Ever since the industry took its first step toward a more value-based marketing system and away from commodity marketing, there’s been discomfort among a subset of producers. It’s not surprising; after all, whenever the rules of the game change, you have new winners and new losers. Those who had the old rules figured out will naturally resist change.
It’s impossible to overstate the degree of change in our industry. Of the big four packers, three are under new ownership. Grids, alliances, forward contracting and other alternative marketing arrangements have changed our business.
But, we need to be careful about naïvely believing that competition is the issue. Studies indicate the overall price of cattle is higher, not lower, because of these alternative marketing practices.
Everyone agrees the industry has problems and must change. But, our current industry debates are being waged on false premises. Power and specific political agendas are the aims, and the debate over our marketing structure is simply a means to move those agendas.
In reality, our number-one problem dwarfs all others; it’s the area where the industry must focus if it’s serious about having a healthy, sustainable and profitable industry.
That issue is beef demand. The numbers of cattle and producers haven’t declined because of grids, branded programs, strategic alliances or captive supplies. The culprit is a precipitous drop in beef demand.
Yes, we saw a small uptick in demand that fueled growth in the late 1990s, but the industry never recovered the levels of the early 1990s, let alone the ’80s or ’70s. Our demand growth was sidetracked by BSE and the loss of export markets; and then came ethanol, which dictated that our industry must become significantly smaller to be sustainable. We’re now mired in one of the industry’s longest periods of liquidation with no end in sight.
To blame our profitability issues on the very mechanisms that allow for risk management, differentiated price based on value, and specification production for niche markets is taking the industry’s focus off of where it needs to be – that’s building demand. If we’re serious about passing on a healthy industry, we must stop fighting over side issues and focus on what is truly important.
I don’t know how to heal the industry divide, earn back the broken trust, or stop the distortion of facts. But, I know one thing with certainty – if we set out to recapture even half the demand we’ve lost, we’ll have done something far more significant, not only for our bottom lines but for those of our children, than we will ever do focusing on these other issues.
Troy Marshall is a contributing editor to BEEF Cow-Calf Weekly, BEEF magazine’s Friday afternoon newsletter. Sign up for a free subscription at beefmagazine.com.