#26 - Glynn Tonsor - Beef Supply, Demand and Mousetraps

Dr. Glynn Tonsor is an Ag Economist at Kansas State University. 

He focuses on beef/cattle and pork/swine demand and supply decision-making tools and information. His broader interests cover aspects throughout the meat supply chain ranging from production level supply issues to end-user consumer demand issues.

Links:
AgManager.info
gtonsor@ksu.edu

Transcript

Matt: 0:01

Hello and welcome to Practically Ranching episode 26. I'm your host, Matt Perrier. It's Bull Sail Week for our family, and I'm glad to have Glen to Ag economist at Kansas State University, uh, give us his perspective on the beef business economic outlook going forth. You know, I already knew that Dr. To was a pretty sharp economist. What I didn't know was that he is a dedicated husband, a father. A coach, a history buff, a data geek, a philosopher, and as you'll soon discover, a passionate believer in the free market economy to allow entrepreneurs and businesses to respond to market signals and find ways to create win-win situations between buyers and sellers. In this week's episode, we'll talk about beef supply and demand, and the way we measure these data pieces today. We'll talk about today's economic situation and the similarities that it may have to the 1980s, uh, both within our ag segment and, and from a macroeconomic standpoint as well. We'll get some of Dr. Ton's forecasts relative to both beef supply and demand. And finally, we get to visit about cattle and beef marketing as we go forward. And try to figure out ways to pass consumer signals back to our very diverse production system in the beef business. You know, I've, I've talked a lot on this podcast about a better mouse trap as it pertains to marketing fed cattle. And in this episode, Dr. Tser pushes back a little bit and you know, I'm kind of glad he did actually. You'll hear his reasons for suggesting that we may not need a new mouse trap. Instead, we may need to let market participants. Numerous mouse traps that might address the heterogeneity, as he says, or the diversity of consumers and of production systems here in the beef in industry. Uh, you know, most economics lectures have a little stigma. Uh, sometimes we don't feel like they're all that exciting, and I may have been guilty of dozing off during my share of these, but, uh, I think you'll stay awake for this one, and I hope you'll even have a better perspective of the market situation for today's beef industry. So, I hope you enjoy my conversation with Glenn Tor I. Well, Dr. Tonsor, welcome to Practically Ranching. are you in Manhattan area today?

Glynn Tonsor: 2:29

I am in Manhattan. It's a nice day. A little sticky cuz I think we actually have some of that, think they call it rain coming

Matt: 2:36

Yeah. good, good. Well, we've got a slight chance and uh, hopefully you'll, you'll be able to share some with us. So, uh, this time of year, it's a pretty wide swath that everybody seems to be needing some, so, except maybe our friends in Florida and that are staring a hurricane out the east window.

Glynn Tonsor: 2:54

That's right. That's right

Matt: 2:56

Well, before we get started too far, uh, tell us a little bit about your background and what brought you to, uh, to Kansas State University and then bring us up to today and your title and, and some of your main responsibilities there at Kansas.

Glynn Tonsor: 3:11

Sure. So for those that don't know, I grew up on a hog farm in northeast Missouri. Um, Monroe City is my hometown. It's about 20 miles from Illinois and about 45 from Iowa. So pretty far up in the northeast corner of Missouri. did my bachelor's at what's now Missouri State. At the time it was southwest Missouri State in Springfield, Missouri. So I'm a first generation college kid. So we stayed in state and then came to K State and got my PhD. So when you asked what brought me to K State, I've actually been here more than once. Uh, so I came here and I was student from 2002 to 2006, and then my wife and I, we were in Michigan. So my first academic post was a faculty member at Michigan State from 2002 to 2006, and then my wife and my two sons at the time. We've since had a daughter born. It was born here in Kansas, but the four of us moved back 2000. Where I've been on the faculty at K State the Department of Agriculture economics ever since then, uh, for some of your more seasoned listeners that might remember Jim Mint, um, Jim was here. I worked with, Jim was either grad student, he's now at Purdue University and, you know, an updated, kind of modified version of his old job as a one I have. I share that because there's this, you know, when you think over years and even decades in the academic world, there's this kind of lineage of academic training and uh, Ted Schroeder, Jim Menner, Terry Castings and several others trained me. And ironically, I came back and kind of took an old version of Jim's job. So that gets you up to today basically.

Matt: 4:35

What would be some of the main responsibilities that you would, would have and, and assignments and, students research, whatever the case may be.

Glynn Tonsor: 4:44

Sure. So I have a extension and research appointment. Um, so if you pick up on that, I do not have a teaching appointment. My engagement with students on campus is primarily with our graduate students, so our masters and PhD seeking, um, degree students. I do a fair amount of guest lecturing, just as much over an animal science and industry as I do acon. Um, but my main responsibilities are in the extension realm and then applied research realm. And when you think topically, so that's a generic kind of like formal appointment answer on campus, but when we talk about topics, it's meeting and livestock economics, so Of my projects and engagements and efforts fall somewhere in the broad meat and livestock economic space. Uh, since we're sitting here in Kansas, uh, we both like to wear purple. It's, uh, you know, cattle, beef, cattle lead in that, simply cuz within the state that's the primary species. But I do a fair amount that's regional and and even international. as soon as it gets to that level, you know, I have a fair amount of collaboration with the National Pork Board, for example. So not everything is in the beef space. Uh, some touches into chicken. So I can't help people understand meat demand without tracking chicken, cuz the amount of chicken consumed per person on par with the amount of beef import combined, basically. So for quick context for your listeners, um, so I'm sure we're gonna geek out in our time here today, Dale, but, um, meat and livestock economics and then lots of sub-projects, lots of hot topics, some that are producer oriented, why producers do what they do. Uh, some that is consumer why they buy the protein or maybe don't buy the protein, uh, that they do is. Some nice segues, if you like, into my day-to-day life.

Matt: 6:21

So which is your favorite part? Figuring out the consumers and why they do what they do? Or from a production side, or is there one

Glynn Tonsor: 6:29

Well, in the spirit of keeping this on us, my favorite part is having a good day that keeps the wife happy. And I'll pause there, right? That's not a shout out to my wife, Shaa. Uh, you know, she, she is the magic behind this, right? Uh, does a great job with our kids, and I'm purposely interjecting that here. Uh, and I'll being half serious, that is a good day, right? If things are good on the home front, topically, um, I like understanding decision. And that's an important way to answer your question. sometimes it's understanding why feed lot producer buys a cattle they do, or why they sell the cattle the way they do, or why a background or buys a certain type of cattle, not somebody else's cattle. Those are all like producer side of that, you know, supply side decision making. equally importantly to me is why buy the rib steak or ground beef package or pork chop or bacon or whatever it is or don't. But the key theme there is the decision making that's underneath, whether it's a private you know, somebody that's a livestock producer. Um, that would be a theme through a lot of my efforts. And one of the cool things about being an academic is if you kind of have this geeky thrust of interest, which is decision making, understanding is what I'm trying to tell you. you can infuse that and I hope helping the meat and livestock industry understand current environment and then maybe extrapolate going forward what we think that environment might be. I hope I'm collectively helping the industry do that.

