up a new plant. But just to
play devil's advocate for a second, how much of this
is just down to pure input costs like grain going up,
(09:58):
or you know, the drought that you just mentioned, or labor.
Speaker 3 (10:01):
Costs at least, especially the move that we've seen over
the last year, which I'm sure which cannot obviously be
explained by multi decade trends.
Speaker 4 (10:10):
So what we've seen is our cattle supplies that tightened
to the lowest levels than seventy five years. So we
have extremely tight supply situation, but we have incredibly strong
beef demand. Consumers willingness to pay for beef appears unbounded
as prices of increase, consumers that still cleared the grocery
store shelves with the product. And so the latest drought
(10:32):
that occurred had accelerated the ongoing liquidation of our US
beef cattle inventory. And that's why our supplies are so tight.
And yet you've got incredible consumer demand for beef, and
so we have seen a spike in prices because of
that strong demand. Consumers continue to be willing to pay
(10:52):
more for beef. But that is not how our market
has been functioning for the past decade.
Speaker 3 (10:58):
Let's say the rain code, there's no drought, et cetera.
What are we talking about for a timeline again, setting
aside the structural things, what do we talk about for
a realistic timeline for getting back to where we think like, oh,
we are comfortable with the level of cattle stock that
we are happy with the level of cattle stock that
we have in this country.
Speaker 4 (11:19):
Right, so we currently produce about three billion pounds less
beef than what is consumed in America. So large segment
of American agriculture actually underproduces for the domestic market. And
because of the long biological cycle of cattle, it takes
about three years to decide to hold back cattle to
(11:40):
breed and then to have a calf, and then to
raise that calf to slaughter weight over a period of
fifteen to eighteen months. And so in order for our
industry to begin an expansion phase, we would need a
price point that incentivizes producers to make the investment to
build a herd, and unfortunately that price point occurred back
(12:01):
around twenty twenty three. We should be in an aggressive
expansion phase now, except that instead of domestic consumers relying
on US producers, we've increased the volume of beef imports
to record volumes in twenty twenty four. That's displacing our
domestic production. And that increase of imports is not distinguished
(12:24):
in the marketplace. Consumers can't tell if the beef they're
buying is four and beef for domestic beef, and so
that puts the power and control in the hands of
the packers and the importers the retailers and not in
the hands of producers. So your question was how much
of this had to do with increase in input costs. Well,
the increase in input costs reduces the margin that US
(12:46):
cattle producers receive at any given price point, and we've
seen increased production costs certainly. But the point is is
that cattle producers do not set the price of beef.
The price of beef is set by the packers and
the retailers who sell to the consumer. The producer is
a price taker in this market and has been for decades.
(13:06):
They have cattle, they offer them for sale, they accept
or reject a bid by the packer, and they're producing
a perishable product. So when an animal is ready for slaughter,
ready to be fabricated into a beef product, the producer
who fed that cattle has a two to three week
window in which to market the animal. Otherwise it degrades
in quality, it adds fat instead of muscle, and as
(13:29):
a result, the producer has very limited bargaining power and
a highly concentrated market as we have now, And when
they're selling into a market that's controlled where four packers
control eighty percent of the market, they are victims of
the abuse of market power that emanates inherently from such
a highly concentrated marketing structure. So the increase production costs
(13:52):
reduce the profitability of producers, but it doesn't affect the
producer's ability to market cattle. That would be the demand
for life cattle, and the demand from my live cattle
is offset and undercut by increased volumes of import.
Speaker 2 (14:23):
What's the relationship between beef availability and the dairy industry?
Dairy cows? So the reason I bring it up, Joe's
going to get sick of me mentioning this, But I've
been reading this like seventy year old book on small
scale farming.
Speaker 3 (14:38):
I hate when people are always bringing up books that
they I know it.
Speaker 2 (14:42):
Bringing up and you know, there's a chapter in it
about whether or not you want to go into cattle
ranching for beef or if you want to raise dairy cows.
