CALF_News_June_July_2020

25 CALF News • June | July 2020 • www.calfnews.net TEXAS FEED FAT CO., INC. P.O. Box 1790 • Durant, Oklahoma 74702 Ted Kirkpatrick, Owner We specialize in Quality Feed Fat and Quality Service. Leaders in the feed fat industry since 1974! With 2 locations to serve you. Call Us Today! TEXAS FEED FAT CO., INC. Durant, Oklahoma Kirk Sehi (580) 924-1890 Hereford, Texas (806) 363-6490 tion lies in fixing the broken piece of the supply chain – the packers. This is where the controversial issue regarding packer leverage has cattle producers at odds. Some believe in a free market – leverage changes hands and the market shows no bias, so every partici- pant will experience periods of fortune and hardship. Producers drew the short straw in this round. Some believe this is part of a bigger problem indicating the need for refor- mation and government intervention in the form of mandated pricing struc- ture for the packing industry to fix the perceived “mistreatment” of American beef producers. Others believe this is a function of price discovery, and we need to consider how we market cattle to fix the imbalance in cash trade. In considering our options, we must consider all facets of this problem. First, this is an issue caused by a situation that it is temporary . Packing plants are feeling the same burden as the rest of the world – employees are unlikely to voluntarily come into work due to fears of the virus, especially since they work in an environ- ment that limits the allowance of social distancing. This isn’t the packers’ fault – it’s merely the nature of the work. When operating, packers are making record margins. However, they are unable to fully take advantage of this opportunity because, with a limited work force and social distancing requirements slow- ing fabrication, they cannot run at full capacity. Using business fundamentals regarding profit maximization, pack- ers will want to continue to harvest until they’ve reached a point where the marginal value gained equals the cost of doing so. Considering this scenario, are pack- ers really the bullies we make them out to be? Could this just be their luck of the draw? Or maybe a little bit of both? Stepping back and looking at the situ- ation in a broad sense helps put this in perspective. Remember, the ultimate cause of all this duress is temporary , so if we take drastic measures such as govern- ment reformation and pricing mandates, there could be unintended and unde- sirable consequences as we return to “normal.” However, doing nothing could potentially negatively impact well-estab- lished feedyards and ranches long term. As an industry – from rancher to packer – our goal is to produce a safe, healthy, affordable beef product in a sus- tainable business environment. It takes all segments of our industry to produce that ribeye we’re all dying to grill to perfection this season. Each segment has skin in the game so each one needs to be part of the solution, creating an opportu- nity for all to be profitable. Our country was founded on the belief that we are assured life, liberty and the pursuit of happiness, but nowhere do those unalienable rights guarantee profitability. We have the freedom in business to innovate and excel or stag- nate, fail and blame others. Being mindful of the importance each segment plays in our industry’s success is a step in the right direction to fixing our problems, as opposed to blaming every issue on the one segment temporarily in fortune. Do you think Lincoln had the beef industry in mind when he said,“A house divided cannot stand”? 