The cattle industry continues to sort through questions surrounding the Trump administration’s proposal to temporarily allow an additional 300,000 metric tons of imported beef into the U.S. market. At the same time, producers are dealing with the smallest U.S. cow herd in more than 70 years, ongoing discussions about packer concentration, and uncertainty over where cattle prices head next. Veteran Iowa cattle feeder and commodity broker Brad Kooima discusses the issues.
“Cash cattle are $40 off of the highs. The market’s coming down by itself. Grinding meat topped the week of 4th of July. It’s been coming down since then. I mean, let the market work. Why did the hamburger start to come down after the 4th of July? Well, because there was some pushback. When that 90% got up to $9 a pound, people backed away. And when rib-eyes got to whatever it did in your backyard, the $25, $26 at the local grocery store, people said, well, I think we’re going to pull back a little bit. And you saw that reflected in what the beef values were. So we don’t need government intervention in the commodity markets, in my estimation.”
Kooima says one of the biggest frustrations among cattle producers is the lack of detail surrounding the administration’s beef import proposal.
“So the one country that leaps off the page as the candidate for this is Brazil, even though nobody said it. I almost think it has to be Brazil, first of all, to have anywhere close to the capacity or the ability to even produce this much meat, which I think is very improbable that any country, on a snap of the finger’s notice, can come up with 100,000 metric tons in 30 days and then followed by another 100,000 metric tons and then another 100,000. That’s how it’s broke down over those three 30-day periods. And then this whole idea that he’s got it figured out, that we’re going to get it priced so that it’s going to be 25% less for the consumer. And I’m going like, 25% less than what? Are you going to have it labeled differently in a Costco or a Walmart or something and say, okay, here’s domestic ground beef, and it’s $4 a pound, and here’s this stuff that we just imported, and that’s going to be $3 a pound, 25% less? I can’t conceive that that’s even logistically possible.”
Even with beef prices remaining elevated, Kooima points out that tight cattle supplies continue to be a major factor in the marketplace.
“Cow herds are the lowest since 1951. That is why we got this high. Year-to-date beef production is down 3.6%. So it’s lower, but it’s not that, oh, my gosh, devastating 10% type thing because we have less animals, but we’re making them bigger than we ever had before. So it’s not quite as dramatic as it sounds. So, yeah, we’re still going to have, I mean, is this thing going to collapse and go down to where it was? No. In my opinion, the numbers are still going to stay somewhat tight, but I think the real extreme of the market is over, and now we’re going to work our way through this next process.”
The president has also criticized the dominance of the nation’s four largest meatpacking companies. While Kooima has long pushed for greater price transparency in the industry, he warns against drastic action.
“Anybody that knows me at all knows that I’m not a packer pal. Okay, I’m not a crony. But if you’re out there rooting for them to break up the big four, I would say be really careful what you wish for. Now, maybe five or six years down the road, maybe that would be a good thing. But, I mean, that’s like I sprained my ankle. Here, let me fix you up by cutting your entire leg off at the hip. The pain that the market would experience during that process would be horrible. You’ve got to have somebody to kill your cattle. That lurking in the background does give me a little bit of cause for concern. I don’t know really what that looks like, breaking up the big four. There is some precedent way back when, when they did that with big oil, back in the 80s, right? But that’s been a while. Hopefully we can trim instead of using a chainsaw, right?”