Episode Transcript
[00:00:00] Speaker A: So why do you do it? You know, you can't compete. And I think that's the title. We just can't compete. So you niche down.
It's a niche and you stack the best that you can, but you can not compete with 2.78% profit margin. Yeah.
[00:00:22] Speaker B: It's really what you're trying to compete with.
[00:00:24] Speaker A: You can't.
It seems like every time we turn around, we hear about another food recall. And last week was no exception. Cargill recalled about 16 and a half thousand pounds of beef from Walmart's welcome to the Duster Mud podcast. On this podcast, we aim to inspire you, encourage you, and maybe even educate on food freedom and farming.
[00:00:51] Speaker B: We spent almost 25 years in the United States Air Force moving around the world. And at the end of that career, we retired and moved to the ozarks of Missouri and started a first generation regenerative farm. On this farm we grow beef, lamb, pork, chicken, eggs, raw milk. And we also do this YouTube thing. And as part of that, we do this podcast. Today we're going to focus again on food, again on local.
[00:01:23] Speaker A: I'm going to touch on freedom and farming too, because I think that our freedom is jeopardized and farming is also how we do it is important to this particular conversation.
[00:01:34] Speaker B: Love it.
[00:01:34] Speaker A: Okay, we're going to touch on all of them. Okay. Cargill, they recalled about 16 and a half thousand pounds of. Was it ground beef?
[00:01:46] Speaker B: Ground beef that was distributed to Walmart's?
[00:01:49] Speaker A: Yep.
[00:01:49] Speaker B: And that was a two day run from one of their plants.
[00:01:54] Speaker A: That's. Wow.
[00:01:56] Speaker B: Yeah.
[00:01:56] Speaker A: Two day run from one plant.
[00:01:59] Speaker B: Yeah.
[00:02:00] Speaker A: That's a lot.
Yeah, that's a lot.
[00:02:03] Speaker B: It was a lot.
[00:02:05] Speaker A: So that makes us. So that just. It's very frustrating on a lot of levels. Number one, that 16 and a half thousand pounds, due to the way that they manufacture the ground beef, is pulled and it's all contaminated and withdrawn from our food resource.
[00:02:24] Speaker B: So the way they stated it was, there was potential E. Coli contamination, potential E. Coli contamination due to a segregated product, whatever that was being mixed in where it wasn't supposed to be.
[00:02:40] Speaker A: So there's a lot of mixing that goes on.
[00:02:43] Speaker B: And we've talked about that on previous podcasts, how the ground beef sort of works. There is the pink slime or whatever that stuff is called these days. And all the USDA says that it's beef. That's right. The definition is now just ground beef.
[00:03:02] Speaker A: It's just beef.
[00:03:03] Speaker B: But nothing actually changed. The stuff is still in there. So we've talked about that. The fact that there are parts and pieces from hundreds, if not thousands of cows in each package of ground beef because it all just gets shoved in together. So in what you're saying, the way that they manufacture ground beef, there is definitely an increased potential for contamination because if one cow was contaminated, now that is potentially spread across, you know, lots.
[00:03:37] Speaker A: Lots and hundreds, tons, tons of beef.
[00:03:42] Speaker B: Like in this instance, eight and a half tons or just over eight tons of ground beef.
[00:03:48] Speaker A: Of ground beef, which cows aren't all ground beef. So it came from numerous different cows.
[00:03:54] Speaker B: That's right.
[00:03:54] Speaker A: Yeah.
Okay. Cargill is a very large, very large company.
[00:04:01] Speaker B: Yeah.
[00:04:02] Speaker A: They, it's not going to hurt them.
[00:04:04] Speaker B: No, no, that, it's not going to hurt them. The, this call. So what happened? The, the recall happened. And then on the social media networks, we, we started hearing the, and this is why you buy local. And, and the push again for local beef. And then from that, the standard comment, about five or six comments down, you'll often find, yeah, but local is three times more expensive.
