The ripple effects of the current global pandemic have left their mark on nearly every sector of the U.S. economy, including agriculture. From low cattle prices to processing plant reductions or shutdowns, beef producers in Oklahoma and across the country have seen tremendous impacts.
As producers grapple with the dramatic decline in cattle prices, many ideas and arguments have been discussed across agricultural circles. Dr. Bart Fischer, co-director of the Texas A&M University Agricultural and Food Policy Center, shared insight into some common conjectures during a recent Oklahoma Farm Bureau webinar.
The USDA is investigating packer manipulation.
Since the beef processing plant fire in Holcomb, Kansas, last year and through the COVID-19 outbreak, Oklahoma cattle producers – and many in the beef industry across the country – have called for the U.S. Department of Agriculture to investigate claims of market manipulation and collusion.
“None of us can know whether there’s collusion because the only way you find collusion is with an investigation,” Fischer said. “It’s very important to keep in mind that that investigation is happening.”
Fischer reminded producers that the United States has strict antitrust laws that are the “envy of the world” along with an extra layer of agriculture-specific rules and statutes.
If the investigation does uncover wrongdoing, Fischer said “the federal government should use its full weight in chasing these things down and addressing them.”
The price spread between live cattle and retail beef can be explained economically.
Though Fischer clarified he was not arguing against the possibility of collusion or market manipulation among packers, he did reiterate that there are fundamental economic reasons for the gap between cattle prices and retail prices.
Fischer said in economic terms, the beef industry is witnessing a perfect storm.
“By necessity, if they’re demanding less from the farm level it’s going to put downward pressure on price,” he said. “By extension, if there’s less product coming out of that plant going to retail, it contracts the supply available at retail, drives up competition and drives up price, and drives these prices even further apart.
“I am not saying there’s not collusion there – there may be – that investigation is happening,” he said. “But I am also saying a lot of this can be explained purely by fundamental supply and demand.”
Importing beef is vitally important.
A former chief economist and trade adviser for the U.S. House Agriculture Committee, Fischer said he is concerned by calls among producers for a cease of imported beef in the U.S.
“The reality on trade in beef is that over the last 10 years, we have exported $15 billion more than we’ve imported,” Fischer said. “I know folks are well intentioned and everyone’s trying to find solutions to the price pressures we’re facing.
“But it’s really alarming to me when I hear those things, because we’re effectively putting billions of dollars a year in net exports, which benefit the beef industry, at risk when we talk about erecting barriers to imports.”
Government officials and agriculture leaders have spent years working on export promotion, Fischer said.
“If we start erecting barriers to imports in our country, it doesn’t take long before other countries start to do the same,” he said. “I hear this argument regularly of ‘Well, we’ll continue to export just not import.’ That’s just not the reality of how things work.”
Be careful when questioning food safety.
Alongside conversations about restricting imports, Fischer said the safety of beef being imported into the U.S. is being questioned.
“In terms of food safety, anyone exporting a meat product to the United States has to meet equivalent safety standards; not by their standards, by American standards,” he said. “And to the satisfaction of the U.S. Department of Agriculture sending inspectors into those plants to do inspections of those plants.”
Mischaracterizing the safety of meat in the U.S. could lead to consumers doubting the safety of American meat products, too.
“We don’t put products on shelves in this country that don’t meet our food safety standards,” he said.
“If we start down that road (of questioning food safety), it also starts to undermine confidence in the products we have on the shelves when all of them are really subjected to the same standards.”