December 31, 2014
What a year 2014 was; it’s surely one that we’ll talk about for generations. With that said, here is my take on what the beef industry’s five biggest themes were in 2014. Do you agree?
1. Record prices. Tight supplies and strong demand created an ongoing string of record prices in all cattle categories, as well as record profitability. What’s more, this good fortune looks to continue into 2015 and beyond. No other industry story can approach this one in significance, and no story needs less description. The good news is that this is a story that is still being written.
2. The beef checkoff is healthier than any of us thought. Despite the failure of leadership that threatened to destroy the checkoff just a few short years ago, producer support for the checkoff remains at near all-time highs. Meanwhile, USDA Secretary Tom Vilsack’s attempt to create a second checkoff failed, which illustrated that while the current checkoff may not be perfect, it’s a pretty good system. When Vilsack rolled out the idea of a second checkoff, people realized what was really needed is the current checkoff, but with more dollars to invest and less government oversight.
3. Mandatory country-of-origin labeling (COOL). COOL increasingly looks like a great waste of industry resources. We fought battles within the industry, and we’ve brought down the wrath of the World Trade Organization on us as well. It was never a battle worth waging. The impact of COOL was minimal, the death of it inevitable, and the expenditure of so much industry effort simply worthless.
The leaders on both sides bear responsibility for this. We all were caught up in the ideology of this debate, which was significant, but the actual policy impact was not worth the political capital expended on either side. Never has an issue captured so much attention, time and money, and had so little impact. It is fitting that it is going out with a whimper, because it never amounted to much more than that.
4. The real industry threats are in Washington, D.C. Whether it’s the regulatory interpretation of the Clean Water Act, Clean Air Act, the Endangered Species Act or a host of other interactions between our industry and the federal regulatory apparatus, some of our biggest challenges continue to reside in our nation’s capital. The government continues to be a key determinant of profitability for many industries, increasingly deciding who the winners and losers will be within those industries.
How big of a factor is this in our business? Consider that cattlemen in highly regulated states like California and Florida were the first to begin creating budget items for lawyers and for supporting their cattlemen’s associations. That’s because they understood early on that their survival depended on going head-to-head with overzealous environmental interests. Today, that realization extends to every state in the union. With fewer folks involved in ranching, we must better support and utilize our state and national organizations to fight for our interests and future.
5. Profitability actually sparks innovation. A commodity mindset has always been revered in our industry. In a low-margin, capital-intensive, commodity-priced business model, it’s the low-cost producers who survive. We’ve been taught to squeeze a dime out of a nickel, and analyze any investment with a very sharp pencil. It was a necessity, but the industry is now learning that it also greatly limited innovation.
As profits have increased and dollars flowing within the industry grow, so is innovation. We’re now investing in the future and making dramatic changes. We now understand how companies like Apple or Microsoft have been able to do so many innovative things. Innovation is much easier when accompanied by profits.
The opinions of Troy Marshall are not necessarily those of beefmagazine.com and the Penton Agriculture Group.
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