And there's, there's just this, I think there's a, an aura or a mentality behind the, the local producer. And it, the way that the comments are stated, it feels like it did when we were in South Florida and a hurricane would come and the stores were constantly being accused of price gouging because the price of plywood would go up or the price of bottled water would go up. And there was this mentality of price gouging.
And that comment in these posts have that same feel to me. Like we either pay, you know, a fair price for this, you know, mess that's getting recalled, or we pay three times that for you local guys.
[00:05:34] Speaker A: And it's the same thing. And in their mind, in the mind of the consumer is that it is the same thing. It's ground beef.
[00:05:42] Speaker B: Right.
[00:05:43] Speaker A: It's beef. Why, why on earth does the little guy charge $8.50 per pound for ground beef when Walmart charges $3.50 per pound for ground beef?
[00:05:57] Speaker B: Right.
[00:05:57] Speaker A: Whatever the pound, whatever it happens to be that day, whatever type of packaging and whatever, whatever label they've attached to it specifically, then it makes, it, makes it feel like the consumer who says, what's three times? Yeah, that'd be great, except you're, you're charging three times more. Well, there's a lot of, there's a lot that goes into, a lot more that goes into that than, well, that farmer's just price gouging me on hamburger.
I can assure you, at $8.50 a pound, for ground beef. Coming from a small farm, they are not price gouging you. And they're probably barely keeping their electric bill paid on that and the truth behind the cost of the beef, and I think that's what we want to talk about today, is the truth behind the cost of the beef and the.
[00:06:53] Speaker B: Fact that the small guy just cannot compete.
[00:06:56] Speaker A: No.
[00:06:57] Speaker B: With the larger.
[00:06:58] Speaker A: So we're talking about Cargill, which is the largest privately owned company in the United States. Now, they don't just do beef, and they don't just process animals. They're a very large, large conglomerate. We all know Cargill's huge, and we're talking about Walmart. So with those two, Walmart is like the largest corporation in the whole world. So with talking about those two very large companies, and they can charge $3.50 a pound for ground beef and air to ground farms cannot charge that and even feed the cows, much less ourselves. And so it just comes to the point of, well, we can't compete. Well, of course we can't compete. What's their profit margin?
[00:07:49] Speaker B: Walmart's operating profit margin is 2.78%. So just under 3%.
[00:07:55] Speaker A: So let's break that down.
Walmart. And we have a lot of family members who work there. That's great. Walmart.
Their margin is $0.03. Less than three pennies on every dollar is what they need to make.
[00:08:13] Speaker B: Correct?
[00:08:14] Speaker A: That they sell.
[00:08:15] Speaker B: Yes, that's it.
[00:08:16] Speaker A: $0.03.
[00:08:17] Speaker B: That's right. And that leads them to billions of dollars of profit annually.
[00:08:24] Speaker A: So they can make a boatload of profit. Not revenue. Revenue is just money you're bringing in. But after they pay all their bills and all their employees and bonuses and everything, the spoils left over is to the tune of billions of dollars on $0.03 on the dollar.
[00:08:40] Speaker B: That's right.
[00:08:41] Speaker A: Economies of scale.
[00:08:43] Speaker B: Right. And Cargills, if you look at their financials from 2023, their revenue coming in was 177 billion. And their profit margin, although it was down 43% from the year prior, their profit profits were still 3.8 billion, which, if you do a profit to revenue comparison, then that means that they're less than 3%.
[00:09:08] Speaker A: So, again, $0.03 on every dollar is what they need to make. Well, we have to make a little bit more than $0.03 on every dollar.
[00:09:19] Speaker B: Yeah, that.
[00:09:20] Speaker A: That comes in. Because if we said, as a small farm, let's just throw out round numbers. Revenue. You make $50,000 in a year in revenue. And you said, well, my profit margin is going to be 3% because I'm going to compete with Walmart. What? How much? How much money is that?
[00:09:42] Speaker B: Not much.
[00:09:43] Speaker A: No. Like, you can make a car payment on it? Hardly one. Just one. And so that doesn't work. And in fact, the USDA put out that any small farmers that are operating under a 10% profit margin are at risk. That means they're at risk of failure. So if you're a small farmer and you're operating beneath 10% profit margin, they're not going to make it.
