Decision Time for Some American Cattle Ranchers

“Most American burgers are, in fact, not entirely American,” began a New York Times article, an article that dished out what many American cattle producers likely do not want to hear. But the reality is that American consumers are eating more beef imported from Brazil. And U.S. meatpackers have been buying more imported Brazilian beef as they prepared for President Donald Trump’s tariff increases.

U.S. producers have not been able to match Brazil in terms of the cost of beef production. Brazil ranchers have numerous advantages: plentiful land, cheaper labor costs, and lower input costs. The U.S. and China are Brazil’s top two customers for the cheaper meat.

It has been the superior quality where U.S. producers have excelled. Marbled steaks tend to be a tastier – albeit more expensive – product than Brazil’s.  

Trump’s tariffs increase prices for Brazil’s beef as it raises the levy to 36% compared to the 12% tariff China places on that country’s beef. The difference could shift even more Brazil exports to China, especially as China has stopped most U.S. beef imports.

U.S. producers don’t meet the appetite for domestic consumers. Americans eat more than beef producers bring to market. Exports made up for the difference.

No Plans for U.S. Beef for Britain’s Largest Supermarket Group

British beef lovers may not necessarily be the answer to make up for a loss of demand for U.S. beef from China, at least according to one major British company. Tesco CEO Ken Murphy told Reuters that his company sources its beef from British and Irish producers. The deal announced between the U.K. and U.S. would allow 13,000 metric tonnes of imported American beef.

But Murphy doesn’t see his company’s plans to increase its purchases of American beef, he said.

U.S. Beef Prices Reach Record Levels

American cattle ranchers are getting record prices for their beef. A big reason is that cattle inventory has dropped to its lowest level in more than seven decades. Prices rose to $5.79 per pound for ground beef. That is an increase of nearly 13% from the year before. Beef steaks also reached record levels at nearly $11 per pound.

Input costs, higher interest rates, and extreme drought in the West all played roles in decreasing cattle herds. Now some ranchers must decide whether – if they have the financial ability to do this – wait to hold onto their heifers to cash in for the higher prices in the future. That could help inventories grow. But that also means passing on growing prices now. 

“The cow-calf guy really hits it big, and it's a 10-year cycle on average cow calf,” Chad Tentinger, Principal Developer of Cattlemen’s Heritage, told American Farmland Owner. “Guy hits it big two of the ten (years). And then there's a few years there where it's like, ‘Oh, it's okay.’ And then there's a few years that are just disastrous.”

That makes it a difficult decision for some cattle ranchers, Tentinger said. “So, they're in the part of the cycle where it's really good. And if you're making a good profit, I think it's real hard to say to a family farm like, ‘Well, retain that heifer. Don't sell all that money today.’”

RELATED: Chad Tentinger explained to American Farmland Owner his idea to bring more opportunities for smaller cattle producers in the Midwest.