And one of the things that you learn from this
is that every dairy cow usually becomes a beef cow
at some point once it's milk production starts to dry up,
(15:03):
it usually gets sold for slaughter. So what's the relationship
or the interaction like there.
Speaker 4 (15:09):
Well, historically, what you described is true. As the dairy
animals have exceeded their production lifespan, they are marketed as
call animals into the beef supply chain. And it's a
very lean meat product that is mixed with the higher
quality trim that we obtain over our grain fed animals
(15:30):
that are fed in feed lots or is exclusively for beef.
So there wasn't much competition between the beef industry and
the dairy industry. But here recently, as we've increased our
technology and genetic abilities, we have begun to raise more
male dairy animals and are bringing them into feed lots
(15:50):
and feeding those animals, and they are now beginning to
compete with the beef cattle farmer and rancher in the marketplace.
And this is a relatively recent phenomena that's been occurring
in our industry.
Speaker 2 (16:02):
Wait, why is that happening?
Speaker 4 (16:03):
Yes, well, it's happening because there's the profit opportunity to
sell dairy cattles into the beef supply chain, and of
course that will compete directly with our America's farmers and
ranchers who not only will have to now compete with
this increase in the dairy beef sector. But they're already
dealing with this undifferentiated, cheaper, important flood that has been
(16:27):
negatively affecting their profitability in this industry.
Speaker 3 (16:31):
Say a little bit more about Okay, kettle prices have
gone up, and so in theory that, as you said,
in theory, that should incent more investment, et cetera. By this,
talk a little bit more about some of the input
costs that a cattle rancher faces. I've been making these
decisions to expand their stock.
Speaker 4 (16:51):
So one of the first factors is the availability of
sufficient land to raise the animal, because in the beef
cattle industry, the animal is primarily raised on grass. After
a calf is born and it suckles the mother for
about four to six months on grass and before it
is moved downstream in the supply chain to become a
(17:13):
yearly in animal and ultimately delivered to a feed lot
where it's fed until it's slaughter weight. And so the
input costs include the fuel with which to run an operation.
It includes the veterinary expenses for keeping your animals healthy.
It includes the land costs of maintaining sufficient forage supplies
with the animal. It includes the cost of equipment to
(17:36):
put up hay and grain with which to feed those cattle,
and in many instances it includes labor. However, most of
the family farm and ranches here in the United States
are just that their family farms and ranches attempting to
raise cattle, and there's experiencing increase input costs. You know,
we could talk about fertilizer costs too as well, but
(17:59):
ultimately the costs have increased due to inflation, and that
squeezes the margin that they receive at whatever price point
that they're experiencing in the marketplace.
Speaker 2 (18:09):
In terms of industry consolidation, the fact that there are basically,
you know, four gatekeepers to beef processing in the US.
How did we actually get here?
Speaker 4 (18:20):
Well, we got here because we were lax in enforcing
our US anti trust laws, the Sherman Act of eighteen ninety,
the Clayton Act, I think of about nineteen fourteen.
Speaker 2 (18:30):
Sherman Act, Clayton Act, those acts. Sorry, the last time
we spoke about eggs in a big series about chicken,
we talked a lot about antitrust, right.
Speaker 4 (18:40):
Well, and that's a huge problem. In fact, it's no
coincidence that as beef prices are increasing, we just saw
a settlement in a national class action suit in which
two of the largest packers, Tyson and Cargill, have purportedly
agreed to settle the consumer's complaints about beef price fixed
to the tune of about eighty seven and a half
(19:02):
million dollars. So what we have in our industry is
a decades long lack of enforcement of antitrust laws that
allowed the meat packers back in the nineteen eighties to
engage in what was called merger Mania. We saw an
unprecedented amount of mergers and acquisitions in the beef cattle industry,
(19:23):
and it was through that process and no enforcement of
anti trust laws, that the meat packers were able to
achieve this extremely high level of concentration. And in addition
to that, Congress realized over one hundred years ago that
independent livestock producers were really vulnerable to the monopsony power,
the buying power of the concentrated meat packers. So they
(19:46):
passed what was called the Packers and Stockyards Act in
nineteen twenty one, and this was to ensure that the
meat packers not only could they not engage in antitrust
activities such as monopolization and price fixing. But this Act
also said they couldn't engage in practices of procuring livestock
from producers that was pactly unfair. And so this important
(20:11):
act actually helped to bolster the United States' ability to
ensure antitrust violations were not incurring in the marketplace, and
it gave the independent producer recourse in the event that
they were treated unfairly or deceptively by the concentrated market.