[00:10:14] Speaker B: That's correct.
[00:10:15] Speaker A: So the USDA says that's not going to work, that.
[00:10:19] Speaker B: No, they. They want you to be at least a 25% profit margin to even be considered as a successful farm.
[00:10:28] Speaker A: So after we've paid for the cows and the hay and all of the things that go into it, and we've come up with our costs, we have to go ahead and tack on 25%, at least in order to be able to even stay afloat, according to the USDA.
[00:10:44] Speaker B: Well, and again, when you're looking at the small farms, according to the USDA, a large percentage of them have off farm income to include us. We don't work off the farm, but the retirement paycheck we get from 25 years in the United States Air Force is off farm income. That gives us a buffer so that the amount of money we do or don't make via farming doesn't mean that we do or don't starve or we can or can't pay our bills.
[00:11:22] Speaker A: Right. So the reality is that small farms simply cannot compete on a one for one basis with Cargill and Walmart.
[00:11:37] Speaker B: That's correct.
[00:11:37] Speaker A: You cannot, I argue, to say it's not the same product, because I can tell you, when my cow goes to the processor and there's a pound of beef, that entire pound of beef came from that one cow.
[00:11:51] Speaker B: That's right.
[00:11:52] Speaker A: One.
[00:11:52] Speaker B: Yep.
[00:11:53] Speaker A: Not 20 or 2000.
[00:11:56] Speaker B: Correct. One.
[00:11:57] Speaker A: Just one. And it looks marketably different. It's actually red, not pink.
[00:12:03] Speaker B: That's true.
[00:12:04] Speaker A: It has a.
It's altogether different product. Okay, now, a couple of podcasts ago, we talked about, hey, good, better, best. If you're trying to eat a ketogenic diet, if you are trying to keep your carbs low, go get the thing that you can afford. Good, better, best. This is not that conversation.
We believe in good better, best, always. But if we're making a product that is best, then I want to be able to command that price.
[00:12:34] Speaker B: That's right.
[00:12:35] Speaker A: And we should be able to do that because it is a different, just a different product. Right.
[00:12:41] Speaker B: It is.
[00:12:42] Speaker A: And so what do we do? You know? Okay, we've just stated we can't compete.
[00:12:49] Speaker B: No.
Like as the farmer, as the producer, there are a couple of things. One, you have to have a consumer, if in our, with our business model, where we are farm to table, farm to fork, direct to consumer, however you want to, however you want to say it, we have to have someone that is willing to say, I agree that that product is better.
I want to support you as a local farmer, and I will pay the amount that it takes in order to do that.
[00:13:34] Speaker A: Right.
[00:13:34] Speaker B: Like, without that consumer, it doesn't matter what we do. So you say, what do we do? Well, the first thing is we have to acknowledge and recognize that there is a total dependence on a consumer that is willing to buy local for a product that is different, in our opinion, better.
[00:13:54] Speaker A: Right.
[00:13:55] Speaker B: So number one is we have to find consumers.
We have to find the people that.
[00:14:02] Speaker A: Are willing to say that understand the difference. And that's why we have this podcast, is so that we can continue along with the other voices that are out there to promote the fact that local is different.
Local can be better.
[00:14:18] Speaker B: Yep.
[00:14:19] Speaker A: And local does provide money into your local economy in ways that whenever, whenever Cargill gets those billions. I don't think that they're helping out your small rural town, too. Awful. Very.
[00:14:39] Speaker B: If you go to their website, they have a lot of information on the things that they're doing for their environmental, social and governance.
[00:14:46] Speaker A: Oh, they're ESG. So they're really on board with making sure that the environment and their social and governance scores. And governance scores are really, really good.
[00:14:58] Speaker B: From all of the 2040 goals on their website, they talk about which goal they're trying to meet with all of their different things.
