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RSS By: Steve Cornett, Beef Today

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A Lackey’s Tacky Take

Aug 25, 2009

By Steve Cornett
 

I’ve been reading Alan Guebert’s fluidly written columns for a long time, but have never been introduced to him. So I don’t know how to pronounce his last name, but presume the “t” to be silent, as in “Colbert Report,” but can’t swear to it.

Now I see he has decided I’m a packer "lackey” for doubting that the concentration of beef packers is responsible for the woes that have befallen cattle producers these last decades.

It surprises me that so many Gueberts are so convinced people who share my doubts have somehow sold out to beef packers. I can’t imagine what they think we get out of this supposed Satanic mortgaging of our first born to cow killers.

Maybe it’s my fault for not being clearer. I’m no fan of beef packers; I know they’re heartless, penny-pinching corporations who make their livings by hiring the cheapest, and often most expendable, workforce to kill cows as fast as possible. Their disinterest in consumer satisfaction and slavish devotion to tonnage and line speed are a big part of beef’s problem.

But blaming them for cattle ranchers going out of business, as the Gueberts do, is like expecting to cure a cold by blowing your nose.

Guebert writes nice columns reminiscing about his days as a farm boy.  I think a lot of the attitude he represents derives from such nostalgia. Hey, me too. I miss the old days, too. I don’t want to see the cattle business chickenized, either. But neither do I want to mortgage the future in some vain effort to have the government recreate Mayberry RFD just so I don’t have to learn how to use the futures market. 

Where is the evidence that consolidation among beef processors is the reason those old days and old ways are gone?

Oh, yes. Guebert provides all the evidence he has:         

“According to data released by the General Accountability Office June 30, the number of U.S. farms with cattle and calves declined 352,000 in the years 1987 to 2007, from 1.15 million to 798,290.

More importantly, reports the GAO, "the fewest number of farms accounting for 50 percent of the sales" in cattle plunged by more than 60 percent during the same period. Only 2,862 farms today account for more than half of all cattle sales in the U.S. In 1987, it took 7,471 farms to reach that tipping point.

Worse, the July USDA Cattle on Feed report shows the U.S. cattle inventory at a 36-year low, just 94.5 million head today, even as cattle producers suffer through one of their biggest, longest blood-lettings.

In short, the packer-led market model that has cut the cattle sector to its smallest size in nearly 40 years, concentrated ownership in its fewest hands ever and now has ranchers and feeders adrift on a rising sea of their own blood is the model the lackeys want to keep?” 

So I guess the evidence is that packers buy cattle AND cattle producers sell cattle AND producers are going out of business THEREFORE it’s the packers’ fault. Case closed. It is with such simplistic analysis that populist arguments sway the kindhearted Gueberts of the world.

Consider this USDA chart of per capita meat consumption in the United States:
chart: Versatile, affordable chicken has grown in popularity

If packer consolidation is the problem behind beef woes, why have the much-more concentrated poultry and pork industries fared so much better? The beef industry is shrinking for a lot of reasons, but the most important is competition from the highly-concentrated, processor-dominated poultry industry. And the growth curve that began for fowl meat in the 1960s began and coincided--not coincidentally--with the concentration of poultry production.

Over the same years, beef packers’ percentage of the farm-retail spread has narrowed while retailers have increased their share. I have never argued, lackey though I may be, that what we need is more packer concentration in the beef industry. My argument is that beef producers need to recognize that the reason poultry is driving them out of business is that the fowl birds have a more efficient business model.

The Gueberts don’t recognize that..

Concentration—packer control—has allowed poultry integrators to cut costs and deliver products consumers like.

In those years of poultry growth—while they were learning to squeeze growers, and popularize McNuggets, chicken burgers and chicken strips—how much improvement have we made in beef production? Well. We’ve made cattle bigger. And blacker.

And we’ve got them bigger and blacker not because consumers want them that way, but because packers prefer bigger to get more yield and hair color is about the best indicator we’ve got in our disjointed system that an animal might marble.

If beef is to continue outselling goats and sheep in this country, producers must find a way to compete with poultry. Hating packers, distasteful as they are, is hardly helpful. The Gueberts may not like the poultry business model. I certainly don’t want beef to go that way.

But facts are ugly sometimes.  If the goal of a business model is to provide continuous improvement and consumer satisfaction, the poultry model of unified practices is far superior to the “every man for himself” model in the beef industry.

We need systems that can emulate what’s good about the way chicken farmers operate: systems like those small producers who deliver beef directly to consumers; systems that reward calf producers for providing verifiable quality to feeders; systems that reward feeders for providing packers with beef consumers like; systems that provide packers with incentives to please consumers and bring them back to beef.

We need more, not less, cooperation between producers and processors. We need more, not less, value-based forward contracting. We need more, not fewer, of the partnerships forged by U.S. Premium Beef and National Beef.

Such systems don’t require big packers, but such systems can work with big packers as the marketing arm. Given the concentration among retailers, there is even some justification for packers to be so large, in fact.

But elements within the Obama Administration and Congress want to close the door on such operations, to enforce unilateral disarmament on the beef industry.

Thanks to Steve Dittmer at the Agribusiness Freedom Foundation for providing this quote from Obama’s man at the Packers and Stockyards Administration:

"I use this analogy when it comes to vertical integration. The herd is stampeding toward the cliff. There is not enough time to turn the herd in poultry. The hog industry is getting closer to the cliff but I think we still can turn the herd. With the cattle industry, it's a little bit further back."

He seems to be saying he will leave the poultry model alone, but force cattle producers to operate as they did back in the “good old days.” That medicine is poison. And as the beef industry continues to atrophy and producers continue to disappear, the Gueberts will say it just goes to prove their point: “We need more government control to keep us ‘independent’” they’ll argue.

That’s just how Gueberts think.

Steve Cornett is editor emeritus at Beef Today. You can reach him via e-mail at scornett@farmjournal.com.

This column is part of the Beef Today Cattle Drive e-newsletter, which is delivered to subscribers biweekly and includes beef industry analysis, market information as well as the latest beef headline news. Click here to subscribe.


 

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COMMENTS (4 Comments)

pwoggi
Surely you wouldn't call someone a Goober just because he called you a lackey!


7:57 PM Sep 1st
 
C.J. Oakwood
The Angus breeders are losing the bull market to the black simmental breed in a big way....Folks have figured out the data on the Angus bulls is flawed, not to mention the self inflicted genetic problems Look for the AAA to downsize in the near future. The seedstock industry is going to get very intersting!
11:16 AM Aug 25th
 

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