Matt: 7:48

That's one thing about any kind of economist and any kind of report, whether we be at a meeting or reading it in an article or or hearing on a podcast. All of us are guilty of wanting to know what's coming up next. What should we be prepared for on the cost side, on the demand side, on the price side, whatever the case may be. But honestly, what I have grown to appreciate, whether I hear you or one of your counterparts at ksu or, or Cattle Facts or anybody, I appreciate hearing. How we got to today and why it is that fed cattle prices did what they did over the last five years and why it is that, that corn and protein prices and and things like that, forage hay prices have done what they've done in the last six months. You know? we all want you to forecast to the penny where we're about to be, but honestly, we probably would do better by just listening to why it is we got to today and then help sort those, like you said, that decision making process, uh, a little better as we go forth.

Glynn Tonsor: 8:52

Yeah, what well said. And, you know, get it beyond meet livestock economics for a moment, like to feel like they're in control and the more you know, the more you feel like you're in control. Right? So, uh, you know, you and I are talking specific economics meet livestock, but more generally as and spouses and so forth, it applies. Um, and if you're a little bit of a historian lover like I am, you know, mankind tends to repeat its mistakes. sometimes it takes us decades to do it, but you it's pretty rare. You go three generations in a family where somebody doesn't repeat, you know, a prior generation's mistake if you really study what's going on. Um, so there is value in learning from the past is why interject that. Um, not like, I think the, you know, US beef cattle gonna go back to 1984. I think there's value in understanding, You know, there's a lot of challenges for the industry in the eighties. It should not be forgotten. So, and we can talk about that if you like, Uh, for your listeners, I was not an adult at the time. I grew up in 1980 or not. I was born in eighties. Excuse me. So I was, you know, developing in the eighties and nineties. So it's not like I can, you know, personally speak to what was going on, but I studied it in hindsight as a data geek and so forth. And importantly for our discussion, you know, the beef demand environment, exactly what was going on in the eighties and nineties, and this isn't fun to talk about, but why we shrunk the industry notably over that two period is really important to remember.

Matt: 10:12

So as we see these charts, and we've talked about it on this podcast plenty, um, that 1996 bottom of beef demand, uh, we see so often and luckily have seen a fairly, not necessarily perfectly linear, but a fairly, decent increase since then. That beef demand that we always reference is usually based off of the beef demand, consumer beef demand index. Is that correct? Give us a little, a little history about that. And then I would like to get back to the eighties. I don't want to get back to the eighties. I would like to get back to the, the topic of, and we can talk interest rates, we can talk inflation we can talk

Glynn Tonsor: 10:55

let's just not talk the short shorts that were worn in the nba. You know, some of things need to be left behind.

Matt: 11:00

That's fair. But like you said, seems to repeat itself we didn't learn from those mistakes. Um, but how did that Consumer Beef Demand Index come about? Um, is it any different today? I mean, give us, give us basics of that demand index.

Glynn Tonsor: 11:17

Yep. So this is gonna be a lengthy answer, but I think it's the proper venue for it, is we need to start and remember our beef goes through one of three channel. So beef is produced and let's just jump to, you know, fast forward, we have beef that's sellable to consumers. It goes either to foreign consumers, so it's exported it stays domestically and goes through restaurants for away from home or primarily through grocery stores for at home. Now there's some other minor channels like, you know, and schools and so forth, but at home, away from home domestically or export, those three channels are all are important. Uh, I'm tying this in because those aren't the same market, right? There's different drivers. Ribeye stakes don't go through the three equally. Short ribs definitely are exported more. I think your listeners probably know all that. Um, the data quality we have differs across those three channels is also why this is important to interject right here. So anybody like me that's trying to measure us beef demand to wrestle with the available and the quality of that data across those. what you're referencing is if you go to ag manager.info, which I hope most of your listeners are aware of, but if they're not, they. Particularly live in Kansas, cuz there's a lot of purple all over it. But even if you're anywhere in the middle of the country, hope you can benefit from the resources we have there. It's our extension facing, outward facing resource from the Aecon Department of K State. month I put up three different sets of beef demand information, and I'll try not to confuse people, but they're using different data to speak to different things. So there's a domestic beef demand index that you're asking me about, and what that basically is, is my using an observed amount of beef consumed domestically and more narrows to per capita consumption estimate that exists from U S D A. And I'm dividing it by what was And when I say what is is given the price we observe, how much volume did we think would've went through the market. And the real simple way for your listeners follow this if more beef went through the market than I expected, given the price environment, the beef demand was stronger than we expected. Conversely, of course. So there's a documented ag manager that's got the formulas and all that stuff for your listeners if they want it. But that's the simple summary is what do we observe divided by what we expected? And if we succeeded in moving more than we expected, then the top of this ratio is bigger than the bottom. So the index grows, right? Uh, I do that domestically. Every month there's a lag. There's about a six week lag from U S D A and their information. I need to populate that. Um, so it's always backward looking, right? Sitting here, you and I are talking in November. It's always at least six weeks old whenever I'm interviewed and can talk about it. There's a parallel index on Ag Manager the same meat demand section of that website that is specific to export demand. this would be foreign consumers demand for us. Beef mechanically works very similar, but instead of the domestic per cap consumption in the domestic price, the estimate from U S D A federal a, uh, statistics service specifically on how much beef we think we moved outta the country and what the price on was. And then relative to expectations and so forth. So again, if we move more given the prices than we, you know, I can tell you foreign demand for US beef was growing. both those measures are out there, both of them are lagged. So about six weeks after a month concludes is when we can speak to that. third thing, so I said there's three measures and hopefully your listeners are following me. These are different measurements for different parts of the story is something called the Meat Demand Monitor is a monthly US survey based project. The beef and pork checkoff programs jointly funded and it's all housed at K State currently. Um, it's called the meat demand monitor. So this is not beef right? It's MultiPro and the way it's funded by multiple checkoffs make sense. We launched it in February of 2020. in the long term context, I can't speak to things in that project. know, basically pre covid we had one month. Um, but I'm able to get more refined insight and tell you things. For example, how is ribeyes stake different than ground beef? On the demand front I can go further and dissect away from home versus at home. And for your listeners, if they're following me, my first index I described was more aggregate like all beef is equal domestically and all beef is equal foreign wise. And there's, there's value in doing that cuz it's a very aggregate measure and I can a multi-decade kind of trend insight doing that, but it's pretty coarse so it sort of treats all beef equal, right? It's the way to think about that certainly doesn't make distinctions between stake and ground and roast and so forth. survey based effort is much more precise and granular, but it's not the same. So there's different types of data behind this and certainly doesn't have the longevity cuz that project was started in February of 20. So that's a really long answer to your But at a minimum, I hope your listeners heard me go to ag manager.info. There are monthly updates, um, not just geeks like me should be benefiting from those demand measures, cuz it does give us a pulse and a more refined pulse of the strength of US beef demand.

