America’s looming cattle crisis
According to the Epoch Times, as America’s ranchers struggle to earn a living, domestic cattle herds are shrinking to the lowest numbers in 70 years, and cattle farmers are exiting the business by the tens of thousands each year, leaving the United States ever more dependent on imports.
A new report from the Federal Reserve Bank of Kansas City highlights the plight of cattle farmers, stating that higher interest rates are now putting many of them into the red.
Ranchers say escalating loan expenses are just one of several factors driving them to sell off their herds, which may herald even higher beef prices for consumers in the years to come.
Rather than borrow to invest in new herds, many ranchers are opting to simply sell off their cattle.
While cattle prices are currently at nominal highs for farmers, prices were also high in 2014, spurring many ranchers to borrow money and expand their herds in expectation of profitable years to come.
However, what happened next was a flood of imports from Mexico and Brazil that hit the market starting in 2015, driving down prices and putting many American farmers into the red, according to a report by Ohio State University.
Ranchers refer to that period of selling into an oversaturated market with prices plummeting, as “trying to catch a falling knife.”
With cattle prices now rising again, agriculture economists say that, according to what is known as the cattle cycle, farmers would typically invest in expanding their herds at this point. However, many ranchers are liquidating their herds, and thousands are leaving the business altogether.
Bill Bullard, CEO of R-CALF, told The Epoch Times that “they’re liquidating because, one, long-term lack of profitability; two, widespread drought; and three, lending institutions just refusing to carry them any further because of the long history of depressed prices and losses.”
“Once a rancher liquidates, there’s a high likelihood that they won’t get back into ranching,” Bullard said.
“There’s a loss rate of over 20,000 ranchers per year for the past five years, and you add that to the fact that we’ve lost 655,000 beef cattle operations just in the last four decades since 1980.”
Consumers have already seen beef prices skyrocket since 2020 and will likely see more of that in the months to come as the average price of ground beef rose to $5.50 per pound as of June from about $3.80 per pound in 2020.
A January market report by agriculture economists at the University of Georgia, predicts that beef prices will continue to rise through 2024 due to “tighter supplies going forward which would suggest that prices are going to remain elevated for the next several months.” That being said, the report noted “the general cycle is that when we start to tighten up these supplies, there’s a point where, when we want to start rebuilding, we retain some of those cattle that normally would be going through the supply chain just to keep normal levels of inventory.”
In the near term, this stage of the cattle cycle would drive beef prices higher as farmers hold back cattle for breeding rather than sending them off to slaughter, but over the longer term, higher prices would result in larger herds, which should eventually bring prices back down – however, America’s farmers thus far don’t appear to be rebuilding their herds, signaling that market and financial conditions have been more conducive to selling heifers and cows than retaining them.
When this wave of selling passes, depleted inventories could result in even greater shortages and additional spikes in the cost of beef, likely increasing America’s dependence on beef imports.
While the United States is still the world’s largest producer of beef, it also has become a net beef importer. Imports have typically been lower-grade frozen meats for blending into ground beef, shipped from Brazil, Australia, and New Zealand. More recently, however, imports of higher-quality fresh cuts from Canada and Mexico have also increased.
American ranchers successfully lobbied in 2002 to get mandatory country-of-origin labels placed on beef packaging. However, foreign beef producers filed suit with the World Trade Organization, and the United States repealed country-of-origin labeling in 2016 for beef and pork; it remains in effect for lamb, chicken, and goat meat and other perishable agricultural commodities.
Competition from imports has put added pressure on prices and profit margins for American ranchers, and recent interest rate hikes have now put many ranchers into the red.
While nominal prices for beef this year are the highest in a decade, farmers’ costs are also at historical highs. When higher interest expenses are added in, there is often no profit left for ranchers.
Raising cattle is unique among animal farming because of the length of time required for cows to reach maturity and become marketable, all of which must be financed – and often through operating credit lines. During this time when there is no income, there remains expenses for land, equipment, veterinary services, vaccinations, fuel, and feed.
South Dakota rancher Brett Kenzy told The Epoch Times that he thinks “it would be hard for someone not involved in agriculture to understand how much money we flow through,” joking that we’re “borrowing millions to make thousands.”
While ranchers are taking advantage of a short-term opportunity to improve cash flow by selling off cattle, the longer-term problem is that with smaller herds, they are less able to make a living even in years when prices are good. An additional concern for ranchers is that consumers shift their buying habits as beef becomes less affordable.
Many market watchers say the consolidation of food production into an ever-smaller number of farmers and meat processors, coupled with an increasing dependence on imports, creates food security risks for the United States.
Volpe: Harris transparency proposal on food costs good, price controls bad
The Hagstrom Report announced that a prominent professor of agribusiness has said that Vice President Harris’ call for transparency on food prices is a good idea, but that price controls, which she has not explicitly called for, are a bad idea.
Richard Volpe, who teaches courses on food retail and supply chain management, transportation and logistics, and data analysis at California Polytechnic University said he “welcomes Vice President Harris’ call for greater transparency in food price formation and strategy” considering that “so much of the inflation puzzle is a black box to consumers, with wholesale prices and other upstream costs completely unobservable.”
“Food price inflation has cooled but food prices themselves have not come down, and consumers understandably want to know why. Food companies throughout the supply chain — particularly manufacturers but also wholesalers, distributors, and retailers — can and should do a better job of explaining and even demonstrating that this is largely a function of slow-moving external factors and not the pursuit of profits and executive compensation,” Volpe added before pointing out that Harris’ “proposal is currently light on details surrounding the mechanisms by which price gouging would be monitored, measured, and reined in.”