The problem is just like our anti trust laws that
(20:31):
collected dust on the shelf, so to to the Packers
and Stockyards Act, and yet today the US Department of
Agriculture has not propagated the rules necessary in order to
implement and enforce this over one hundred year old Packers
and Stockyards Act that was intended to protect independent livestock
producers from the abuse of market power of the dominant
(20:53):
beef packers.
Speaker 3 (20:54):
Do the children of ranchers want to become ranchers? There
was a popular country song that came out in twenty
two three by Cody Johnson called Dirt Cheap, and the
entire premise of the song is about this dad. There's
real estate developer offers them all this land and he's
about to take the money and then he gets sad
thinking about his kids will never be running around on
this And when I hear the song, I got a
(21:15):
little cynical. I was like, yeah, but that daughter is
going to sell the land when she gets older, so
it's this like she's going to move to a big city.
But are there issues in your industry of like the
next generation of ranchers, Like, no, I want to sell
this land to a data center. I want to sell
this land to a housing subdivision so that I can
like go work in finance in New York City.
Speaker 4 (21:34):
When you have an industry like ours that has lost
over half its participants in the course of just over
a generation. Yeah, it's not unsurprising that the average age
of the US farm and rancher is now somewheres north
of fifty eight years of age. And we hear anecdotal
information all the time about ranch families who have struggled
(21:57):
under an economic cost price squeeze for decades their children
have watched, They've encouraged their children to do something else
other than to ranch. And that's a huge problem that
we have because part of this expansion phase will require
us to attract new interests to attract aspiring cattle farmers
and ranchers into the industry. That's not happening. And even
(22:18):
though I said that the price point was sufficient to
incentivize the expansion over a year ago, we're not expanding
and we're not expanding because our cattle producers has recently
witnessed a complete collapse in cattle prices. When we were
about where we're at today, and that was just as
recently as twenty fourteen and fifteen. At that time, we
(22:39):
had the highest nominal cattle prices in the history of
our industry, and beef consumers were then paying the highest
nominal beef prices in history. And every analyst, government and
private alike, said, the cattle producer is going to receive
another three years of very strong prices because of that
long biological cycle of cattle.
Speaker 3 (22:58):
This is this strange me as a very important data point,
the fact that the rancher has been trained essentially to
expect that high prices won't necessarily sustain themselves.
Speaker 4 (23:10):
Right.
Speaker 3 (23:11):
You could see the boom bust, Ye yah, the boom bust.
And we talked about this across industries. It's like, great
that the price is there, but is the price going
to be there in three years when that cow is
ready to be sold for meat. It's not enough to
just have temporarily high prices.
Speaker 4 (23:26):
Well, that's right, and that's exactly what happened at the
end of twenty fourteen. In twenty fifteen, when everyone believed
that our cattle prices would stay strong, they inexplicably collapsed,
and they collapsed further and faster than any time in history.
And they collapsed until we hit that point in twenty
seventeen when suddenly consumer demand was driving beat prices higher
(23:48):
and the meat packers were paying less and less for
cattle prices, and so we had this in verse, completely
dysfunctional situation in the marketplace, and producers were hurting. That's
the period we lost a hundred six thousand producers from
twenty seventeen to twenty twenty two. And only now, after
this latest drought that we shrunk the herd size to
(24:08):
such an ultra low level, have we seen the cattle
prices begin to once again respond favorably to the latent
forces of competition in the industry. They began to chase
beef prices upward, and we've seen that more acutely here
in the last couple few months as beef prices of increase.
