Episode Transcript
[00:00:00] Speaker A: For decades, beef has been kept artificially cheap.
[00:00:04] Speaker B: Ranchers have gone broke, packers have absorbed losses, and the consumer has gotten used to an illusion.
[00:00:11] Speaker A: Maybe expensive beef isn't a crisis.
Maybe it's a correction.
[00:00:17] Speaker B: Welcome to the Dust or Mud podcast. I'm Rich and I'm Shelley, and we.
[00:00:21] Speaker A: Sell beef and we grow cows.
[00:00:25] Speaker B: We are ranchers and we sell beef out of our store. Our beef.
[00:00:31] Speaker A: Yes, we do.
And I have a feeling that this podcast is going to ruffle some feathers, because creating the podcast and thinking through all of the different points of this podcast kind of ruffled my own feathers as a farmer, a beef seller, and a consumer.
It made me really think about my food and where it comes from and how much it costs.
[00:01:06] Speaker B: So last week, we talked about the cost of beef, the president talking about how beef prices are too high and how he's going to work to correct it. And we talked through some of the things that were on the table that people are talking about. We also threw out some of our own ideas about potentially making the whole process better and even bringing down the price of beef. But we've spent the last week really thinking about maybe.
Maybe that's the wrong.
[00:01:38] Speaker A: The wrong thought, the wrong approach.
Maybe.
So we just wanted to take a minute or however long it takes and walk through a little bit of how we got here, how we got to cheap beef.
[00:01:56] Speaker B: Yeah. So everybody's talking about record high beef prices, but maybe, maybe that isn't the system breaking.
Maybe that is the system correcting and going back to what it should be.
[00:02:12] Speaker A: Yeah.
Consumers are very, very used to having cheap food.
[00:02:21] Speaker B: Yeah.
[00:02:22] Speaker A: And that when. Whenever you're used to something and a system begins, a correction hurts. It hurts at the. It hurts at the register. We don't understand what's going on. And this is an opportunity for us to look at one specific industry across the system and see if there.
What is really happening in the production models that maybe we all need to get used to.
[00:02:57] Speaker B: Yeah. So we took this discussion, broke it into five different segments again, and I think you'll be very interested in segment three, where we talk about the amount of money historically that has gone towards the purchase or the amount of effort that has gone towards food in our daily life.
Some talking points to set this whole thing up.
We've talked about them in previous podcasts, but if you haven't watched every one of our podcasts, which I assume is most of you, a couple of talking points. One, Tyson has been losing money every quarter, say, across the entirety of fiscal year 2024. In its Bee depart or beef side of business, to the tune of hundreds of millions of dollars, like 4 to $500 million lost in 2024 on its. In its beef production.
[00:03:58] Speaker A: So Tyson, not only do they do chicken, they do beef. They buy live animals through the contract system. They buy at a price, and then they pack that meat up, send it off to the grocers with a certain wholesale price.
And it's very shocking if Tyson were to say, oh, my gosh, I had to buy that cow at a really high price. Now that price of that beef is really, really higher. So instead of them doing that, they are able to. Because they have all of their chicken, they are able to hold the prices down, keep the consumers happy, keep everything moving off of the shelves. Because their chicken keeps the doors open. Yeah, because chicken. They make a lot of money in chicken. So much money that it holds up their entire beef program.
[00:04:55] Speaker B: Yeah, pork, too. They're making quite a bit in pork, so it's helping them as well. So chicken and pork are holding up beef for Tyson.
[00:05:02] Speaker A: Okay.
[00:05:02] Speaker B: Another stat that I think is important to look at is the. The years between 2002 and 2022. Okay, so 20 years, but not that long ago. Right. So over 20 years, the United States Department of Agriculture says that we lost 130,000 beef cattle operations.
So we went from 650,000 cattle operations in 2002 to 520,000 cattle operations in 2022.
[00:05:41] Speaker A: Because what we don't know, whenever we're buying that pound of hamburger or that steak or roast, what we don't know is that the rancher, the ranchers that raised that cattle have been operating at basically. Basically a loss or. Right. At very, very thin margins, basically at cost. These guys have been losing. Decades, Decades. They have been losing. And just recently, have things turned for them for the. For the better in terms of their.
Their money coming back into their farmer ranch?
[00:06:22] Speaker B: Yeah. Although if you look at what's happened over the past week, the price of live cattle has plummeted. Yes, it's gone down a lot. We were talking about it last week, saying we weren't sure exactly how the market was going to react, but it has gone down.
[00:06:39] Speaker A: It is. It is on a.
On a quick downhill slide. One thing that the cattle markets do is they have limits on daily. How far. How low a price can go.
Like the stock market can go really, really, really low before they will actually just close the markets.
[00:07:03] Speaker B: Correct.
[00:07:03] Speaker A: So if the market. If the. If the actual New York Stock Exchange is on a free fall, they'll they'll just be like, nope, no more. And they'll, they'll actually close markets early to keep it from doing that. Well, in the livestock industry, apparently there is a limit to the bottom price.
[00:07:21] Speaker B: For the day, and they call it limit down. So there's a limit at how far down it can go. And then the past few days, they've had an expanded limit, and it has hit the expanded limit down every day.
[00:07:34] Speaker A: So while still at okay prices, right now, the trajectory is, is not going, is not going in the, the right direction for the, the rancher.