[00:15:07] Speaker A: I don't know that I necessarily, I'm not going to go too far into this, but I necessarily agree with the route that they're going with their goals. I think that, I don't really subscribe to some of that, but, I mean, that's their business, not mine.
Back to cargill and the big four.
They, they run a lot of cows.
They run a lot of cows through those processing plants.
[00:15:38] Speaker B: 26 million cattle per year run through those four processing plants.
[00:15:44] Speaker A: Four. They have 80%, 85%, 85% of the cattle market share of the cattle.
[00:15:51] Speaker B: Yep. That. That equates to 26 billion with a b pounds of beef on an annual basis.
[00:16:01] Speaker A: You know, in the night in the 1970s, the big five, there are four now. The big five packers, they had 25% of the market share in the 1970s. And now the big four have 85% of the market share.
Wow. The, the centralization of the food production.
[00:16:23] Speaker B: As you continue, it's a little scary. Well, yeah, as you continue, like when, when the goal is price, price, price, price, price, price, price, price, price, price, price, price, price, price. Then you have to go with economies of scale. So you have to continue to get bigger.
[00:16:36] Speaker A: Well, bigger and faster.
[00:16:37] Speaker B: You have to get bigger. You have. The way to get faster is to get bigger. Right? Like, you can't be hand doing everything and expect it to be fast. There have to be efficiencies. So bigger, bigger, bigger, bigger.
[00:16:49] Speaker A: Right.
We don't use those packers for our meat. They wouldn't want to do business with us because we do, like, I don't know, one, four total, you know, a year kind of thing. Maybe six. But the point is we, they don't want our business. They don't need our business. And we, even if we begged them, we couldn't get in with them. No, we are very, very fortunate, and I do mean very fortunate because they're few and far between. We have a USDA processor within driving distance of our farm that we have access to. And they have been amazing. They work with us sometimes if we're on, if we're like, we need to get an appointment. Can we get in?
They have yet to tell us. No, that's correct. They have gotten us in and they're very good. Meticulous, clean. You walk in there, it doesn't smell like anything, honestly. It just smells clean. Um, which is an amazing thing. Glass. So you can see everything going on back in there. We really are satisfied, very happy with, with our processor, which is good because they're part of our team.
[00:18:02] Speaker B: Yeah.
[00:18:03] Speaker A: We can, we could drop a cow off and they just ruin the thing.
[00:18:05] Speaker B: Right.
[00:18:06] Speaker A: You know, and that would just.
[00:18:07] Speaker B: Here's your cow.
[00:18:07] Speaker A: Here's your. Yeah. And that would be horrible.
[00:18:09] Speaker B: Yeah.
[00:18:10] Speaker A: But it does happen to people. So since we were looking at those numbers, 26 million cattle in the big four. So that's what, six and a half million per.
[00:18:21] Speaker B: Yep.
[00:18:22] Speaker A: Okay, sure. Six and a half million annually. I called to find out, hey, guys, how many head of cattle do you run through?
Ballpark? And she said, well, about 40 a week.
So sometimes it's a little more, though. Whenever they don't have a lot of pigs, they do pigs and lambs and then they have deer season. They don't do anything other than deer.
That's roughly 2000 head of cattle coming through there in a year.
Small.
They can't compete.
[00:19:05] Speaker B: No, they cannot compete with.
[00:19:06] Speaker A: They can't. They can't run at a 3%, no margin. Like, there's no way. We see all the employees. They have quite a few employees buzzing around there to do 40 head of cattle and a number of pigs on the Mondays that we're there. And, yeah, they do to us. They do quite a bit of business, but nowhere near millions and millions and millions, you know?
[00:19:31] Speaker B: So we've discussed that we can't compete with Walmart.
Our processor can't compete with Cargill.
[00:19:38] Speaker A: Nope.
[00:19:39] Speaker B: So where does that leave us? We believe that it leaves us with a value proposition and that the product that we're producing, in our opinion, to our local economy, has value, and we believe that that value makes it worthwhile.
[00:20:00] Speaker A: Well said.
That was really well put.