Matt: 16:14

Well, I'd say all those are, are really good to, to have in our toolbox. And frankly, I'm guilty of kind of, uh, reverting to that initial one, the domestic Beef demand index. And, and, uh, I had, I remember hearing through the Kansas Beef Council about the, um, the survey base, the meat demand monitor. So I have to ask, did you have enough data surveys information already within a month of the pandemic to already see that thing go? Absolutely nuts when people obviously couldn't go to restaurants and for that next year, that food service, you know, traded a lot of consumption over to retail. And, and if so, how did you deal with that when you had one month of quote unquote normal and, and then everything we've had since

Glynn Tonsor: 16:59

Yeah. None of my statements at the time, you know, and we were in a stressful environment. I was trying to help do lots of interviews at the time I was sharing what I saw in that data, but I was careful not to, you know, rely on February of 20. Cuz, cuz as you said, I only had one month's observations. What I had a lot more faith in, if your listeners followed me, and for those that have heard me talk about the MDM and other venues, we're surveying over a thousand people every month specific on their protein for at home and a parallel effort of a separate thousand away from home. So simple example for ribeye stake is I have a demand measure for rib stake, both at and away from home every month. What I was able to do, for example, in March, so let's ignore February, let's say by the time March of 20 hit and we're all shut down at home, whatever. was able to confirm quick. others could, cuz I had the survey data rolling in looking at it even before the month was done you know, surprise when you shut down restaurants, rib by steak, demand falls and when we all buy our meat at the grocery store and take it home. It spiked, right? But the real nugget was that direction difference I just told you for rib by steak occurred and I confirmed it, but the of story was even greater for ground beef and the reason was ground beef demand for at home went up even more than rib by steak demand at home. This isn't real surprising probably to your listeners, is people are more comfortable cooking ground beef at home. You know, it's an ingredient, not just a main entree. It can be both. There's a lot of reasons that doesn't but I didn't do anything really reliant on March. To answer your question, had the ability to like basically track the two market channels as the pandemic developed, which was very helpful. Um, hopefully I helped, um, the world with that. I was on CBS Evening News in the middle of that cause there's a lot of discussion about shortages and so forth. I was trying to, uh, de-stress and hopefully depoliticize a little bit that discussion cuz we were changing the variety and just kind of, you know, the, the flow was messed up. We were not short of cattle for sure. you know, and certainly six weeks later things were on balance, much more normal. and having that resource, so it wasn't just expert opinion. I had data to speak from. Um, certainly made me more comfortable in those interviews, but I hope it gave my comments more credence, you know, in hindsight. So, again, hopefully that helped.

Matt: 19:11

I'd say anytime we can reference data and especially good data, um, hopefully that does, I mean, whether it's CBS evening news or social media or, or whatever the, the media might be. It seems like the, the rule of the day is emotion and passion and getting people excited. Whether that's positive, negative for or against, um, that's what I appreciate. Not only about the way you convey your information in, in a very logical level headed tone, but also the fact that you've got enough data. You're not, you're not just baffling'em with bs. I mean, that's, that's we need today, is that data and that information as to our consumer demand or production or whatever.

Glynn Tonsor: 19:56

Well, thank you. As, you know, add on, you know, I'm not perfect, right? I'm doing my best is what I'm trying to share with everybody, but no data set's perfect either, right? So even the different demand measures I've walked through, there's pros and cons and you know, the, what I call the precision of the data, is it the same? Um, know, I can nitpick my own projects apart and I won't do that, you know, in detail here. But I think there's value in measuring things more than one way crosschecking it, having more than one person do it. Um, what's a simple example? Um, you know, there's a reason we have more than one person on the ranch to watch for animals that are ill. than one set of eyes helps, right? So, you know, that that has nothing to do with data per se, but sometimes crosschecks are important the same thing holds when we have a data.

Matt: 20:39

Yeah, those, those redundancies, those duplications of efforts are, are, I think, critical as we do any of this, especially when we have as much value in that data and, and those observations is what, what we do Today,

Glynn Tonsor: 20:52

right now to keep it light, my family probably thinks there's too much redundancy on trying to get me to do the right stuff, uh, so redundancy can be frustrating, right? Uh, fortunately I'm surrounded by patient people

Matt: 21:06

yep, we've all been there. And yeah, fortunately I am as well. So what would be the biggest misconception of, of beef demand, of consumer beef demand, whether it be, any of these indexes, uh, as you talk with producers, what do people not get the