[00:07:45] Speaker B: Yeah. But interestingly, box beef or the, the beef that is packaged up, getting ready to sell to the consumer. So box beef has gone up.
[00:07:57] Speaker A: Yeah.
[00:07:58] Speaker B: So what the rancher is getting paid is going down, and what the consumer is going to pay is continuing to go up.
[00:08:07] Speaker A: And this was all fueled by a comment by President Trump last week that said, we're going to import a little bit more Argentinian beef. Now we import about 1% of our beef is from Argentina prior to today or prior to last week or even probably still. I don't even know what deal they made.
So it's a very small percentage of beef that comes into this country that comes from Argentina. I don't think that the increase he was talking about was even really that much, but one cup. Well, I don't know what did he talk for a minute on Air Force One about a small percentage of importing a little extra beef just through the markets into an absolute chaos.
[00:08:49] Speaker B: And the most likely, we don't know exactly what he was, what he was thinking, but the most likely is that he was talking about importing box beef.
[00:08:56] Speaker A: Right. Which typically the majority of that is trimmings.
[00:09:00] Speaker B: Yeah. And that's what we said last week during the podcast. But the interesting thing is the thing that he was most likely talking about importing, which is box beef has gone up, and the thing that he wasn't talking about, which is live cattle, has gone down.
[00:09:15] Speaker A: And that's because that's the way the system works.
[00:09:18] Speaker B: And we talked about that. Again, it's emotional. So let's look at it. Segment one, the illusion of cheap beef.
So the idea behind this is we having thought through it a lot now, we don't think that the price of beef that it was a few years ago was reality. We think that it was actually an illusion.
[00:09:48] Speaker A: Right. And all of that was, we feel as the consumers, we think that the cheap beef, it was like a sign. It was if because there was so much efficiency in the market, Right. That it was based on efficiency, but rather instead of efficiency, I think it. What if it was based on rather a, A, a system or even symptoms of exploitation.
[00:10:18] Speaker B: Yeah. And I mentioned the number of ranchers that have gone out of business over the past 20 or so years.
[00:10:24] Speaker A: It wasn't because they don't like cows.
[00:10:26] Speaker B: No. They.
No.
[00:10:28] Speaker A: Or got tired of doing it.
[00:10:30] Speaker B: Nope.
[00:10:30] Speaker A: It wasn't. It wasn't because they didn't want to work hard.
[00:10:34] Speaker B: Right.
[00:10:35] Speaker A: Was it? It wasn't.
[00:10:36] Speaker B: No. It was because they were going broke under the current system.
[00:10:39] Speaker A: And there's just so much you can, there's only so long that you can live like that.
[00:10:43] Speaker B: Right.
[00:10:44] Speaker A: Like legitimately.
[00:10:45] Speaker B: Yeah. And we've talked about again in previous podcasts, the number of ranchers and farmers that have off farm jobs in order to support the farm.
Right. So it's not like. And it, what was it? 80%, I think, of farmers and ranchers have off farm jobs to help support the farm. So it's not like the majority of ranchers and farmers are making a living even off of their farm.
They're making a living from a town job and they're farming. So there's a whole lot in this that makes up the price currently.
So you've got foreign imports and our exports.
You've got the, the different sectors inside these large companies that would allow them to adjust the prices even down to a loss to the tune of hundreds of millions of dollars. So, like, there's a lot at play here.
And you know, one side of it right now, everybody seems to be, if you look at mainstream media, it seems to be demonizing that farmer and rancher that is getting rich right now off of the price of beef. And there is so much included in that. What, what makes up the price of beef.
That farmer rancher is one, like the very beginning of that whole thing. And just now, like within the past year or two, are they even making it above the cost of what they have to pay to make the beef?
[00:12:32] Speaker A: So while we as consumers, grocery store shoppers, you know, moms filling their baskets, have become very accustomed to $3 a pound ground beef.
Our producers have been squeezed out of business.
[00:12:50] Speaker B: Yeah.
[00:12:50] Speaker A: All the way. And when production is down, guess what happens.
[00:12:57] Speaker B: Yeah, supply goes down.
[00:12:59] Speaker A: Yeah.
[00:12:59] Speaker B: Demand has remained the same. So prices go up.
[00:13:02] Speaker A: Actually, demand is going up.
[00:13:04] Speaker B: Yeah.
[00:13:05] Speaker A: I mean, you know, it's not. It. People, people really do want it.
[00:13:08] Speaker B: Yeah.
[00:13:08] Speaker A: And I, and I do too. And I don't blame anybody. Like, we need beef. Nobody's saying, like, don't eat Beef.
[00:13:14] Speaker B: Yeah. You know, so from the 1980s to 2000s, real beef prices stayed flat. But the input costs, think feed, fuel, land, equipment, all of that went up 40%.
[00:13:31] Speaker A: So how, like, how is that what business model in this country or any other, what business model says all my costs are going up, but I'm just going to keep my, I'm going to keep the price of my product that I'm offering super low.
[00:13:47] Speaker B: Yeah.
[00:13:47] Speaker A: And lose money, you don't stay in business. That's why our ranchers are going out of business.
[00:13:52] Speaker B: Thus we lost 30%.
[00:13:56] Speaker A: But, you know, people don't know.
And podcasts like this are here to just educate, talk about, think about what's really going on. Do we know everything? Absolutely not.