But the fact is is that we have not enforced
(24:30):
antitrust laws and what we need to do now is
determined to what extent are today's beef prices caused by
antitrust behavior in the marketplace, not from the cattle producer,
who's the price taker in the marketplace, but by the
multinational beef packers and retailers that are actually controlling the
beef market here in the United States.
Speaker 2 (24:52):
Well, speaking of that end expansion, one thing we have
seen is new entrants, new corporate entrants moving into the
beef and history and I mentioned Walmart earlier, what's the
thinking behind that? Is it just a vertical integration play
or what's the additive for a company like Walmart to
get into beef.
Speaker 4 (25:11):
Well, you think about all of our livestock sectors. So
we'll start with the poultry sector. That sector was vertically
integrated in the sixties and seventies from egg to play.
It's the corporations, what we call the integrators, were controlling
the production. The farmers owned their farms and ranchers they
invested in the capitol, but the integrators dictated how the
(25:33):
farmers would raise those chickens. In fact, the integrator owned
the chickens and essentially hired the farmer to raise them
for the integrator. That model was then applied in the
eighties and nineties to our hog sector. Back in nineteen eighty,
when we had one point three million cattle producers, we
also had six hundred and sixty seven thousand hog producers
(25:54):
scattered all across the United States raising hogs. But today
we're down to sixty five thousand, ninety percent of our
hog producers because that industry, the corporations involved in that
industry began to follow the chicken model, and so we
reduced the number of participants and they began to raise
hogs under a highly concentrated situation, and it's completely vertically
(26:17):
integrated from birth to play. The cattle industry is the
last frontier for these major global need packers, and it's
because of the forage requirements and the long biological cycle
of cattle that has prevented them from engaging in the
vertical integration model, which we call chickenization. And we're trying
to prevent the chickenization of our cattle industry. But the
(26:38):
reason Walmart's getting into it is because it's profitable. So
Walmart has decided it's going to vertically integrate the beef
cattle industry. It's going to direct what genetics of farmer
rancher has to use in order to raise the animal.
Walmart will dictate the production practices and feeding, and then
Walmart will provide the marketing outlet for the ucers, and
(27:00):
then Walmart will sell that resulted beef product to the consumer.
Speaker 2 (27:04):
Hey, it really is chickenization. It's the tournament system basically.
Speaker 4 (27:08):
And it will lead to that. So the tournament system
is a pricing mechanism that greatly benefits the integrator and
allows them to buy the chickens from the farmer and
pay less for their managerial skills and raising the chicken
for them. And that's a concern we have with the
Walmart model. Walmart wants to lock up this segment of
the beef industry and they want to eliminate all these
(27:30):
cattle producers just have been eliminated. Hog producers were eliminated
in the hog industry, and poultry producers were eliminated. And
the first step in the process is you do away
with you eliminate the competitive cash market that's what allows
them to vertically integrate an industry, and we're seeing in
that in the cattle industry, our cash market has been
shrinking at an alarming rate, and as we allow this
(27:53):
to continue, we will soon see even more vertical integration.
What this means is we're going to hollow out rural
communities all across America, just as we have been doing
for the past four decades. And that's because we will
eliminate profitable opportunities for our independent, family scale farmers and
ranchers by eliminating the cash market, by dismantling the competitive infrastructure,
(28:14):
and simply handing the industry over to a highly centralized,
highly concentrated be packing and retailing industry.
Speaker 3 (28:36):
I'm going to veer into some sensitive territory here. I
don't know, I think about how you lean politically. I
also don't particularly care is fine. All that being said,
I think that I have stereotypes, and I think I
imagine what the typical cattle rancher, how they are politically,
guy wearing a cowboy hat, speaking with a country accent.
