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Beef & Cattle Markets Driven by Supply & Demand

Following warnings about government intervention in beef and cattle markets from leading agricultural economists from around the country, François Léger, Owner and CEO of FPL Food, on behalf of the North American Meat Institute (Meat Institute) offered his perspective on the market as a beef packer and processor during the House Agriculture Committee’s hearing to “Review the State of the Livestock Industry.”

“The cattle and beef industry are driven by the supply and demand fundamentals of the free market, and the cattle industry is cyclical,” Léger said. “Not that long ago the cattle market was the reverse of today – in 2013, 2014 and 2015, the herd was small, and producers were making record profits while packers were losing money.

“During the pandemic, with packing capacity operationally reduced and the cattle herd large, cattle prices dropped. FPL worked with the Georgia Cattlemen’s Association to help support the cattle industry: we need cattle producers. And cattle producers need packers.”

For Léger’s complete written testimony go here.

During the hearing, House Agriculture Chairman David Scott (D-Ga.) submitted for the record an analysis of beef and cattle markets originally requested by the Chair and Ranking Member of the Committee during the previous Congress. The analysis is a 180 page book called “The U.S. Beef Supply Chain: Issues and Challenges,” and is the result of a collaboration with Texas A&M’s Agricultural and Food Policy Center, national experts and the U.S. Department of Agriculture.

One of the most significant findings of the report was that U.S. Senator Charles Grassley’s (R-Iowa) proposal to have the government mandate for a minimum of negotiated cash market purchases, called the 50/14 bill, would cost cattle producers $16 billion over 10 years.

“Senators Grassley and Fischer’s proposed legislation will reduce the use of alternative marketing arrangements, hurting producers by limiting the ways in which they can market cattle, and damaging the entire industry by reducing the economic incentives to meet consumer demand for beef,” said Julie Anna Potts, President and CEO of the Meat Institute. “But this pales in comparison to the unintended consequences: an estimated $16 billion negative impact over 10 years, which will largely be borne by cattle producers. In a rush to pick winners in the beef and cattle market, Members of Congress may harm those they are trying to protect.”

François Léger’s FPL Food employs 1300 workers and slaughters cull cows and bulls, sourcing cattle through auction barn purchases across the Southeast from more than a dozen states, from east Texas to the Carolinas, from Mississippi, Alabama, Louisiana, Virginia to Florida, and Georgia. FPL’s fed cattle operation, Chatel Farms has a herd totaling more than 8,000 head including Angus and Akaushi (Wagyu), pure-bred seed-stock animals, and feeder cattle to support the FPL Food beef brands.

Léger told the Committee that production in meat packing and processing plants is tied to the number of employees working the line, and the pandemic has only exacerbated labor shortages.

“Currently, we see on average 20 percent daily absenteeism in our plant,” Léger said. “I come to work every day and the first decision I face is which line to run and how to staff it. We have increased our starting salary to $15 an hour, which also means we must increase all salaries up the chain. Our average salary is now $20 an hour for plant workers, and yet we still cannot run at full capacity because of absenteeism. Our costs in salary alone have increased by $7 million a year.”

Léger concluded his remarks with a warning of his own, “We cannot achieve these goals in a restricted market that does not allow companies like mine to produce products that meet consumer expectations. USDA has announced plans to propose new Packers and Stockyards Act rules to regulate the interactions between packers and producers, and bills have been introduced in Congress that would place certain purchasing requirements on packers. Government intervention could jeopardize packers’ ability to provide products customers and consumers desire. The industry needs to be customer oriented; we must provide the products customers want. Thirty years ago, I saw first-hand in France the result of direct government intervention into the meat industry, and it was a failure. I hope we avoid the same mistake here.”

Léger’s testimony also reminded the Committee that the Meat Institute recently unveiled the Protein PACT for the People, Animals, and Climate of Tomorrow, the first joint initiative of its kind designed to verify progress toward global sustainable development goals across all animal protein sectors to ensure customers and consumers trust that meat aligns with their sustainability expectations.

“Through the Protein PACT, Meat Institute members have developed robust metrics for continuous improvement and publicly committed to sustain healthy animals, thriving workers and communities, safe food, balanced diets, and the environment, and align with the United Nations’ 2030 Sustainable Development Goals,” Léger said.

For more information from the Meat Institute on beef and cattle markets see the following:

They Said It: Economists, Academics, Industry Agree: Supply, Demand, Labor, Economies of Scale Drive Beef and Cattle Markets

On Inflation: North American Meat Institute to Secretary Vilsack: Scapegoating Industry Does Not Help Consumer

On Market Structure and Capacity: Meat Institute’s Public Comments in Response to Secretary Vilsack’s Request for Information on Investments and Opportunities for Meat and Poultry Processing Infrastructure

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