But just take an opportunity to learn about where our food comes from. Even if we're living in a high rise in New York City, where's my beef coming from? If I can at least understand why what is happening is happening, then maybe I get it and I have to change the way I think.
[00:14:27] Speaker B: And that's why we started by saying maybe the consumer believes in illusion, but because the, the while, while the price that was being paid at the store was low, that's not the actual cost of beef.
[00:14:46] Speaker A: Yeah.
[00:14:47] Speaker B: So the illusion is the cost of beef is low.
[00:14:51] Speaker A: Yeah.
[00:14:52] Speaker B: Wow. Right.
[00:14:53] Speaker A: So like we've all just been like living this lie because we didn't know.
[00:15:01] Speaker B: Right.
[00:15:01] Speaker A: You know, and I don't think the people trying to keep it low were doing a bad thing, you know, but the downstream unintended consequences of long term, kind of upside down economics, the long term downstream effects on our nation's food supply is now at risk.
Right. Because of policies over the past, how many years?
[00:15:31] Speaker B: 50, at least.
[00:15:34] Speaker A: And that's how we got here.
[00:15:35] Speaker B: Yeah.
So that leads us to SEC, to segment 2. Why expensive might actually be healthy.
[00:15:45] Speaker A: Now that, that one hurts.
But going to the gym is healthy and that hurts too.
[00:15:51] Speaker B: Yeah. So higher prices might be signaling that the system is healing itself, not that the system is, is getting out of control.
[00:16:01] Speaker A: Okay, expound.
I'll let you take, I'll let you take it.
[00:16:09] Speaker B: Well, maybe we're actually seeing the true cost of things now.
Right.
So the, that higher cost of cattle, you know, the feeder, like the markets that we were talking about, at that higher cost, you're.
Maybe it's actually covering the cost of that feeder cow. Yeah, maybe it's covering the cost of land and taxes and hay equipment and hay, if you're buying it, and feed inputs and the hay rings and the squeeze chutes and the tractors and the side by sides or horses or the feed for the. I mean like all of the labor. I mean, just hikes.
Yeah.
[00:16:53] Speaker A: Day labor, even if I work cows.
[00:16:55] Speaker B: But I say I didn't even talk about the price of labor. Right.
[00:16:59] Speaker A: The cost of labor has gone up a lot.
Typically, whenever a business makes money, they. And they show a profit.
Most a lot of the time they reinvest in their business. They put that income back into their what, wherever they need for their infrastructure. So what we need is for cattle ranchers to make some money.
Because if they. That's the only way that we're going to build this herd back.
[00:17:32] Speaker B: Right, that's what I was going to say. It's the only way they'll be willing to retain their heifers.
[00:17:36] Speaker A: And we need ranchers to reinvest. We need them to make some money and we need them to reinvest. We need them to keep their heifers back.
We need them to make more beef.
[00:17:48] Speaker B: Right.
[00:17:48] Speaker A: And the only way to make more beef because the costs have gone up by 40% is to make more money.
[00:17:55] Speaker B: Yeah.
[00:17:56] Speaker A: You know, and it, it isn't like ranchers aren't getting rich. You know, they're just, they're just not. Yes, they own a lot of land. They might have a lot of assets or something like that, but we need them to. Because we need the food.
[00:18:11] Speaker B: Yeah.
[00:18:11] Speaker A: We need them to have that. We need them to have the access to pastures so that they can graze cat.
And it takes a lot of space to do that. It's one of the only things in our food supply that takes a massive amount of land to grow one beef.
[00:18:28] Speaker B: Yeah.
[00:18:29] Speaker A: You know, you're. You need two to three acres depending on where you are. For one head of cattle.
[00:18:34] Speaker B: Yeah. It can be as high as 20, as low as 1.
[00:18:37] Speaker A: Right.
[00:18:38] Speaker B: But still, you need a lot.
[00:18:39] Speaker A: Yeah. You need several acres per cow to, to be able to raise beef. And I don't think that the general public really understands the, the what's required in order to raise that beef.
[00:18:54] Speaker B: Let's talk through the heifers. I want to talk through the timing on that again. So let's say a calf is born and that calf is a female. It is a heifer calf. And we've been saying for months now ranchers need to retain their heifers. Need to retain their heifers. We have to rebuild our dwindling national cattle herd. And the only way to do that is keep heifers. So if the rancher Keeps that heifer. It was born today.
And the rancher says, you know what? I'm showing a little bit of a profit. I can now rebuild my herd. And still, instead of selling off my herd, so keeps the heifer. Today, two years later, that heifer can be bred.
Okay?
Nine months after that, the heifer has a calf.
[00:19:49] Speaker A: Okay?
[00:19:51] Speaker B: Two years after that, that calf is now. If it goes into the feedlot system, that calf is now ready to process.
It's. It has now become beef. So that's four years, nine months. Everything went perfectly.
[00:20:06] Speaker A: So let's say five years.
[00:20:08] Speaker B: So five years from five years, the decision to keep a heifer to a. A steer coming out of that heifer ready to be processed.
[00:20:18] Speaker A: So why don't ranchers just grow more beef?
Because to keep one heifer, you've got to feed her for five years before.
[00:20:29] Speaker B: There'S ever a dollar back from that heifer.
[00:20:32] Speaker A: One, even one.
So that's why.
[00:20:36] Speaker B: And the gamble is, five years from now, the market will be good.