(28:59):
I would we have a presumption about how they might vote. Again,
not you specifically, Well, you know, I have my stereotypes,
et cetera, and they're probably true. Has the current administration,
you know, talking, he's been talking to you guys via
history social account. You want to to lower prices, but
also appreciate him for the high prices. A little unclear
he has this current administration been a friend to the
(29:23):
independent cattle rancher.
Speaker 4 (29:24):
Well, what independent cattle producers needed is they needed our
imports to be managed, not to hand to the meat
packers the ability to source whatever volume of imports they
want to displace our domestic production, to prevent our domestic
production from keeping up with growth and population, which is
what has occurred here. And so what we needed was
(29:46):
the implementation of tariffs and tariff rate quoters on countries
that persistently maintain a trade surplus with the United States.
In other words, countries from which we buy large volumes
of beef, but we sell to them very little. So
we have been calling for tariffs and tariff rate quotas,
and tariff rate quoteras, of course, are limits on the
(30:07):
volume of beef that any country can export to the
United States. And so when President Trump took his second term,
that's the first thing he began doing was imposing tariffs,
and for an industry that underproduces in the domestic market,
we need the tariffs to provide our industry the space
to expand and increased production. So we strongly supported the
(30:28):
tariffs when we saw Brazilian imports absolutely explode in twenty
twenty five and even last year, we were thankful that
the President imposed a fifty percent tariff on Brazilian exports
of beef because that was going to further keep our
industry awash in these price depressing imports. But when the
President announced this idea to lower consumer beef prices by
(30:52):
increasing Argentina's beef import quota rate, we believe that he
was misguided. He was misinformed as to how the market
structure work. I don't think he was aware that our
industry has just gone through years of depressed prices while
consumers were experiencing record beef prices. I don't think he
(31:14):
understood how severe the lack of anti trust enforcement has
adversely affected our industry and caused our industry to shrink.
And so producers are very very concerned right now because
we're at the price point where we should be expanding,
but we're not expanding as we should be because of
the concern for the market failure in our industry that
(31:34):
has not been corrected. It's because we're not certain anymore
whether the President is in fact going to begin to
manage these imports or if he was just going to
let these packers continue to import whatever volume of beef
and cattle they want to displace our domestic production, and
they do this without informing consumers where that beef is from.
There is no country of origin label on the imported
(31:56):
beef product, so consumers can't choose to support the domestics
supply chain versus the foreign supply chain. And that's why
we urge in Congress to pass mandatory country boards and
labeling immediately. And I think this will help to at
least mitigate the negative impact that increased imports from Argentina
will have on our industry, because then we can go
to the consumer and ask them to choose the higher
(32:17):
quality USA produce beef and support US cattle farmers and ranchers.
Speaker 3 (32:21):
Look, I totally get where you're coming from, but I
live in New York City and I have children to feed,
and one of my children loves beef a lot. And
the vast majority of Americans are not cattle ranchers by
any strategy. So again, I understand that you have a
constituency that you represent. You want to make your case.
(32:42):
Why should the vast majority of the country, which are
beef consumers get no benefit from higher cattle prices, get
no benefit from higher beef prices. Why shouldn't we want
the either imports channel or the Walmart, which frankly has
a long history of driving prices down in almost any
category enter. They're sort of famously a low cost seller.
(33:02):
Why shouldn't we support these trends?
Speaker 4 (33:04):
Well, look at any other sector in the American economy.
So we do import large volumes of goods from China,
for example, and a consumer can go to the grocery
store and see a China priced product labeled as China
product or China or they could buy a USA product,
And typically the USA product is going to cost more,
But consumers have a choice. They can choose to purchase
(33:27):
the cheaper product if they want to. Now jump to
the beef industry, consumers have no choice. The product is undifferentiated.
The meat packers are importing this beef from Australia, New Zealand.
In these twenty different countries I talked about earlier. They're
importing them cheaper than what we can produce it here,
but there's no label on it. What there is on
it is a US inspection sticker, leading and suspecting consumers
(33:50):
to believe, well, that must be a domestic product. And
so because the consumer can't choose between the cheaper foreign
product and the more expensive USA produc product, there's no
price saving for the consumer because the packers and the
retails will price it identical because they don't have to
distinguish it, so they pocket the increased profitability of buying
(34:11):
low and selling high. And the most affluent beef consuming
market in the world, and that's the United States of America.