Glynn Tonsor: 21:21

To gonna give you two. And one is inner and one is outside the industry. So the inner, inner and what I mean by this is mainly producers and those that buy cattle. So with the supply side of the industry is treating a per capita consumption number. So for example, 55 pounds of beef per person as a demand number. And this is an important point cuz this is nothing about the price paid and you and I talking here in November of 2022, it's extra important Ill be shocked if we don't have less beef consumed per person the next three years in the US that is primarily cuz we're gonna be producing less beef. So if there's less beef being produced and our net trade doesn't change a lot, we're gonna have a lot less beef available, which means lower per capita consumption. says nothing about the public's lack of interest in buying beef. Cause I didn't tell you anything about the price of the value of beef when I said just poundage. So within the industry that's an ongoing, gonna just call it education challenge. Um, I threw out Jim men's name earlier. Even Wayne Perell before him at Virginia Tech has tried to build some of these demand indice. Educate the industry on this and give us measurements. Um, but there's more work to be done there. So that's one. Uh, the second one would be, you know, there's a lot of discussion in the general media about vegan, vegetarian, and even flexitarian And for your listeners, Flexitarian would be somebody that still consumes meat, but they intentionally don't have it every meal. So if there's 21 meals in a standard seven day week, they're intentional not to have a meat protein in at least some of those 21. Um, by the way, they're still a meat consumer. They're just not one for 21 meals, is the distinction. Um, those rates, you know, the, the size of the US population that fall into the vegan vegetarian flexitarian bucket is certainly higher than it was 20 years ago. I mean, I confirm that it's actually in our meat demand monitor. We, we measure that as well. Cause it's a resident survey, not just a meat consumer survey. But that does not mean that meat demand is. Because the world's population and in most cases income, buying power, at least pre our current inflation environment was growing. Um, which lends to stronger global protein demand. both can be true. You can have more vegans, vegetarians, and flexitarians in the world and have growing aggregate protein demand and on balance that's been occurring is my opinion on that. so Jason Lusk is a colleague of mine at Purdue University. He and I together on a lot of these kinds of topics. We actually have a paper, your listeners can email me if they like. Um, that takes some of the meat demand monitor survey data and longer term data that does a deep dive on this. And our title basically is meet demand out does meet avoidance. Trying to give some context to exactly this. So, you know, these self-declared diet patterns, they are growing. I'm thrilled to live in a country where at least to date, that's a private choice you can do. I think you should be able to have that choice. Um, I hope, you know, my kids continue to live in a country where that's a choice they can have, that does not mean the world is trying to step away from beef, pork, and chicken. So that sounds like a lawyer comment. I understand. But both can be true and I think that gets lost in the general media kind of consumer side of the industry.

Matt: 24:25

Yeah, I've, I've seen that both of those misconceptions and I figured the first one for sure. That brings up the question. Okay. So, in the denominator of your domestic beef demand index is what we expected to move per capita in terms of volume. How do you get at that? What price? I mean, I don't need to know the formula, but what all factors are going into that expectation of, of what we should be moving for a given protein at a given price.

Glynn Tonsor: 24:54

So I bring in estimates on basically price sensitivity. So elasticity is the term economists use. So based upon past much less do you buy when price goes up? Well, there's an economic measure called an elasticity for that, or price sensitivity. Um, if you bring that measure in, you can project how much volume we think would've moved when we couple that up with the USD reported price. that's your kind of expected price, it does not have to match the observed for that month. I mean, that's why these, the top and bottom aren't the same. Uh, so if we move more than we projected or expected, demand went up. Um, that's the simple summary for that. Probably most importantly for your, I'm guessing not all your listeners care about the details of how I do it, but it is documented. I'm a big believer in transparency. you know, all, everything I'm talking about here is, you know, key state based that Ag Manager website. I talked about the same place where you find these indices. At the very bottom of each of those page pages, excuse me, I've got a three or four page kind of standard PDF where I list out the variables, where I get'em what U S D A source there is. Um, describe the formula. So we're kind of, we're doing the narrative observed, divided by expected is mechanically basically what it is, but how do you come up the expected is your question. And all those variables are listed out in this document. So, um, there is a that the analyst, and that's me in this example, has to make on what price sensitivity number you use. Um, so you can get a slightly different, you know, story on a demands. Basically the magnitude, the demands going up or down depending on what elasticity estimate you use. I use the best one in my judgment, but I'm highlighting that cuz again, no data sits perfect and periodically we need to update that because the real world buying behavior is changing. So, um, these indices need to be maintained, not just monthly updated, I guess is the point of that comment.

Matt: 26:43

So, have you seen that, and I, I suppose I could go and find this, but have you seen that sensitivity to price decrease, in other words, almost more of an elastic demand as uh, gone through this pandemic?

Glynn Tonsor: 26:58

So I,

Matt: 26:59

I would say is as beef quality and consistency have gotten better, hopefully throughout the years.

Glynn Tonsor: 27:04

So I'm gonna give you a pre pandemic answer, and then I'm gonna give you a more recent one that's actually pork based and we'll extrapolate to beef cattle. But before the pandemic, had a lot of evidence that price sensitivity was declining. So when I ran my geeky demand models, and I've done some of these for the, you know, the beef checkoff funded evaluation committee and so forth, is price sensitivity was declining. Things besides price, safety, taste, you know, eating experience, freshness, claims, lots of other things. And in some PA, for some folks, and I'm a welfare and environmental, there's a long list of things that now relevant that weren't 20 years ago, those all had grown and price had declined, relatively speaking, pandemic. So I was very confident in that message for basically the decade before the pandemic was, price is always gonna matter. So as an economist, I gotta, you know, say we recognize price matters, but relative to those other things, it was declining in importance, which enabled the beef industry to have whereby stick prices higher than probably previously thought and so forth. The pandemic a wrench in that trend. fortunately for at least the first 12 and probably in the first 18 months of the pandemic, and when I say this, I'm using like March of 20 as the first month. In those kind of statements, um, beef demand was up. Price sensitivity wasn't a big deal. People wanted to have protein at home. And that was enough of a strength that you, it wasn't a real, you know, price sensitivity was not a big problem early on. We had lots of government payments that may have enabled that. There's a lot of things to decompose there. but fast forward to now. So again, you and I talking towards the end of 2022, know, we've had multiple months of elevated inflation. We've now had a, about a two year period where the average person in the US and average is misleading. Cause we have a massive country, a lot of variation, but the average worker in the US. Clinical falling behind. So their wages are not keeping up. The cost of living is what I mean by that. So their financial, you know, at home, financial budgets are being squeezed we are now seeing price sensitivity become more important. I hope people follow my history lesson. Pre pandemic, it was declining. Fast forward to now it's growing and I think it's cuz we're in, you first time in our generation, I'm 42, I've never lived through six to 10% inflation till now. And, you know, 42 and younger represents of quite a few people, quite a few buyers in our US economy today. and we're adapting to that. Some of those specific points about now come from some pork research. the National Pork Board is, you know, commission of studies that again, Jason Lus and I have done, uh, that are deep dives into the pork aspect of that. So when I say pork price sensitivities went up, the own price elasticities have grown. alluded to elasticities earlier. They're further from zero or they're more negative to before you change the amount you buy more. For a 1% change in price today than you did six months ago, is the trend before the pandemic. And my expert opinion is that's inflation net pay at work in most households.

Matt: 29:58

And so those elasticities of demand, are those separate for the different proteins? I mean, you run those separately for beef, for poultry, for pork, et cetera

Glynn Tonsor: 30:08

Yep. We do. And

Matt: 30:10

you

Glynn Tonsor: 30:11

well,

Matt: 30:11

anything differently within a species, uh, in other words, quality grade branded versus unbranded, et cetera, et cetera?