He went on to state that, in his opinion, “price controls are not a good idea,” and “will almost surely do more harm than good in the food supply chain if implemented” when “retailers are forced to increase prices on those foods not affected to recoup losses for foods with price constraints.”
It was noted that “the vice president’s proposal does not explicitly call for price controls, but a strict limit on price gouging would result in constraints on the prices retailers can charge for certain foods. Food prices are the subject of many moving parts, most of which take place upstream in the food supply chain and retailers have no control over.”
In the interview, Volpe said that consolidation is not the major reason groceries are more expensive, but that the “pain points” in the food industry that consumers don’t see start with transportation and continue with severe weather and labor costs.
Newhouse foreign farmland purchase bill passes House
The Hagstrom Report announced that The House passed the Protecting American Agriculture from Foreign Adversaries Act last week with a vote of 269 to 149.
The bill adds the Agriculture secretary to the Committee on Foreign Investment in the United States (CFIUS) for transactions, including land, biotechnology, transportation, storage, and processing. It also requires the secretary to report any transaction that can be considered a threat to national security.
Rep. Newhouse said in a news release that “the United States took a stand against one of our greatest foreign adversaries, the Chinese Communist Party (CCP) … The CCP has been quietly purchasing American agricultural land at an alarming rate, and this bill is a crucial step towards reversing that trend. We know that USDA’s foreign purchase tracking is wildly flawed, and by adding the secretary of Agriculture to the Committee on Foreign Investment in the United States, we can begin to correct course. Food security is national security, and it is incumbent upon us to keep our adversaries far away from the lands that feed our country and the world.”
Sen. Mike Braun, R-Ind., and others have introduced a companion measure in the Senate.
Australian farmers protest at Parliament angered by Labor government’s anti-farming agendas
According to Tri-State Livestock News, over 2,000 Australian farmers gathered in front of the nation’s Parliament House in Canberra to voice their anger over a number of the Labour government’s rural policies.
It may not have been on the same scale as previous farmers protests in the mid-1980s with over 40,000 in attendance, but the message to the government was just as clear.
Organised by the National Farmers Federation (NFF), farmers attended from most of the country’s states, some taking several days to make the long journey from Western Australia and the Northern Territory.
Their gripes with the Albanese-led government included the banning of live sheep exports, the restriction of water rights, and renewable energy policies, to name a few.
Ahead of the protest a truck and tractor convoy snaked around the Parliament area before a number of influential speakers from a variety of farming bodies sent a clear message to policy makers as to how farm incomes are being impacted.
They said that farmers do not feel like they’re being listened to, and that their voices are being drowned out by activists with anti-farming agendas.
However, there was generating anger and frustration among the farmers because no-one from Prime Minister Anthony Albanese’s government, especially the federal Agriculture Minister Jude Collins, turned up to hear the farmers.
The NFF president took the stage and commented that as proud farmers that look after more than 55% of the nation’s land, they deserve to be respected but feel as they are getting stiffed. David said the NFF met with Prime Minister Albanese and made it very clear that farmers do not agree with the decision to ban the live export of sheep, and that farmers needed to be a key stakeholder at any policy negotiating table.
He went on to highlight how activists are having such an influence sending anti-farming agendas to the government when the farmers and producers should be setting the policy because they are the interface between the environment and the consumers, claiming that “the reality is, we stand between prosperity and the starvation of this nation.”
This protest in Australia continues a wave of similar discontent by farmers across Europe also fed up by government policies imposing environmental regulation, extra red tape and higher production costs.
FSIS issues guideline on animal raising, environmental label claims
The Hagstrom Report announced that the Agriculture Department’s Food Safety and Inspection Service released an updated guideline that makes recommendations to strengthen documentation that supports animal-raising or environment-related claims on meat or poultry product labeling.
USDA also released a Federal Register notice on the subject and said it will take public comments for 90 days after it is published.
Agriculture Secretary Tom Vilsack stated that the “USDA continues to deliver on its commitment to fairness and choice for both farmers and consumers, and that means supporting transparency and high-quality standards … These updates will help to level the playing field for businesses who are truthfully using these claims and ensure people can trust the labels when they purchase meat and poultry products.”
USDA said, “Animal-raising claims, such as ‘raised without antibiotics,’ ‘grass-fed’ and ‘free-range,’ and environment-related claims, such as ‘raised using regenerative agriculture practices’ and ‘climate-friendly,’ are voluntary marketing claims that highlight certain aspects of how the source animals for meat and poultry products are raised or how the producer maintains or improves the land or otherwise implements environmentally sustainable practices.”
The documentation submitted by companies to support these claims is reviewed by USDA’s Food Safety and Inspection Service (FSIS), and the claims can only be included on the labels of meat and poultry products sold to consumers after they are approved by the agency.
In the updated guideline, FSIS strongly encourages the use of third-party certification to substantiate animal-raising or environment-related claims as both help ensure that such claims are truthful and not misleading by having an independent organization verify that their standards are being met on the farm for the raising of animals and for environmental stewardship. The revised guideline also emphasizes more robust documentation for environment-related and animal-raising claims, recommending that establishments using ‘negative’ antibiotic claims (e.g., ‘raised without antibiotics’ or ‘no antibiotics ever’) implement routine sampling and testing programs to detect antibiotic use in animals prior to slaughter or obtain third-party certification that includes testing.
USDA said that a study of liver and kidney samples for veterinary drugs “found antibiotic residues in approximately 20% of samples tested from the ‘raised without antibiotics’ market” and added that “the action FSIS is taking through the publishing of this guidance addresses these concerning findings and makes clear that FSIS will take enforcement action against any establishments found to be making false or misleading negative antibiotic claims.”
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