Ranchers Respond

Following Monday afternoon's WSJ report that the White House will temporarily cut beef import tariffs, we spoke with three ranchers across America's beef-producing corridor, centered on the Great and Southern Plains, to gauge industry sentiment.

The message from all three, including Elkins Cattle Company, Beck Ranch, and KC Cattle Company, premier ranchers featured in the ZeroHedge Store, was broadly the same: the proposed policy may briefly ease pressure on ground beef prices at the supermarket, but it does little to address the deeper structural crisis facing the nation's cattle herd and could further weaken domestic producers.  

With U.S. herds already near historic lows and ranchers still battered by elevated costs for diesel, labor, fertilizer, equipment, and transportation, a flood of cheap imported beef risks pushing cattle prices lower without reducing producers' operating expenses.

In other words, Trump's potential move to ease beef prices at the store appears aimed at boosting affordability ahead of the midterms. What needs to happen is for the administration to push pro-growth policies that rebuild America's cattle supply over the medium to long term.

By Tuesday morning, Reuters reports that the Trump team is "fine-tuning" an executive order aimed at reducing ‌domestic beef prices.

"The president is committed to lowering beef and other grocery costs for everyday Americans, and the administration is accordingly fine-tuning potential executive actions to alleviate temporary shortages in the domestic beef market," the White House told the outlet in an emailed statement.

Here's the first take from Tim Elkins of Elkins Cattle Company (of Texas):

Here is how I see it:

Tariff-rate quota is basically a penalty threshold that gets removed. This in turn, allows imported beef to enter at lower tarrifs. US cattle herds are at record lows BUT we have slowly been rebuilding. By removing this barrier this is going to drive cattle prices down.

While that's GOOD for consumers, it's VERY bad for us cattle ranchers. Our input costs are still sky high. Think: Transport (diesel costs), tractor parts, labor, fertilizer etc. These costs DONT come down for us with this. It just makes us compete with lower cost, lower quality imported beef.