Glynn Tonsor: 30:21

so some of these of elasticity estimates require a lot of historic. In order to estimate with some faith from the analyst's perspective. And that means you need 10, 20, maybe even 30 years of data depending on the type of model you're trying to set up. And first and foremost, we didn't even have like prime data 30 years ago. Right. Um, or, not enough to, for me to confidently do anything with. so most of my statements so far would be isn't pork, isn't chicken. But we don't go further than that in these elasticity estimates. Not because I don't think it matters. Cause I definitely think the elasticity is different for prime than it is select. Right. Just to, for your listeners to know, I don't think they're the same, um, different types of consumers, there's lots of reasons they should probably be to be different, but we don't have the level of detail and the time period of detail estimate that real confidently. that's one distinction. So you go to the quality grade component, which matters for sure. But equally importantly is there's no reason to believe that, you know, boneless rib. And 75% lean ground beef have the same elasticity, right? when I run around with roughly a negative 0.5 is my best estimate of a beef elasticity number. So if you the price 1%, we're gonna reduce the volume bought by 0.5% is the way to use that number. That's aggregate statement,

Matt: 31:41

right?

Glynn Tonsor: 31:42

I definitely don't think it applies equally to rib and ground or prime and select and so forth, it's the best we can do in many cases with the data in front of us. Um, in the future, hope data collaboration and so forth enables us to get better on that. You know, we live in an era of clinical big data. There's a lot more data in the world than there was 10 years ago, but getting that lined up with the right people that are allowed to analyze it, and even just in a time period that's consistent enough to have the observations that would get these estimates more granular is a challenge.

Matt: 32:15

Well, it's, it's one that I appreciate that you are taken by the horns, if you will. And, and I think this information you're getting on your survey data, your meat demand monitor, I mean, I think that's an opportunity. Granted, it takes a while and especially since you had such a, uh, an anomaly and the data Right off the bat from the time you started recording. That's, that, uh, is not with, its without its challenges. But I continue to see, and, and you know, we've talked a lot about, uh, a lot of our listener listeners would be involved with programs like Certified Angus Beef or, or, you know, Many different, you name the program. Um, but we've seen significant differences in consumer's interest and their price sensitivity to what would be some of these premium protein programs compared to others. Now, I guess we can use this as a segue to go back and let you try to draw some similarities between the eighties and now in terms of the economy, but I don't know that it's a fair comparison in what we had to sell consumers in terms of consistent high quality beef and and

Glynn Tonsor: 33:24

Or, or

Matt: 33:25

things like

Glynn Tonsor: 33:26

you know, who the consumers are. So, you know in the early eighties exports, I'm not gonna say they didn't exist, but they certainly weren't relevant to the tune they are today. So, you know, Asian buyers and for that matter, you know, Canadian and Mexican buyers and others were comparatively speaking not as important. the food service channel wasn't either. So there, there's a reason I interjected the three different market channels earlier in our discussion two of those have matured a lot since the eighties. Um, it's, we produced different, There's definitely a higher volume of higher quality right beef available today in the eyes of the consumer than it was then. The consumers we're talking about are very different also, and we need keep both in mind.

Matt: 34:10

So let's just talk about, uh, that time in the eighties and what you see as some similarities in comparing comparisons and contrast to what's going on now in terms of inflation in the Fed, raising interest rates and everything else. I mean, are we, are we setting ourself up for the same thing again in production ag or, or what are some of your forecasts there that may or may not be?

Glynn Tonsor: 34:31

Yeah, well maybe one like that's a frame of reference. Um, of your listeners probably have seen or heard me speak at the stocker field day, so I belabored this point in September. Um, what's happening to the cost to run a cow? So let's take the component of your question. Let's just jump to that. So, um, I'm gonna refine, I'm gonna go to the cow calf level to answer your question, just to pick out one segment, uh, U S D A in 2022, it takes the average cow calf operation. And again, whatever that means, cuz there's a lot of variation across cow calf operations. About a hundred dollars more to run a cow, maintain a cow than it did the year before. That's massive. So that's inflation in lots of different ways. Labor costs, forage costs, you know, indirect corn prices are up, so that pushes other feed stuffs up. Um, you know, lots of things on your partial budget, you know, for your listeners that maintain budgets on operation, few of those line items are lower than they were a year ago and certainly compared to like three years ago. Why is that relevant? The cost of running the cow and subsequently, ultimately the cost of getting a calf, you know, full slaughter weight to get beef to consumers definitely up. And this is an inflation story, not necessarily what the fed's doing yet. Just the reality of cost of doing way up. Um, when I try to, a, that's kind of a state of the union observation is the first part of my response. But the, so what what do we do about it naturally follows anybody that is even slightly more efficient. If you can quote unquote waste 2% less feed. Or you're better at guiding your labor. We all struggle with finding the labor and keeping the labor, but now think about like how you manage it and allocate Anything you can do to manage those now more expensive inputs is going to give you a leg up, or in some cases just allow you to survive, right? These cost squeezes that are going on. Um, the simplest way to think about that is we've added a hundred bucks to run cost to run a cal for a year. you're 3% better than your neighbor, 3% times a bigger number.

Matt: 36:27

Yep.

Glynn Tonsor: 36:28

Now, I don't really like saying pit you against your neighbor. Don't, you know, that's not the point. But there is a lot of variation in the cost structure in the US cal calf sector. Uh, some of the information we have at K State via it, our network is over a$400 range in cash cost. Not even total cost, but just cash out of pocket cost across in Kansas. So if you're on the more efficient end of that, obviously your break even what, what you need to get out of a six week calf to cover your cost is a lot lower than if you're the inefficient. those lessons bore out in the eighties when there was a lot of financial squeezes, and I think we're gonna lift through'em again that those that run a tighter ship that have cost control. And please note, I didn't say anything about the price you get for your calf so far. I'm just talking about on the cost side of the ledger. I anticipate they're gonna be the ones that, you know, sustain the challenges the best.

Matt: 37:21

And what did I, I can look it up on Ag Manager I'm sure, but, um, what was U S D a's estimate on that annual average cow carrying cost.

Glynn Tonsor: 37:31

So we've broke a.