If it's a cow calf operation, you can cut a year off of that. So you could say four years from now, the market will be good.
Right?
[00:20:57] Speaker A: And cattle markets go in cycles. About 10 year, 10 to 12 years, they go in cycles. It goes up, it goes down.
[00:21:04] Speaker B: Right. If the prices go up, as long as the prices are kept artificially low, then it can't. It won't cycle. Oh, because when the prices are low, everybody, they have to sell the herd, Right?
[00:21:19] Speaker A: You can't rebuild the herd when the prices are low.
[00:21:21] Speaker B: For what? For cattle.
[00:21:23] Speaker A: Oh, okay.
[00:21:24] Speaker B: So when the prices are low for cattle, there's no incentive to build.
So when there's no incentive to build, it doesn't. It doesn't.
The supply demand curve, right? Like, that's cycling the whole thing.
So as long as people are selling off the herd to pay the bills, the supply doesn't go down low enough.
Right. So as the prices start going up and up and up, you start to say, now I can reinvest.
Now I can start keeping cattle.
[00:22:05] Speaker A: Because you have more money.
[00:22:06] Speaker B: Because you have more money. You're now finally. What we were saying earlier, you're now finally starting to make a profit. So you can say, I can reinvest. I can rebuild my herd and gamble on four years down the road. Because I have a little bit right now.
[00:22:21] Speaker A: Thomas Massie was talking in a podcast that we were listening to earlier, and he. He said something that I had never thought about it like this before or knew about it, and he said high cattle prices Are the answer to high prices.
[00:22:36] Speaker B: To high beef prices.
[00:22:37] Speaker A: To high beef prices.
[00:22:38] Speaker B: Yeah.
[00:22:40] Speaker A: And I went, oh, okay.
Now it's starting to make sense to me as to how. How the markets. How the market works with the fluctuating and keeping. Keeping cows and holding them back or selling them off. And now we've had record droughts. We've had a myriad of reasons for cattlemen to get out of business, to sell off their heifers, cost, weather.
So many things, so many reasons that. That are out there. A myriad of reasons. But the. If the ones who are still in the game, if they can make some money and start to rebuild, then our. Our whole beef system gets more robust.
[00:23:27] Speaker B: It gets healthier, Right? Yeah. So that. That's the whole point of this segment is higher beef prices.
I think we should be looking at that as the start of the cycle of getting better.
[00:23:44] Speaker A: Okay.
[00:23:45] Speaker B: And don't. Don't try to drive it down.
Realize that this is the system healing.
[00:23:57] Speaker A: Unfortunately, like, it's just. It was doing so good, and then, like, one injection of presidential words, good, bad, or ugly. The fact is, like, one injection of words just, like, causes chaos, you know, and now it's like, okay, it's on this downward trend.
How do we even level. How do. How does it. How is it even going to level off? I don't know.
[00:24:22] Speaker B: We'll have to watch it because, like, literally nothing has changed.
[00:24:27] Speaker A: I know. So this is selling time. This is the time where most.
[00:24:32] Speaker B: This time of year.
[00:24:33] Speaker A: This time of year. This is the fall. This time of year is when the cow calf operations sell their calves. So they will calve in February.
I'm going to use round months. They calve in February.
They keep the calves on the mamas until about falling, and then they. They take them to the markets, they sell them where they go to another rancher's property and go eat grass for another, you know, nine months or a year before they go to a feedlot. And right now is the time for them to be selling. And if they didn't hit the market two weeks ago, now they're, you know, like, dang.
[00:25:17] Speaker B: Yeah. So again, nothing has actually changed other than the. The emotion, emotions, the feeling of the market. So because there hasn't actually been a change, maybe it will stop this plummet and. And correct itself back, you know, but.
[00:25:34] Speaker A: The consumer is only interested in how much it's costing them to buy ground beef and roasts. You know, honestly, like, okay, what with. With the cattle market, right? We want everybody to understand, but they don't. The Only thing they're concerned with is how much it costs them at the grocery store. But here, the price of our groceries over time. Let's talk about history and how long, you know, we as human beings have been eating food, which is like, all of the time. And depending on how long you feel, you believe that, you know, humans have been around, that's not up for. We're not debating that today. But we've been around for a long time, and for the majority of the history of humankind, our lives have been spent in an effort to feed our faces.
[00:26:27] Speaker B: So section three, segment three, real food costs real money.
So prior to, say, the 1500s, and even if you could. You could even go to. Into the 1800s, somewhere around 80 to 90% of people and time were spent growing food.
[00:26:55] Speaker A: Right.
[00:26:56] Speaker B: So that's what you did from the beginning, from the beginning of when. When you believe humans got here.
[00:27:03] Speaker A: Yeah.
[00:27:04] Speaker B: Until the 1800s, the majority, like, 90% of the time was spent on food.
[00:27:13] Speaker A: Yeah.
So, like, literally, survival was like eat or die, and food was.
Was the economy.
[00:27:21] Speaker B: Yep.
[00:27:22] Speaker A: It was all about food.
[00:27:23] Speaker B: Yeah.
You can go back and look through, like, the data from our early agrarian cultures, like Egyptia, Mesopotamia, the Chinese, and the data that exists for that, it supports that somewhere around, you know, 80, 90% of.
Of all labor was tied to food.