That's an example of our dysfunctional market. Consumers have not
benefited from these increased volumes of imports. Instead, these increased
volumes of imports have reduced demand for our domestic cattle,
driving hundreds of thousands of cattle producers out of the
(34:32):
industry over the past four decades.
Speaker 2 (34:35):
Can I start a beef processing plant? Why can't I
go into it? It seems like a very profitable business. Certainly,
if you're a JBS or someone like that, you seem
to be making a lot of money, why don't we
have new entrants.
Speaker 4 (34:47):
So you have four packers controlling eighty percent of the
fed cattle market, meaning they also control about eighty percent
of the box beef market, meaning they've got long term
and short term contracts with the major retailers. They have
shelf space with those retailers. So, if you're a small
packing plant trying to get started, how are you going
to market your beef? When you're marketing into such a
(35:08):
highly concentrated, consolidated market where the retailer has long term
contracts with the largest dominant global beef packers, how are
you going to access the marketplace? So we've had lots
of smaller meat packers try to start up that it
requires a huge capital outlay to do so. Nevertheless, the
government actually during the past administration, has been encouraging their
(35:29):
growth and development. But they're struggling. They're struggling because they
have difficulty in marketing their product. Even if they're marketing
a high quality product, they're marketing into a commodity structured
marketplace and the advantage falls to the meat packers. So
until and unless we enforce our antitrust laws and our
(35:50):
fair competition laws, we will continue to see these upstart
experiencing severe difficulty in finding a profitable marketing outlet for
their product.
Speaker 3 (36:02):
You know, like I said, I really like beef. Everyone's
into protein these days. That we talked about this recently
on another episode. Protein is really hot. Animal protein in
particular is really hot. There's a lot of influencers when
people have podcasts and they say things like eat more
red meat, and our attitudes about red meat of change.
When I was growing up that was scary of don't
(36:24):
cut back on your red meat. Now it's like a
red meat is like the healthiest thing you can eat.
I don't know if that's true, but a lot of
people would say that how much of the prices that
we pay, whether it's for the price of cattle or
the end price of our ground beef, for whatever steak
is about the secular trend towards people wanting to have
(36:46):
more animal protein in their diets.
Speaker 4 (36:49):
Sure, so, I think it's a huge factor. I think
there are a number of factors contributing to the consumer's
increased demand and willingness to pay more for beef, and
I think they're in life. The answer to the problem.
If we enforce our antitrust laws and let the market
signals flow in our industry, we will begin to expand
and our production will soon hit an equilibrium with the
(37:11):
consumer demand, and we would see prices subside. In fact,
if consumers are unwilling to pay current prices for beef,
they would shift to other protein sources like lamb, chicken,
and pork, and you would see the price point from
the retailers begin to fall, and you would see the
high beef prices subside. Actually, but if the government causes
(37:33):
us to happen, if the government interferes and forces the
demand for live cattle to decline, we're not going to
increase the size of our US cattle herd, and America
will become increasingly dependent on foreign sources for the beef.
Right now, at twenty twenty four, about twenty two percent
of all the beef available in the US market was
(37:55):
imported product. And if we look at our sister industry,
the sheep industry, would who is the direction our cattle
industry is going. In twenty twenty four, seventy three percent
of all the lamb consumed in America came from Australia,
New Zealand. We've decimated our domestic sheep industry. Now we're
now government has its sights on the cattle industry, and
(38:16):
the increasing imports without any product differentiation in the marketplace
will simply exacerbate the ongoing shrinking of our cattle producer
in terms of the number of participants, number of cattle,
and the number of marketing outlets.
Speaker 2 (38:31):
All right, we're going to have to leave it there,
Bill Bullard, I just realized Bullard nominative determinism. Right, you
had to go into cattle. Thank you so much for
coming on offline.