Matt: 37:33

That's what I thought

Glynn Tonsor: 37:35

So I don't remember, just live, if it was 1,020 or 1,015, I don't remember what it was. We broke a thousand, um, and it was quite a bit lower, you know, five, 10 years ago. And this is just everything in our system's more expensive, right? You know, go try to buy a new pickup today, and it's a little more expensive than it was five years ago. this is inflation at work just more money in the system, which you threw out. The Federal Reserve, this is part of what trying to respond to. Um, higher rates increase the cost of borrow. Which all else equal is going to reduce demand for those loans, right? So, um, you know, we're in the midst of that occurring. Um, the cost of having a mortgage, so 30 year mortgage is a lot higher today than it was just nine months ago because of that. Uh, if you go take out a loan to buy a farm, not just a residential home, but the same math right, is different. So maybe we're eventually gonna put some downward pressure on some of those inputs, but I said some cuz they all have a different story to them. Um, the Labor one in particular is pretty complicated, cuz you know, to date we haven't changed anything about the quantity workers that's available That quickly enters into the labor market discussions. feed cost could be different, right? If mother nature's different you know, all grain and wheat and soybean acres around the world, if they go back to producing. That'll put supply side pressure downward on feed cost. not predicting that tomorrow, but I do think at some point that will happen. You know, we're kind of buying more acres back into production at higher green prices. so some of those inputs I think will come down, but not tomorrow by any means.

Matt: 39:07

So with that breath of fresh air for our

Glynn Tonsor: 39:09

Yeah that, that's a Dr. Bear Cobb, a hundred percent. I understand

Matt: 39:13

what are you seeing in terms of forecasts for consumer demand and, and obviously those US consumers and probably global consumers are under some of the same pressures in terms of inflation and things like that. But, um, specifically to beef demand, because I, I do believe that I see a continued difference between as we used to just lump red meat and poultry together. Um, I see those spread now, so I, I do. Personally have a lot of optimism in that regard, but what do you see coming forth?

Glynn Tonsor: 39:47

I don't disagree. And I was, I knew we were gonna talk about, that's why I started on the cost side, is we're increasing the cost of producing the only way the industry, quote unquote, you know, gets ahead despite that, is for demand growth to carry us past it. Right. So, um, you know, the revenue side has to grow more than the cost side is a different way of saying that. and I do that's possible. Uh, I'm gonna give you the export part of this. First is, you know, China, there's a lot of optimism, there's a lot of political uncertainty with the Chinese market for sure. But there's a lot of optimism that the US beef industry will export more to China in the next, you know, week. But over the next five, 10 years, um, I don't know if next 30 years makes sense because of demography challenges there, but I'm interjecting this because, you know, the companies that are interested in doing that aren't really interested in getting half of the Chinese population eat us. If you get one to 5% of a big population, that's a big demand boost. Right? And the reason I'm interjecting that is you can take that same one to 5% statement and apply it to Japan and other current customers. not necessarily the economic situation of the median or kind of the middle of the road consumer that's most relevant for us beef. Cause US beef is never gonna be the cheapest protein. So consumers are protein that are more price sensitive. They're not in the market for US beef, They're, they may not even be in the market for meat protein. It might be a cheaper, you know, source of proteins. Not even livestock based. But you know, there's this kind of trading up, you know, historians talk about rice bowl to chicken, to pork to beef, that kind of logic. Um, the reason I'm interjecting that is there's some reason for optimism the macroeconomic clouds that I was alluding to, they're not gonna. You know, the top three to 20% of populations from a socioeconomic buying power perspective quite the same as the median or kinda the average Uh, think wealth effects are different than w two income effects around the world, is part of what I'm trying to get at. Um, and I certainly hope that's the case. I think there's reasons to believe that's the case over the next three to 10 years. Um, that's the segment that can afford has had the unique eating experience of a, you know, high quality, green product that they now recognize is different than either a beef product from another country that wasn't green finished, which is mainly anywhere that isn't, you know, Canada as a whole. And there's, there's some growth in that space in Australia and Brazil, but not the bulk of their system is that way. Um, or the contrast with, as you say, the other red meat, you pork or chicken. Uh, if you've had that eating experience, You can afford the difference. I think there's ab sustain power with that subset. I wanna be very clear for your listeners, I'm not talking about the average in China or the average in Japan. It's the, you know, it's the three, five, 10% that kind of are your target market that needs to, that's an important distinction here at home. Um, there's some demographic challenges. You know, we're not growing fast as a country population lies. Um, you know, the beef probably has some room for improvement the, um, oh, I'll call it the snack space. So not everybody eats three traditional meals a day, all us equal to younger you are the less likely you are to eat that way. Um, me and most of your listeners that might be my age or older are probably a little more traditionalist of our breakfast, lunch, and dinner. Uh, but there's a lot of other work that says younger folks tend to spread their calorie consumption out a little bit more. Um, if the beef can adapt to that, I think there's a lot of reasons to be optimistic because if you offer a smaller portion that's more convenient, Price sensitivity isn't as high either. not gonna react to the sticker price the same if you're consuming two to four ounces at a time versus, you know, 14 ounces at a time. um, I embedded the need for some innovation change in my answer there, but I think there's room for that to occur.

Matt: 43:32

Well, that's what times like this transitions, um, that, that inspire some, some innovation and new product development and things like that. So it sounds like we just beef jerky for all right, uh

Glynn Tonsor: 43:47

Well, and you know, I've given a couple shoutouts to my spouse cuz we need to do that. but I'll acknowledge my kiddos here. You know, I'm blessed, I'm able to do a lot of youth coaching. you know, my oldest son's almost as tall as me, so there's a season for this that's wrapping up. But beef jerky is definitely a product we've kept in my truck because you can have it in the truck and you don't need a refrigerator and so forth. But we need to do more than beef jerky is basically my shout out here. So there's a place for beef jerky, but not everybody's gonna raise a family just on beef jerk. So got more, more work to do

Matt: 44:15

Yep. So, switching gears just a little bit and that, that, those two discussions give us, I think, a lot of basis for where we've been and, and what we need to continue to do in terms of looking at, at just basic economics, not just cost of production, but also opportunities to, to market beef better. I've had the discussion on here, we've set through plenty of discussions, you were part of one in DC we talk a lot about how we price and market and merchandise fed cattle today. And it is significantly different, as you know, than it was 20 years ago. And especially as we get clear to the eighties. I, I call it a better mouse trap and I have yet to figure it out, but what are your thoughts on the way we price cattle today? And, and when I say price, I think everybody that's been listening here knows. But, um, the negotiated cash price that we use to base a lot of the value-based marketing grids and formulas, alternative marketing arrangements from, um, is there a better mousetrap? And if so, do you have some thoughts of what, what that may look like?

