BEEF PRICES

President Trump now officially plans to print $12 billion (money that does not exist) and throw it at soybean farmers suffering from price collapse due to China's retaliation over tariffs.  In case you missed the memo, in 2024 the U.S. exported 50 percent of its soybeans and China bought half of those--meaning China bought a quarter of the U.S. crop.

                  While soybean farmers are projected to lose $100 per acre this year, beef prices are at an all-time high.  President Trump's first response was to blame farmers and ranchers for being greedy, but it didn't take 24 hours for the backlash from his conservative rural base to make him change his tune and blame collusion and corruption from the Big Four processors that handle 85 percent of U.S. beef markets.  

                  In 1980, those four only handled 36 percent.  While this is certainly consolidation, concentration, and centralization, corruption is hard to prove and has been an ongoing debate for years.  I doubt anyone will get charged with anything, even if they're guilty. 

                  What I want to point out is price relativity.  In 1961 when my mom and dad purchased the core property that eventually birthed Polyface, it was $90 an acre.  An acre would carry half a stocker calf.  At that time, stockers sold for about $180 apiece, liveweight, meaning half would be $90.  Looked at another way, an acre would feed about a fifth of a cow and her calf up to weaning.   

                  The calf was worth $180, so one fifth would be about $35 per acre.  That means in three years the production would equal the market value of the land ($35 X 3 years = $105).  Today, that land is worth $9,000 per acre.  In order to have the same ratio of production to market value (a third of the market value per year)  would require a calf worth $15,000 (one fifth is $3,000).

                  Right now these calves are selling for $2,000 and everyone is flipping out. To be fair, our property was a gullied worn out rockpile.  Let's assume the price of farmland in our area, if it was decent, was double what our family paid for ours.  Suddenly our same math brings equivalence to $7,500, which is still nearly four times what farmers are getting for these "walking gold" calves right now.

                  This, my friends, is what decades of USDA market interventions to guarantee cheap food eventually creates.  Why are we losing farmers?  We can blame a lot of things, but in general the price of food has not kept up with overall farm expenses.  This same ratio analysis  could be applied to labor, machinery, buildings, insurance.

                  If we had similar ratios to expenses today, ground beef would cost more than $25 a pound.  That, by the way, would re-create historical normalcy in pricing.  In 1980, Americans spent 18 percent of their income on food.  Today it's 9 percent.  In 1960 it was 25 percent.  Here again, the ratios work out to about 3X:  if ground beef right now is $8, 3X would be $24 and as 4X (1960) would be $32.

                  You can play around with the numbers all day, but they point to similar conclusions.  When a culture worships a cheap food policy in order to accumulate stuff and entertainment, their food turns to junk and their relationships turn to mush.  Only when we restore farmers--good farmers--to a place of prominence do other societal ills begin healing.

                  Question:  if burgers were 3X their price, what would be the big changes in Americans' spending?