Speaker 4 (38:44):
My pleasure. Thank you very much. Joe.
Speaker 2 (38:58):
That's really interesting. I'm definitely closely related to the Chicken
series that I did, and again it seems to be
that chickenization the running through agriculture. I hadn't realized that
cows cattle ranching were basically like the last frontier agriculture either.
Speaker 3 (39:15):
And I, to be honest, I would have already assumed
it had been more or less on that. I actually
think the Walmart thing is very interesting because on the
one hand, people look at an entity like Walmart and
it's like, here's this monopsity player. It's gonna drive so
much power. On the other hand, you say, here's a
(39:36):
new market entrant. This is is like here is it?
The market has just gotten more competitive. I think it's
an interesting gut check for people who want to think
about like market competition that when you read the headline
Walmart is going to get into beef processing, do you
read that as like bad or good? Because you asked,
why aren't there more interest? Well, here's a new entrant
(39:58):
coming in. I have to say.
Speaker 2 (39:59):
I shop at on I buy beef. I buy those
big Have you ever seen the big, like long packages
of ground beef.
Speaker 1 (40:05):
Oh?
Speaker 2 (40:06):
Yeah, they're pretty good. Actually, I am kind of floored
that there's no country of origin label on these. I
never thought about that.
Speaker 3 (40:14):
I am a little skeptical would change much like might
not like, would you spend meaningfully more or less on
beef presuming you expect that it was like healthier or whatever,
that it was safely arrived.
Speaker 2 (40:30):
Yeah, Well, what I would say is I do shop
at Walmart, but I shop at Walmart generally for bulk beef,
and if I'm looking for the really good stuff, I
will go to an independent farmer, of which there are
many in Connecticut. And I realized, like not everyone has
that luxury, and I will try to get the good beef.
Speaker 3 (40:49):
I might try to get the good beef too. It
might come from Japan. Don't they like treat their cows
really well, like they like give their cows like beer
and all that stuff massages. Yeah, No, I think I
love talking about animal industry economics. There's a lot of tension.
I will say one other thing, which is, you know,
I asked that question about like, well, why should we
care the beef consuming part of the world, which is
the of the country, which is the vast majority of
(41:11):
the country. The US used to run a very big
trade surplus and food stuff. Only very recently, in the
last couple of years, has that turned into deficit. It's
probably a source of some concern to me that like
we no longer can domestically satisfy all of our food needs.
Speaker 2 (41:32):
If you're worried about domestic semiconduct, then you probably should
be worried about food capacity.
Speaker 3 (41:37):
I think there are some some overlap issues.
Speaker 2 (41:40):
You can't eat the chips, Joe, oh, except.
Speaker 3 (41:43):
For except the other chips that we can eat. I know,
I think there are some I think there are some
things to worry about or think about with food that
are a little different, a little similar, that maybe we
should talk about more.
Speaker 4 (41:55):
At some point.
Speaker 2 (41:55):
Absolutely, all right, shall we leave it there for This
has been another episode of the All Podcast. I'm Tracy Alloway.
You can follow me at Tracy Alloway.
Speaker 3 (42:03):
And I'm Jill Wisenthal. You can follow me at the Stalwart.
Follow urcaf USA. It's at arcaf USA. Follow our producers
Kerman Rodriguez at Kerman armand dash Ol Bennett at dashbod
and kill Brooks at Kilbrooks. From our Odd Lots content,
go to Bloomberg dot com slash odd Lots with the
daily newsletter and all of our episodes, and you can
chat about all of these topics twenty four to seven
(42:25):
in our discord discord do gg slash.
Speaker 2 (42:28):
Odlocks And if you enjoy odd Lots, if you like
it when we do these agricultural episodes, then please leave
us a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
all of our episodes absolutely ad free. All you need
to do is find the Bloomberg channel on Apple Podcasts
and follow the instructions there. Thanks for listening in
Hosts And Creators
Joe Weisenthal
Tracy Alloway
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.