Glynn Tonsor: 45:23

Yeah, so my crystal ball is definitely gray, broken and shattered, right? Like everybody's on. There's no easy answers to this. and I'm not trying to dodge a question. I'm gonna say a few things that probably aren't popular, but I don't think there's a simple answer, is the reason I give you the crystal ball front, um, embedded in our, you know, so you and I've had whatever it is, 30 or 40 minutes of exchange here so far. Um, there's a lot of examples of differences across consumers. So I, you know, I made this long comment about not all Japanese and Chinese are the same. Well, even in the US we're not all the same, right? actually those that consume ribeye usually aren't the same, that are heavy ground beef so forth. It's a little bit frustrating to me as an analyst and somebody trying to help the industry that thinks we need to have a better mousetrap when everything around us on both the supply and demand side a lot of heterogeneity. So consumer side, there's a lot of interest in different types of products, right? Not everybody an NHTC product, but there's some that do, right? And we have a supply system for that. Not everybody wants to pay the premium for Prime. Not everybody wants bone in. There's a lot of examples, right, of differences where you find subsets of consumers on each side. And I think our system overall, you know, gets the right product to the right people. but it does that cuz there isn't one system lots of different ways to send signals either to consumers that this is a bone in versus bone list and there's a premium or going backwards towards the producer, you know, we're gonna differentiate your fed. And if we're gonna be complete here, differentiate the feeder cattle and differentiate the bowls on the seed stock side. These are all part of that discussion to be complete for our listeners here, it's not just fed cattle. Um, I think a more mature discussion in the industry would recognize the heterogeneity both the supply and demand side of this exists. It's frankly, it's a big part of the demand success comparing now to the eighties that we alluded to earlier. Um, you know, people see on the eating experiences improved and so forth as part of that, that's not everybody in the us Not everybody's a heavy beef eater, right? Not everybody eats real ground. I'm hopefully your listeners are following me. So my answer is it would actually be foolish list to try to have a better mousetrap cuz it would take a heterogeneous, lots of variation situation and shove us back into something that's homogeneous. And regardless of how well intended or not that, You're gonna miss opportunity. When you take all that variation, you shove it back into something that kind of is black or white and gets away the continuum of gray is a way to think about that. Um, you're pick up on a little bit of my frustration here and I'm obviously not mad at you with the question, I, but I think the live animal and the meat and the consumer side of this all the way through, um, would be better served if we had multiple systems, know, multiple ways to align production system A with marketing system, A for consumer, a and I'm using a generically, maybe it's N HTC probably as an example, people relate to, and it's intentionally different than something that is a, you know, AVAC 60 program that has another claim with it that for consumers that are, you know, want that on and on and on. So would like multiple mouse traps. Not one simple one. Um, that may be too and geeky, but I think a loss a lot would be lost economically if we had one mouse trap is what I'm really trying to say. And I think both supply and demand side. Cattle producers and beef consumers would lose if we shove everything back into a mouse trap. Regardless of how well designed that one homogenous trap was.

Matt: 48:53

The folks that are listening to this can't see me grinning. Um, but, but I am, because, uh, I feel like you may have been eavesdropping on a conversation that I had with a friend of mine a week or so ago that it, and we were frustrated just like you are because talking about this exact issue, as long as we've been talking about it, we still kind of keep coming back to the same non-answer and non-agreement. And, and, um, one of us, I am not totally sure, which, Said that very similar thing. What if we have different production systems? And if you feel like because of your environment and the uh, management scenario that you have, you fit toward a small rib eye, small portion sized, high quality type of market scenario, you know that you're likely going to be selling into the 11 to 13 inch rib eye, high prime marketplace. And uh, you're not gonna have 1600 pound live weights. You're gonna have 11 to 1300 pound live weights like we used Conversely, if you're selling into the red meat yield, we don't care about quality. Uh, lots of protein that we can either grind or turn. Whatever quick heat and eat meal that you're talking about for the, for uh, fast consumer. You're looking for nothing but efficiency of beef production and you don't care about the size of the ribeye or anything else. And, and, you know, you name it, you got's talking about, uh, management claims and NHTC programs, things like that. Those, those could be deals too. So do all of those in your mind, do all of those have a separate way of passing the signals and or the price, the actual price directly from the consumer at retail, at food service, at wherever that, that channel, that supply chain is ending up back through and, and we don't, we don't even consider about pricing'em all by the same pound or price per.

Glynn Tonsor: 51:05

in general, my answer is yes because the, you know, the risk reward trade off from everybody, whether it's seed stock, all the way to the final beef consumer is different depending on the kind of claim. So if it's a prime versus choice premium, let's just use that simple example. you know, at worst case, has to accept a choice price after overinvesting and making'em. And that's not free, but we can kind of quantify how much is at stake there. Pun intended. I use the term stake, Uh, yeah. Uh, but that's different if we do nhtc cuz it's a multiyear production system that's at play, right? Cause you gotta put it you know, organic claims, multiyear and so forth. if it's AVAC 45 premium, is simply for the health of the herd and the feed yard that has nothing to do with a beef claim, then we don't even need to have the discussion. How do you send a beef signal back? Right? Cause it's a feed lot all the way back to seed stock story, not the full chain. So, a we need to recognize not everything needs all the chain connected. It's the reason I'm giving that example from, you know, seed stock all the way consumer. some of them have different risk reward. You know, of risk is why I'm interjecting that part here. So there's no reason to believe that common mouse trap would make sense. We already have some of this difference. Uh, think about people that market calves. So, you know, the majority of our calves are marketed in the fall, right? Not all. Cause obviously we have both, you know, spring and fall. Calvin Systems with a big chunk our October, November marketed a lot. Go through local auction markets, not all. go through a video auction, right? Maybe a few months earlier. Some are direct sold to a feed yard, some are retained through a feed yard. of those are alternative outlets for let's say the six weight calf system, right? I think we would lose a lot if we tried to take the six weight calf system down to one. I think we would lose a lot if we took those four outlets I just described down to one. you have the same challenge when you talk about pricing fed cattle. If we run it back to one mouse trap. So I think it's appropriate to have different systems that look the same in terms of duration of commitment on both sides, uh, and maybe the magnitudes of economic carrot and sticks. Probably differ because there's different amounts of risk and reward at stake in some of those claims. So that's convoluted But this is, all of those are examples of the heterogeneity I was trying to map out for your listeners earlier. Yeah,

