A commentary from R-CALF….
BILLINGS, MT | First question: Do beef and cattle imports depress U.S. cattle prices just as we already know lamb and mutton imports depress domestic lamb prices? Second question: Why are we even having this conversation?
If you embrace the fundamental economic law of supply and demand then you know that when you increase supplies while demand remains constant, prices will fall. But it’s utterly bizarre that mainstream beef industry representatives say that’s not true.
So, let’s look at some evidence.
Remember 2013 through 2016? First, we had tight cattle supplies and cattle prices skyrocketed through 2014. Then suddenly and unexpectedly, and even while cattle supplies remained tight, cattle prices collapsed beginning in 2015 and throughout most of 2016.
Why did cattle prices collapse so suddenly? Especially while supplies were still tight and beef demand remained strong. Here’s the answer to that important question provided in writing by the four largest U.S. beef packers who were explaining what happened after the mandatory country of origin labeling (COOL) rule was repealed. Here’s what they wrote:
“After the rule was repealed, foreign beef no longer had to be labelled as such. That spurred additional imports and caused domestic cattle prices to fall.”
Did you catch that? The four largest beef packers stated that when additional imports were introduced into the U.S. market, they caused cattle prices to fall.
And about the same time the beef packers wrote this, 28 bipartisan members of Congress, including both senators and representatives, and led by South Dakota Senator Mike Rounds and Minnesota Senator Tina Smith, wrote a letter to the U.S. Attorney General and said this regarding the disparity between cattle producers and packers and how imports impact domestic cattle prices:
“One potential explanation for this disparity may be the ability of meatpackers to import beef from foreign countries…” And based on U.S. Department of Agriculture (USDA) data they wrote, “as the price increases for live cattle, there is a subsequent and consistent increase experienced in beef importation.” And pointing to the repeal of mandatory COOL, the joint congressional letter stated, “Furthermore, the initiation of plummeting prices in the live cattle market appears to correspond almost exactly with the repeal of Mandatory Country of Origin Labeling, which demonstrates the negative impact of imports on domestic beef prices.”
Did you catch that? A bipartisan group of congressional members stated that when domestic cattle prices increase, there is a corresponding increase in imports, and those imports have a negative impact on prices.
And now let’s look at what the USDA says. The USDA has stated that imports of beef and cattle compete with domestic beef and cattle in at least two USDA rulemakings, the first in 2007 and the second in 2013. The agency has found that additional beef and cattle imports cause lower domestic cattle prices due to increased supply.
And you caught that? The USDA, which utilizes economic analyses in its rulemakings, found that increases in beef and cattle imports cause domestic cattle prices to fall.
So, there it is. The four largest beef packers, 28 members of Congress, and the USDA have all concluded that beef and cattle imports depress domestic cattle prices.
Earlier I said it was bizarre, but it’s really an absurdity that we even have to have this conversation…it’s just so fundamental that everyone should know that if you increase supplies with imports, you will decrease domestic cattle prices, period.
But there remains a powerful and very vocal faction within our industry that wants to convince you that beef and cattle imports do not lower domestic cattle prices.
So, ask yourself, who benefits from increased beef and cattle imports that everyone knows causes cattle prices to be lower?
Well, it is the multinational beef packers and the cattle and beef trade associations they support that benefit because when imports lower domestic cattle prices, then beef packer margins increase, particularly when beef demand remains constant or is increasing.
Right now, we are experiencing higher cattle prices due to tight supplies caused by widespread drought and an 8-year stretch of seriously depressed cattle prices, both of which have contributed to cattle liquidations.
So, given this conversation regarding what to expect when cattle prices are high, does it surprise you at all that the CME Group just reported that beef imports in July were 20% higher than they were a year ago?
And now for the $60 million dollar question: Now that you know how imported beef and cattle are being used by multinational beef packers to lower your domestic cattle prices, what are you going to do about it?
So far, we’ve done nothing, but it’s high time we did. And that’s why R-CALF USA continues fighting to reduce imports through the use of tariffs and tariff rate quotas so our U.S. cattle industry is afforded the space and level playing field it needs to rebuild.
# # #
R-CALF USA’s weekly commentary educates and informs both consumers and producers about timely issues important to the U.S. cattle and sheep industries and rural America.
Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA) is the largest producer-only trade association in the United States. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle and sheep industries. Visit www.r-calfusa.com or call 406-252-2516 for more information.