[00:27:48] Speaker A: Yeah. Like the. The entire structure of society was like, managing livestock and how do we store our grains? How long can the grains be stored? You know, is it a. Is it a bumper crop year? You know, are we. Are we bumping into next year kind of thing? Was it a good.
Every food preservation? That's what people did. They grew it, they managed it, they preserved it so that they could stay alive.
[00:28:14] Speaker B: Yep.
[00:28:15] Speaker A: And we don't do that anymore.
[00:28:18] Speaker B: So by the 1800s, we've got.
Roughly 83% of Americans were involved in agriculture.
[00:28:27] Speaker A: Wow, 83%. That's a.
That's like every.
That's almost everybody.
[00:28:33] Speaker B: Right. You know, and with the Industrial Revolution, though, as things started becoming more and more mechanized and you start building inefficiencies.
[00:28:44] Speaker A: Building.
[00:28:45] Speaker B: Building in efficiencies. Yeah, building efficiencies. So by 1900, the number of Americans involved in agriculture had dropped to 41%.
[00:28:57] Speaker A: Yeah. Not only do you have mechanization, you have distribution.
So now instead of foods being solely regional, you bring in railroads. So now railroads can now take a grain or a crop or whatever across the country to another population, demographic. Yeah, like completely, like. Yeah, that changed everything. You can grow one specific. You could grow something in the South. That doesn't typically grow in the Pacific Northwest.
And that changed. We're. No. That's no longer regional food anymore.
[00:29:38] Speaker B: Yeah. So just because of railroads, even though, you know, the number of people involved in agriculture was continuing to drop, we're down to, you know, around 40% still. 40 to 60%, somewhere in that range of everybody's household income went to food.
[00:29:56] Speaker A: So half.
Half of your money, if you lived then went to your grocery bill.
[00:30:06] Speaker B: 125 years ago. Yeah.
[00:30:08] Speaker A: Yeah.
Wow.
[00:30:12] Speaker B: Yeah.
[00:30:13] Speaker A: We don't know. Wow.
Gosh, that's a. That's a lot.
[00:30:17] Speaker B: Yeah.
And it has. It has gone down consistently. So by the time you get to, say, the Great depression era, say 1933, the stats are 25 to 30% of household expenditures were food.
[00:30:33] Speaker A: Well, then we got World War II.
[00:30:36] Speaker B: Yep.
[00:30:36] Speaker A: And that changed everything.
Well, in the United States, post World War II.
[00:30:42] Speaker B: Well, during World War II, you had, like, things like the Victory Gardens. And it was a morale boost. Everyone was involved in the war effort. You know, it was a big thing. But also, 40% of the vegetables consumed during World War II were grown in Victory Gardens.
[00:31:04] Speaker A: You know, whenever we hear about that, though, in our history classes, if you do hear about it in history anymore, you.
[00:31:11] Speaker B: You.
[00:31:11] Speaker A: It's really the morale thing. Like, everybody is coming together, pitching in, pitching in. We're all. We're all in it together. But you don't realize they were really growing food.
[00:31:21] Speaker B: Right.
[00:31:22] Speaker A: So that they could eat.
[00:31:23] Speaker B: Yeah.
So then, Post World War II, now we've talked about the introduction of synthetic fertilizers. We had to do something with all of those bomb plants and all of the chemicals that were involved in the making of weap.
The war is over. Now what do we do? Well, we start making chemical fertilizers. And now you continue mechanization, continue gaining efficiencies, Add in chemical fertilizers, and by 1960, we have 17% of the household income was spent on food.
[00:32:04] Speaker A: Wow. That dropped it, like, over half.
[00:32:08] Speaker B: Right.
[00:32:08] Speaker A: Just by.
Well, more modernization, refrigerated trucking, starting to.
[00:32:15] Speaker B: Get supermarkets and consolidate the markets so that you're not, you know, a butcher shop, a vegetable shop.
[00:32:21] Speaker A: You know, the interesting concept to me is the disposable income part. 17% of your disposable income goes to food.
Why is.
Why is our grocery budget in the disposable income section of budget building?
Why is. Because I think just thinking about this, food should be in the other category.
It should be closer to the top of what we're spending. This should Be like line item number one if you're. If you're budgeting.
But that's what we do. I've done it. I've been guilty of it. Like we need to. When, you know, we've got four kids in the house, you're a young captain. We don't have a whole lot of money. And you go to the grocery store, and that's where you. Or you make your budget for the week or the month. And I would make my budget. And all of these things had to be paid. Well, if we're going to tighten up and not spend as much. Well, where do we do it?
We do it at the grocery store.
That's the flex money that we build into our budgets. Well, I'll just spend less at the grocery store.
When food 100 years ago was at the top of the budget, it was at the top of your time budget, their energy budget, your money budget. Everything was food. But as time has progressed and things have gotten more efficient and more technology has come on board, food has gotten cheaper. Cheaper over time in terms of time, labor, energy.
So it is personally cheaper.
It's like the cheaper the thing gets, the low the lower it goes. On your line item on your budget list.
[00:34:13] Speaker B: Yep.
From 2000 to 2019, time frame, you have the introduction of consolidated animal feeding operations. CAFOs continue to consolidate systems, and then by 2019, you have 9.5%.
And it's hovered right around there since 2019.
[00:34:38] Speaker A: A little above 10%.
[00:34:41] Speaker B: 10%. So for the first time in human history, 10% or less of the resources. If you think of money as a resource, 10% or less of a family's resources are spent now on food.