A quick story. We were at the Forsyth Farmers market. Thank you to all of you who came out and saw us and visited our booth and took home some food with you. While you were there, we had somebody come up to us and were, can I see your ground beef? Yes. And I love to get our ground beef out of the freezer and show it to them because it's beautiful. It's just red and looks amazing. And they're like, oh, wow. And, of course, the price and. But they took some anyways. They. The value, it meant they wanted to take it home because they said, well, we can't eat the stuff yet that comes in the tubes at the grocery store. Now, there's other options, but they. Or in the packages that we can't eat that for some reason, there's a. It gives us a reaction, and we're like, oh, now, of course, we didn't say what we thought that that reasoning was, but we said, oh, no. Well, here's what this is. It's only beef it comes from. And we were able to really explain to them the difference between the two. But to hear from people that they can't eat the food that's being produced in those facilities is alarming. And it's also encouraging to say there's your why? Because there's food out there being created that people are reacting to. That means it's not.
Something's not right.
And so the value becomes your health, the value becomes your community's longevity, your community's economy.
Actually putting money back into your specific community and to put nourishment in there, you know, that it be, you do have to stay open. You've got to charge enough to be able to keep doing it. You can't give the food away. We're not a 501 C three.
[00:22:11] Speaker B: We are not a nonprofit.
[00:22:12] Speaker A: We are not. So we, most farmers are for profit so that they can stay open and pay their bills. And it's just, it will keep you going, though, to hear the stories of what food does to people.
[00:22:30] Speaker B: Yeah. We also think that the consolidation that we're seeing in the, you know, big four producers having over 80% of the market share, and then the, the large, very large corporations like Walmart, the risk there is what happens in the supply chain. If things start going awry with the supply chain, it just turns bad really fast.
Like our local Walmart, they get two plus semi trucks a day is what it takes to keep that Walmart stocked.
[00:23:13] Speaker A: And it's a pretty small Walmart in a rural area.
[00:23:16] Speaker B: Right. The town of Ava has less than 2500 people in it.
[00:23:20] Speaker A: Yeah.
[00:23:21] Speaker B: And we get two semi loads a day to keep the Walmart stocked. So it doesn't take very much of a supply chain interruption for things to start to turn to, you know, to go the wrong direction.
[00:23:36] Speaker A: Yeah.
[00:23:36] Speaker B: And when you have it consolidated in this manner, you must rely on the supply chain.
It, it just, it's very fragile.
[00:23:47] Speaker A: And we believe, and we're not talking about the big stuff like 2020, just major weather like what has happened in Oklahoma or what has happened in South Florida at times. And when bad things, hurricanes come through you.
[00:24:05] Speaker B: Right.
[00:24:07] Speaker A: You're reliant, even if you're regional and they do things to reroute it, but you've got days and weeks.
[00:24:13] Speaker B: Right. A bridge goes down.
[00:24:15] Speaker A: Yeah.
[00:24:16] Speaker B: Where you have a road is closed due to weather. Like, the supply chain is just fragile. And we believe that having small farms, another value that is added is there is food that isn't dependent on and a national or even international supply chain, it's not, it doesn't matter if the shipping lanes are open.
[00:24:42] Speaker A: Yeah.
[00:24:43] Speaker B: For us to sell ground beef, we just need to be able to drive, you know, 100 miles or whatever it is to our processor.
[00:24:51] Speaker A: Right.
[00:24:52] Speaker B: Like, it doesn't have to, we don't have to have a ship coming from South America.
[00:24:57] Speaker A: Right.
So we encourage everyone. Again, I'm just going to keep eating the drum.
To find a local farmer near you. Find one.
Eatwild.com. Check out their website. They have a lot of farms on there in every state across the country. They have farms on there of people who are producing local food.
Try to find one that's, you know, farming the type of food that you like to eat.
[00:25:30] Speaker B: Yeah, for sure.
[00:25:31] Speaker A: Yeah. And check out your local farmers markets. It's. They're gearing up. They're getting busy. And you'll get you some. Get you some fresh local food. There's nothing like it.
