A Divided House
May 1, 2005
A Divided House
As some meat processors make curtain calls on the world stage to deliver lines designed to cure their ailing industry, their counterparts march to a different tune fueled by their own agendas.
Consider the recent pronouncement from the American Meat Institute’s chief executive regarding the divided house of the American cattle industry. As Pat Boyle points out, the closed Canadian border represents a windfall for some producers profiting from a tight and largely closed market. Meanwhile, the American beef processing industry is struggling to simply keep their plants running, forget about at full capacity.
The love/hate relationship between packers and producers is longstanding and not exactly a secret. They are our customers, a cattle producer acknowledges, but we wish there were more of them so there would be more competition in the bidding. When control is in the hands of a small number of companies, the economic scenario is classic. When a large number of sellers and a small number of buyers negotiate, the buyers have the power. It would be foolhardy for those in control to abuse their power, for surely what goes around comes around.
Concentration is targeted too often in times of low cattle prices. Listen to Joe Queen, a North Carolina cattle producer and vice president of the National Cattlemen’s Beef Association.
“Today’s strong cattle prices tend to dispel any notion that cattlemen are currently victims of unfair or inadequate competition, and I am not one to blame packer concentration for every ill that affects the cattle industry. But I do feel that robust competition in the packing industry is ultimately very good for cattlemen, and helps ensure that we are selling our cattle in a fair and open marketplace. Competition is especially critical for those raising cattle in regions that do not have an established history of supporting packing capacity. If cattlemen in the West and Northwest, for example, have to rely on a single packer as the destination for their cattle, they may very well face a price squeeze. An even more difficult scenario presents itself when these cattlemen have no packers in their regions whatsoever. In this case, they will mostly likely face a market price squeeze and will be forced to absorb significant freight costs.”
I am no preacher, so my aim is not to convert. Infighting does seem senseless, however, especially given what’s at stake in these trying times. There are precedents to consider, one being from the coffee industry. In the 1970s, crop failures and other factors combined to drive the price of coffee through the ceiling. Those with product were delighted. Their joy was short-lived, however, because many consumers, faced with ultra-high coffee prices, simply quit drinking coffee never to return. The long-term result was very negative for coffee growers and the industry.
It behooves those with interests in the beef industry to take care that they not cut off their noses to spite their faces.