[00:35:01] Speaker A: Food is cheaper than it has been in all of human history.
[00:35:08] Speaker B: Correct.
[00:35:09] Speaker A: Yet we as consumers. Guilty.
Complain that it's so expensive.
So that begs the question, where's the disconnect?
That's back to the illusion that you were talking about.
The illusion is that it's cheap.
[00:35:26] Speaker B: Yes.
[00:35:27] Speaker A: Because we've been so conditioned to receiving this cheap food.
But is it really cheap?
Somebody's got to pay for it.
And for the last 50 years, our farmers and ranchers have been paying for it.
[00:35:47] Speaker B: Man.
[00:35:50] Speaker A: If you're listening to this, I just did that thing with my hand.
Mind blown.
[00:35:58] Speaker B: So now.
[00:35:59] Speaker A: So that sometimes whenever we're recording these podcasts, it's really off the cuff. And we think while we're talking.
[00:36:05] Speaker B: Yeah.
[00:36:08] Speaker A: Okay.
[00:36:09] Speaker B: So now with that, now as a. As a fresh thought in our brains, let's move on to segment four, which is sort of Relooking at some of the things we were talking about last week as potentials for lowering beef prices.
We mentioned the. We could use the packers and Stockyards or. Yeah, packers and Stockyards act.
And we even mentioned the mandatory country of origin labeling as potential things that maybe we could, you know, get Congress on board and get things moving.
And in our mind at least, the idea was maybe that would help bring prices down.
So segment four is why laws like the packers and Stockyard act doesn't necessarily lower prices.
No.
So what happened back in the 1920s, there were five. I mistakenly said eight. Last week there were five companies.
And they owned the system, like, all the way through.
[00:37:24] Speaker A: So they were vertically integrated.
[00:37:26] Speaker B: Completely vertically integrated. And they were meeting. Having meetings in Chicago between betwixt themselves and were setting the prices between themselves. And the government stepped in with the packers and Stockyards act and broke them up.
[00:37:45] Speaker A: Basically. They applied the antitrust laws of monopolistic behavior that is, that exists for other companies, and they kind of took it one step further with the Stockyards act and applied it to agriculture. Because while it's the same, it's a little bit different.
And so they applied the same types of laws to bust them up, Right?
[00:38:09] Speaker B: Yep.
[00:38:10] Speaker A: So.
Because we don't like monopolies in this country.
[00:38:13] Speaker B: But the. The entire point of the law of the act was not to lower prices.
It was to ensure fairness, which is.
[00:38:25] Speaker A: What antitrust laws do.
Fairness so that they can't.
So that they can't collude.
[00:38:35] Speaker B: Correct.
[00:38:35] Speaker A: And set prices.
[00:38:36] Speaker B: Correct.
[00:38:37] Speaker A: We want the. We want fairness to the market for all involved.
[00:38:43] Speaker B: Right. Yes.
[00:38:44] Speaker A: Okay.
[00:38:45] Speaker B: But that could mean higher prices.
[00:38:50] Speaker A: Very well. Might mean higher prices. I would think.
[00:38:53] Speaker B: So as we thought through. How would we. How would we look at that today if we were to, you know, invoke the packers and stockyards?
[00:39:02] Speaker A: Because it's really largely not enforced.
[00:39:05] Speaker B: Correct.
But if we were to invoke it, and we said that the big four that are currently controlling 85% of the U.S. beef production, if we invoke the packers and Stockyards act and broke them up.
[00:39:21] Speaker A: Okay, you just broke up a lot of efficiency.
[00:39:24] Speaker B: Well, and Tyson's currently losing what, a half a billion dollars a year on their can.
[00:39:30] Speaker A: Right.
[00:39:31] Speaker B: Because they can. So now this huge company that has been selling beef at a loss can no longer sell beef.
The small company can't sell beef at a loss.
[00:39:47] Speaker A: No, they can't.
[00:39:48] Speaker B: So if we break up the big companies, which I happen to be in favor of, but that does not mean that beef prices are going to go down.
Nope.
[00:39:59] Speaker A: Right. Right. Yeah, that makes sense.
[00:40:01] Speaker B: It would mean the system would be fair.
[00:40:06] Speaker A: Well, and with the Stockyards act, it would also mean that we would. We. Well, it would be fair.
It would be more diverse, so it would be stronger. It would be less consolidated. The supply chain would be, like, way less consolidated. So when things like pandemics and groceries and all of that and having to. All the things that went on in.
[00:40:32] Speaker B: 2020, that diesel prices, truckers go on strike, like, yeah, there's a lot of things.
[00:40:38] Speaker A: So. So if we did that, we could deconsolidate and the system would be stronger. That would be. That would be a really good thing.
[00:40:47] Speaker B: But it does not mean prices would.
[00:40:49] Speaker A: Be lower at the grocery store.
[00:40:51] Speaker B: Correct.
[00:40:53] Speaker A: Okay, so what about another thing that you talked about was mandatory country of origin labeling, or MCool.
That is.
That is a. That is a regulation that many in.
Many products that are sold in this country must abide by. So when you see. Made in Thailand, grown in Mexico, avocados from Mexico, like, when you see where that product was made, where it came from, bananas from Chile, whatever the product is, you know, my. My crocs probably have a made in, you know, kind of thing.
But beef, pork and lamb.
[00:41:44] Speaker B: No, lamb does.
