In 2014, the most common questions during the first 10 days of December were what caused prices to move this high and how high will they go? In 2015, the questions are similar but inverse—how low will this market go and what has caused such a precipitous fall? It is little comfort to producers to hear that the market of 2014 was a psychology-driven market that went higher than fundamentals would have supported, or that the precipitous fall of 2015 is a psychology-driven market that has gone below what the fundamentals would support.
The perfect storm scenarios that are being used to describe the market volatility are not without merit. Terrorism, the rising dollar, a stagnant global economy, a lack of “longs” in the future market and a fed market that lost currentness are all legitimate explanations.
Then this week we got another bit of negative news, with the WTO awarding approximately $1 billion in tariffs to Canada and Mexico to mitigate damages caused by the actions of the U.S. as a result of mandatory country-of-origin labeling (COOL).
The beauty of passing time is that perceptions turn into reality. When it comes to COOL, there is neither a supporter nor an opponent who shouldn’t be humbled. We now know that both sides overstated the positives and the negatives. The benefits and the costs were grossly overstated.
In fact, it is increasingly obvious that COOL was a red herring of sorts. COOL wasn’t really the issue, but rather it was the symbol of an ideological and political divide that was used to enflame the passion of both sides. The great irony is that the results of COOL largely proved the opponents to be right—it not only has been proven to add costs without little benefit, but also to ultimately be untenable from a global trade standpoint. But it was the opponents of COOL who lost the most.
They may have been vindicated, but they allowed themselves to be used as a political football and they wasted valuable political capital in the process. In retrospect, knowing that the promises would go unfulfilled and that COOL would eventually cost the nations billions of dollars annually, they probably should have stepped back and let it die at its own hands.
Conversely, the supporters of COOL also had fundamental and real philosophical differences, and by attaching themselves to COOL in order to advance that agenda, they ultimately saw their agenda severely damaged as COOL failed to deliver on its promises.
Armchair quarterbacking doesn’t stop the decline in cattle prices, nor does it repair the political and economic losses that the industry suffered as a result of our debate and divisions over COOL. Instead, the focus should be on what the true causes of these negative events were and how can we avoid repeating them in the future.
And yet, that seems to be the biggest failure of all. As an industry, we have a tendency to spend more time explaining why these negative events occurred, instead of working to ensure these mistakes are not repeated over and over again.
The opinions of Troy Marshall are not necessarily those of beefmagazine.com and the Penton Agriculture Group.
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