Blame the Root Problem, Not Each Other

By Jennifer Hill

As pressure mounts across our nation our citizenry is becoming increasingly divided, inclined to point fingers, place blame and demand change from “the other”. We see this same team mentality occurring in agriculture. Years of depressed live cattle prices, rising inputs and general frustration have led us to a point of a constant blame game as we search for a magic bullet to fix the industry. Unfortunately we are also mimicking the larger nation in our inability to dig down to the real cause of the issues, instead staying hyper focused on throwing band aids on the symptoms, further pitting us against each other.

Hay Prices

A social media post went semi-viral last week with ranchers expressing anger over the potential price of hay headed their way. Farmers were told to “heed the warning” that hay prices were unsustainable. It’s a reasonable concern. With continued drought conditions across much of the US demand for hay is going to stay high. Coupled with the price of inputs including fertilizer, which went up 100% in 2021 and then another 100% in 2022 plus the cost of diesel, hay is going to be necessarily expensive in order to cover costs. But blaming the hay farmer for the situation is short sided, unproductive and shows real ignorance. If we want to blame someone for the situation we must dig deeper into the input costs. Why are fertilizer and diesel so expensive? It can’t all be Putin, given that prices were on a sharp upward trend long before he crossed the Ukrainian border. But the answer does lie with government and their ever increasing and demanding regulations. China is a major producer of nitrogen and Russia supplies much of our potassium. Both of these nations are major players on the geopolitics chess board, and susceptible to price fluctuations based on the current political relationship. Additionally, it takes a large amount of natural gas to turn the raw imports into the final product. The price of fertilizer really began to skyrocket when COVID regulations shutdown plants in 2020. As with all industrialized work in the US, we could use more plants to increase production but the regulatory burden comes with an ever increasing price tag making investment hard to find. So yes, hay is high but the hay farmer is not at fault.

Imported Meat

I’ve written at length about my belief that we need imported lean ground to meet our fast food ground demand in this nation. However there’s some indications that the quality of imported meat from Mexico is improving. Some Mexican ranchers have invested heavily in importing improved genetics and it stands to reason that there will come a time when the achievement gap from cattle that ship from the south shrinks. Concern over this potentiality is real. If the Mexicans can produce a product of similar quality to ours but at a much cheaper price point our ability to compete will be impacted. Rather than demand a halt to imports or restrictive tariffs to level the playing field we should be asking why it is that they can produce beef so cheaply. The price of land is certainly a factor, but the massive difference in labor and regulatory costs are huge. According to Statista the average annual salary in Mexico is approximately $16,700. We’d have a hard time hiring a part time college student for that. In our current labor crisis plus inflation status I’ve seen McDonald’s advertise $20/hour for flipping burgers. Who can compete with that?  Mexico also functions with a much lower regulatory burden. But before we ask the government to fix this problem let’s think about the ways they’ve caused it and reverse course via reduced regulations and tax burdens, not by creating new rules and hoops.

There’s a chance we’re worrying about nothing here anyway. Derrell Peel of Oklahoma State University believes we’re about to see fewer imports from Mexico. Currently Mexico exports into our feedlots but they are rapidly increasing their own feedlot capacity. Peel believes that with their ability to produce and finish their own quality cattle they will export less to us and import less from us. Peel states, “Increased demand for cattle to fill expanded feedlot capacity in Mexico is likely to push domestic cattle prices closer to a balance with the U.S. cattle market and will likely reduce both the incentive to export and the supply of cattle for export.”

Where to Lay Blame

As producers we must not allow ourselves to be distracted from the very real challenges we face and turn on each other. The powers that be know that if they can keep us fighting amongst ourselves we will be too busy and exhausted to get to the real work of dismantling the system that holds us back, the bureaucratic and regulatory state. At the end of the day the blame for the bulk of our input price hike can be laid directly at the feet of the US Government. Federal Reserve monetary policy and massive, unnecessary government spending are absolutely responsible for the current inflation and input price hikes. Instead of yelling at other producers or sectors of our industry let’s demand change and conserve that anger for the government.