[00:41:45] Speaker A: Lamb does.
Oh.
[00:41:47] Speaker B: As I understand it, it's beef and pork.
[00:41:49] Speaker A: Oh, well, beef and pork do not have to have them.
[00:41:54] Speaker B: In 2015, the United States caved to the World Trade Organization when the World Trade Organization said, that is unfair trade practices. You're not.
You're not being fair on the world stage if you make country of origin labeling for beef and pork mandatory.
So the United States said, oh, okay, and they got rid of it.
[00:42:21] Speaker A: So whenever an American cattle rancher raises a steer and sends it all the way through the process to be a rib eye, when you're standing there at the grocery store, pick whatever one you want to shop at. You have no idea if that steak was raised in America. I don't.
The USDA label on that stake has to be there because it came into this country, like, like, period.
It has to have the USDA certification to be sold retail. That does not mean that that is a United States grown product.
[00:42:56] Speaker B: Correct.
[00:42:56] Speaker A: But that, like, we don't know that USDA stamps on there.
[00:43:01] Speaker B: So this year is the first year that product of the USA on beef means that it has to be actually a product of the usa.
So up until that, it. It just had to be packaged here. And it could be like the final cut, the final grind, whatever, and then Put into a package and it could say products of usa. But now if it has that, it's a voluntary label.
But if it has product of usa now it has to be product of the usa.
[00:43:33] Speaker A: Okay.
[00:43:33] Speaker B: But it does not have to say, like, if there's no label on it, you have no idea.
It could be Brazil or Argentina or China or Mexico or like, you don't know or usa.
[00:43:48] Speaker A: So let's just say they invoke this mandatory country of label origin onto beef and pork.
And we say, okay, we want to know where it came from.
[00:44:01] Speaker B: Right.
[00:44:02] Speaker A: Like, I want to know if this is a product of Argentina. If it is. I mean, we know where the coffee comes from. Costa Rica. I mean, you, you know where your products are coming from. Except for beef and pork.
[00:44:15] Speaker B: Yeah.
[00:44:15] Speaker A: So I want to know product of Argentina. Product, you know, a hamburger package. Product of where? Brazil.
Product of Colombia, product of Canada Pro.
[00:44:27] Speaker B: You're going Australia. Yeah. You're going to add cost.
[00:44:33] Speaker A: Product of the usa. So what, what happens if now you, everybody, it's all labeled.
[00:44:41] Speaker B: So even, even if you, even if you take out the mix, like if you say, okay, now we're, we're no longer going to mix Argentina Argentinian lean trimmings with us, you know, fattier beef to make a leaner ground beef. Like, like don't even talk about that. So the cost is going to be added because now you have to keep things separated.
[00:45:10] Speaker A: Yeah.
[00:45:10] Speaker B: And there's traceability now.
So it's, it can't be that everything just gets piled into one.
So where, where you, where's your U.S. beef processed? Where's your Argentinian beef processed? How do you store it separately? How do you label it separately? Right. Like even pre processing that you have to have your, you know, that beef's over there and that beef's over there and you got to trace it where everything is coming from. So like the, the more regulation, the higher the cost.
So I love the idea. Again, I'm totally for, I want to know where the beef is coming from. I think everybody should like, look, if you want to buy beef from Argentina or Mexico because it's cheaper, you should have that as an option.
[00:45:58] Speaker A: Well, maybe I, maybe we should have as an option.
The least expensive option would be to continue doing what we do with bringing some in. It all goes into one big, you know, kind of grinder and we're mixing up this thing. But let just say multiple country product, multiple country origin.
[00:46:19] Speaker B: You would have to put every one of them beef from Argentina, Brazil, Mexico and usa.
[00:46:25] Speaker A: Okay, so Well, I think another it may be unintended consequence of it would be American beef would tend to be premium and if it is the premium product and you have alternative, lesser expensive products, the beef coming from American ranchers would be more expensive.
[00:46:50] Speaker B: Potentially.
[00:46:51] Speaker A: Potentially. Like I, I don't know but that is oftentimes. Like have you tried to buy a pair of denim jeans that are wholly made in the USA with USA grown products?
Like I don't wear them because I'm not going to spend $250 on a pair of jeans. That's reality anything. I mean if you've gone out shopping for really something made in the usa there are some things that are very affordable but a lot of it, if it is really made here, it's really expensive.
[00:47:25] Speaker B: So for me, I think the, the things that we talked about last week and are covering again here are about making the system fair.
And I'm, I'm in favor of that. I think making the system fair is a step in the right direction to healing the entire system.
I do not think that it is going to make it cheaper.
[00:47:59] Speaker A: Ah, I think you're, I think you're right.
So what does that leave the consumer?
[00:48:05] Speaker B: Segment five, the road ahead.
Where do we, where do we go? Yeah, I, I think the path forward is let's be honest about the price of beef and, and groceries writ large food.
But for you know, because we're looking at a tiny segment, transparency. Yeah.
[00:48:27] Speaker A: In the production adds to that.
[00:48:29] Speaker B: Yeah.
[00:48:29] Speaker A: That. Well, that is honesty.
[00:48:31] Speaker B: Right.
Let's, let's be honest, let's be honest about what we expect to spend on groceries currently less than any human that has ever lived.
[00:48:48] Speaker A: But we complain.
[00:48:49] Speaker B: But what, what should we expect to spend?
