It’s an unusual summer in Kansas. As we head into mid-July, the wet soil conditions indicate no drought and only irregular abnormally dry conditions. Even the maize crop is rated almost 70 percent good to excellent. The six to ten day outlook (July 12 to July 16) indicates normal to slightly below normal temperatures and normal precipitation for our region. Decent for pollinating corn. The eight to 14 day outlook (July 14 to 20) indicates normal temperatures and precipitation. Last week we discussed the background regarding perfect competition, supply and demand curves and equilibrium, especially the concepts of many buyers and sellers combined with perfect information (open access to all information). Today, what prompted the demand for changes in the livestock market by producers and other farm groups?
First, the concern about pricing and transparency has its origins in time. Although there are many small beef processors, they are only a minor part of the meat packaging industry. Depending on the source, there are three or four major packers in the United States: Tyson, Cargill (Excel), JBS USA (Swift), and National Beef. The concern is twofold. First, this is not the definition of many buyers and second, do they work together to “fix” prices. More recent events have put new emphasis on these concerns. First, the fire at the Tyson meat packing plant in Holcomb, in August 2019. This shut the plant down until it was rebuilt and the plant handled about 6% of the beef supply. from the country. This had a major impact on the prices of finished cattle and consumer beef. Prices for finished cattle have fallen while consumer prices have increased. It took some time for the markets to return to normal after this event.
Second, the effects of the pandemic. There are several factors here. Although the livestock supply was not directly affected, disruptions at packing plants occurred when COVID-19 closed the factories. There have also been production slowdowns as changes were made to operations to prevent the spread of infections. In addition, buyers’ markets have been interrupted. Much of the finished product went to restaurants, school cafeterias, etc., which were either closed or reserved for take out orders. And consumer demand at retail increased because people were at home. These factors have resulted in a change in demand, processing and distribution. Add to that the panic buying and resulting shortages in a variety of food items, including beef.
Prices for finished cattle offered have decreased significantly while consumer prices have increased dramatically. The result of these two events was a surplus of finished cattle leading to lower live prices and increased demand creating a shortage which pushed up consumer prices. In plain English, the finished cattle producer was losing money while the packer made more money per pound from scarcity and good profits.
The dilemma for finishing cattle is different from that for many other commodities. You can’t just store livestock until you need them because they have to be fed. Finished cattle is a product that takes time, about 24 months in total. When they’re ready, they’re ready. The beef industry maintains that they are exploited and handled by major slaughterhouses and forced to sell below the actual market price. And they are even more affected because they fear that the main packers will work together to control prices.
Next week, what is a market transparency bill supposed to do.
Dr Victor L. Martin is an agricultural instructor / coordinator at Barton Community College. He can be reached at 620-792-9207, ext. 207, or email@example.com.