The Cattlemen's Complaint

By Marshall Loeb

Executive View

Traveling out in America's fat cattle country, through Iowa, Idaho and Colorado, the visitor from the city hears the other side of the emotional story of the meat price inflation.

Like almost all U.S. farmers, the cattleman is aggrieved. For four years the prices that he collects have buckled like a sick calf, while the costs of everything he buys--gasoline, fertilizer, tetracycline for ailing heifers, tractors from Peoria and bull semen from France--have climbed like corn in August. And just when he had started to make a comeback, a politically motivated peanut farmer from Georgia cut him off at the knees by letting in a lot of imports.

Urban shoppers, stunned as they are at beef prices climbing 4% in April alone and perhaps another 5% in May, should not lightly dismiss this plaint. To do so risks biting the hand that feeds. The U.S. cattleman is the descendant of the romantic cowboy, and for the most part he preserves those storied virtues of ruggedness, independence and dawn-to-dark hard work. But he is also a modern businessman, worried about cash flow and capital costs and, of course, interest rates. Says a typical cattle raiser in Oregon: "My family has been in this business for three generations, and we haven't been out of debt for one year."

Tens of thousands of cattlemen survived only on the sufferance of country bankers from 1974 through 1977, when any businessman could see that the cost of raising steers and cows was higher than the price for selling them. Cattlemen cut their herds from 132 million in 1975 to 115 million now, and the iron law of supply and demand levied a heavy fine on the supermarket shopper. When average prices of beef cuts jumped from $1.63 per lb. in March to $2.09 per lb. in June--far faster than the cost of living--Jimmy Carter's advisers urged him to open the import gates.

It was then that Dick McDougal, a Lovelock, Nev., rancher who heads the National Cattlemen's Association, flew to Washington to huddle with Robert Strauss, the celebrated Texas shooter of the bull. McDougal made this case to Carter's No. 1 inflation fighter: beef prices have gone up about as far as they will go. So, just let the cattleman alone, and he will build up his herds. But if more imports come in, the rancher may well reduce his herds still more--and prices, after a short dip, will climb through the early 1980s.

A few days later, Carter raised annual import quotas from 1.3 billion to 1.5 billion Ibs. Now that seemingly enormous amount works out to 1 lb. per American for the rest of this year and will probably clip a few pennies a pound off hamburger. Beef prices in general are expected to level out or decline a bit in the months ahead. But the psychological blow to ranchers has been devastating. The value of their cattle has dropped $6 billion since Carter's import decision, says McDougal, who adds, "We feel betrayed."

There have been misunderstandings aplenty in this classic clash, and lessons to be learned on all sides. First, the ranchers, who overreacted to a rather modest increase in quotas, should recognize that freer trade will ultimately benefit them. America's potential for export to a beef-loving world is enormous, and ranchers cannot exploit it while clamoring for rigid quotas.

Second, the Administration should help cattlemen to realize that potential by getting tough with countries that bar beef. If the Japanese refuse to lower their high barriers against America's meat, the U.S. can put quotas on Toyotas.

Third, instead of fighting the other meat exporters, notably the Australians, the U.S. should join with them in pressing for large increases in meat quotas by Japan and the Common Market.

Fourth, the Congress can reduce the farmers' costs by easing some of the stringent, and sometimes silly, environmental rules that restrict use of herbicides, pesticides and fertilizers.

Finally, the public can recognize that the farmer, too, is victimized by inflation and stop complaining so loudly about the big bite at the meat counter.

Marshall Loeb

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