[00:48:52] Speaker A: Yeah, I think that's what you know that we say that often is, you know, expectation management is the key to maybe you know, happiness or contentment or just being an overall good mood is. What was, what was your expectation when you went into that situation?
[00:49:08] Speaker B: Yep.
[00:49:11] Speaker A: When, when our customers, our regular customers come in to our meat store that is regenerative, non GMO grown right here, locally raised, locally sourced feed, all of those things locally processed locally right here. I'm talking Ava, Missouri type meat.
They know that we are, it's just us. I mean it's just us and they know what to expect when they walk in and they expect it to be premium meat.
They get that. They expect that it's going to be delicious. They get that. They expect us to be very open, we're very honest, we're very transparent. We have a YouTube channel that shows you exactly what we do. Can't get any more transparent than that. But they also expect that it's not going to be cheap.
[00:50:06] Speaker B: Yeah.
[00:50:06] Speaker A: Like, they know that now.
They're okay with it because they know what they're getting.
The value is in the real food to them.
[00:50:17] Speaker B: Yeah.
And I think for the consumer that. That probably is, at least in our opinion, the road ahead. Buy local, where you can have a. Have a real thought about how much you expect to pay for food.
And for. For me, I would encourage you to support fairness and transparency in the market. Like, it, It's. It is an illusion currently, and I think that the illusion could be coming down.
[00:50:55] Speaker A: We need our ranchers to reinvest.
[00:50:58] Speaker B: Yeah.
[00:50:59] Speaker A: We need our ranchers to hold back their heifers, grow their herds. We need more regional meat processors, our communities investing in local meat processors. We have one. We're blessed to have a USDA processor that's close to us.
We need more of those to spread out the beef and not have it quite so consolidated.
[00:51:31] Speaker B: Yeah. And I think that gets to, like, if we could speak to the policymakers, the. Hey, support Thomas Massie's Prime Act.
The idea of allowing for more free trade in. In locally produced meat is beneficial to the entire system.
Like that. That. That's huge. Allow meat that is processed at a custom processor to be sold as retail cuts.
Like, if the beef is safe enough to sell as a half beef, it's safe enough to sell as a ribeye.
It just is. It's the same beef.
The fact that you're buying a half of a beef is no like that. That doesn't make it any safer than I only want to buy a ribeye.
So from a policy perspective, let's. Let's kick in some of these things.
[00:52:27] Speaker A: Like the prime act, and stop chasing the cheap imports.
[00:52:33] Speaker B: Cheap imports is not going to.
That is not a solution to the domestic problem with beef production.
Yes, it can. For the time that you're importing, it obviously increases the supply of beef. I mean, I'm not arguing that, but it doesn't fix the problem, doesn't do anything. For fixing the problem of US Beef production, and then for everybody, I would say a reminder that food security is national security.
If.
If you're not eating, you're certainly not secure.
[00:53:16] Speaker A: Yeah.
And in this economy, we have hard, really hard choices to make because we don't get to set what the. What the dollar's worth. We don't get to decide what the interest rates are. We don't get to decide how much this dollar bill will buy me. We don't get to decide that.
[00:53:41] Speaker B: And because we can't decide how many dollar bills are in circulation, we don't get to control inflation.
[00:53:47] Speaker A: All we can decide is what we do with the few that we have and where on the budget our sustenance is.
And if we, if we make the hard choices and maybe move food up on our line item to where it's less disposable income. And this is mandatory income or sorry, less disposable and yeah, income like. But this is a mandatory expenditure.
[00:54:19] Speaker B: Right.
[00:54:21] Speaker A: This is, this is, this is a non discretionary expenditure. Expenditure that, you know, the government talks. You know, they've got their discretionary and their non discretionary like this is, this is a must. And these aren't necessarily a must. Well, food's the must.
[00:54:40] Speaker B: Yeah.
Interestingly, that's not how the government sees it.
[00:54:44] Speaker A: No, they don't. Because here we sit with the government shut down and 42 almost million individuals are relying on food benefits that come from the government. And the government didn't put food on the must spend item.
[00:55:05] Speaker B: Right.
[00:55:06] Speaker A: And so SNAP benefits for the first time are looking at potentially in November not getting funded.
[00:55:15] Speaker B: Funded.
[00:55:17] Speaker A: Which is insanity.
[00:55:19] Speaker B: Yeah.
So wrapping it up, I would say the, the low price of beef that we have been experiencing has been an illusion. And I think it's high time to, you know, pull back the curtain. Who's. Who's behind there, who's the wizard of Oz actually, you know, what's actually going on with the system. And maybe time to look at the increasing beef prices as a sign of a market that is healing and not a market in crisis.
[00:55:59] Speaker A: Yeah, this was a hard one. This is a really.
Anytime you pull a band aid off and look at what's going on or pull the curtain back and look at what's going on in, in any situation, especially something like this. It's hard to. To discuss.
It's hard to say, man. Maybe it's us.
Maybe our, maybe our expectations of cheap food have to go away.
[00:56:30] Speaker B: Yep.
Well, thanks for hanging out with us again on the Duster Mud podcast. We really appreciate it. If you liked it, share it with somebody.
[00:56:39] Speaker A: If you join like it, share it with somebody.
[00:56:41] Speaker B: Yeah, join the conversation. Leave us a comment, Let us know what you think. And until next time, bye, y'. All. Bye.