Matt: 53:24

and one of the first things that consumers tell us when they do have a poor eating experience. It's, it's something to do with inconsistency, usually, uh, rib eye size, taste and tenderness, you know, what quality, whatever the case may be. And a system like you're talking about would get straight at that inconsistency issue. I mean, up, up to this point in our supply chain, especially today, um, we, we achieve consistency by sorting. So we'll start at the packer and go all the way back, but we do a cooler sort and we send the prime carcasses into this room and they go into boxes. We send the high choice CB type programs into this cooler and choice. And then we've got the no role and maybe a few selects still, uh, they all get sorted in a cooler. Prior to that, most feed yards today aren't sorting outta there, but, but they can and some do. Uh, they may sort'em once or twice upon arrival and, and part way through, you get to a livestock market or even the corrals at home as we're loading these calves to go on the truck. We sort'em by weight, by color, by whatever. How do we achieve, given today's structure, how do we achieve this? What I like to call vertically coordinated, not integrated, but coordinated program where, where a lot of the times, at least from a merchandising and marketing standpoint, we have to be able to sort, we think, have to be able to sort these cattle to actually get sold into a, a right sized lot. And of course there's lots of things to overcome, but that's the first one that comes into my mind. How does this supply chain that we have built continue on in a, in a scenario as you're talking about?

Glynn Tonsor: 55:11

Well, I, you know, during my

Matt: 55:13

Or does it just blow up

Glynn Tonsor: 55:15

well during my lifetime, that has developed as you kind of mapped it So there's a lot of those sorts that are done. And we've probably always sorted for weight. That probably predates my time on earth, right? But there's other things that are sorted for in this industry that weren't sorted for 30 years

Matt: 55:29

That's true. Yeah that's

Glynn Tonsor: 55:31

Um, so we continued just to add layers to that. Management the point. And this is unique to the live cattle industry, right? Um, and I don't mean feed lot. I mean the live animal stage of production is what mean here almost everything around us more complexity and more, you know, things to it. you know, your listeners didn't get to see me these headphones where we talked about this, but that wasn't something would've been done 20 years ago. I would've been on a different kind of phone, right? so we've already went down that path. The markets have already develop. Towards aligning those things and more sorting and coordinating to the past. And I'm basically forecasting that. I think of that would be better because that heterogeneity I'm talking about, both sides could be aligned better. And it doesn't have to be vertically integrated, as you said. It could be vertically by sending the signals. Um, I personally think that needs to be a decision between the buyer and seller all the time on exactly integrated that is. Um, we don't have to solve that today. That's a private decision in my eyes. we're gonna see more of that going forward, I think. I think there's economic incentives to see more of that going forward. I'm confident in that statement. I pause on the forecast a little bit because the current political environment is to hit pause on that and treat things as more homogeneous. And that's what I was alluding to on the, I think there's a lot of economic challenges with doing that. And if we pause that development that's occurred over a 40 year period, in my example of life, we certainly can't act like it's free. So, yeah, that, that's on that point, but, things like, I'm not plugging video auctions for your listeners, but the relevance of video auctions in the feeder cattle arena is a lot different today than it was 30 years ago. And why wouldn't we expect it to be right? The internet is available. You and I are doing this via the internet today. was not a tool, right, for the animal industry to use for marketing and for signaling 30 years ago like it is today. be foolish not to use that to coordinate a cattle buyer in Nebraska. They could find something they can't find at home that they pull out of southern or, I'm making that example of, you get the point the markets can be coordinating from a different at a lower transaction cost via the modern video auction system. Right? Again, this is not a plug for angle video, that's not the point. There are places for local auctions and for direct marketing, think there's value and opportunity for each of those outlets. But we need to recognize they reflect heterogeneity on the supply and demand side of this story. can't forget that. Otherwise we're gonna go backwards and shrink the industry is simple summary.

Matt: 58:04

Well, and as folks have heard me time and again say that, you know, if it's, if it's right for the industry, right for consumer alignment, right for profitability and, and the ability to bring that new money into the beef industry, which comes from the consumer every time where the new money comes, um, and yet feels wrong because that's not how dad or granddad did it. We probably need to look at it from little more futuristic perspective, that's what this would be

Glynn Tonsor: 58:33

Yep. Well, I'll share this. This is certainly not a popular view with everybody. I've shared it elsewhere, so I'm comfortable doing it again, but there's a lot of successful that involve more than one entity. And our simple example, a buyer and seller, right? Somebody raises cattle, sells it, and somebody else buys it. Where both sides are better off. Both sides are not equally better off.

Matt: 58:56

Hmm.

Glynn Tonsor: 58:57

So I'll repeat this. There's a lot of businesses out there where both parties that engage in it are better off than not doing Otherwise, by definition they wouldn't keep doing But that does not mean they both have the same 9%, you know, ROI or whatever metric you wanna use on, you know, the decision. And even if it was the way, saying 9%, one might have more risk involved. So the mean return of 9% isn't sufficient to say they're the same. One side might have a lot more risk and variability behind that. Um, of this is philosophical and even emotional on, or we as society, this isn't Cal, Cal versus Packer's society, okay? Accepting business relationships where both are better off, even if they're not quote unquote equally better off. soon as we try to make the world where both are better off and they have to be quote unquote equal. I don't know how you ever do that because you never have equal risk and reward on Because different, I mean, think about somebody that raises organic corn. They have to put the land aside for multiple years to be eligible. Their risk there is not the same as somebody that buys the corn. people that buy the organic corn have to line up a market and supply there, they're, they worry about losing customers, which isn't the same as putting the land in. Both of them have risk of being aligned, but you'll never get an arena where those two have the same risk. Right? So you're never gonna get to where the risk reward is exactly equal, even if in a multi-year setting, they both are better off doing it People are picking up on my tone here. I think we're productive when we allow capitalism to align people that want to engage and accept the risk on both sides of And if both are better off, are better off. Let's go forward. Um, and maybe even just, I don't wanna say come to terms with, but just recognize and quit fighting over both sides aren't gonna be equal all the time. There's seasons to where. The seller gets the better deal in seasons where the buyer gets the better deal and that ebbs and flows over time. Uh, there's a lot of cycles in these discussions from a historical perspective, which we've interjected in a lot of our discussion here today. I think some maturation of win-win deals mean equal deals, is what I'm trying to impose on everybody here. I know that's not fun to talk about. It gets emotional real fast, but I'm concerned going forward that if we seek out when, when, and equal, they'll never exist. And therefore we never make progress.

Matt: 1:01:13

Well, you mentioned capitalism a little bit ago, and I think what I would say when you said it would never work, like you were talking, if we had everyone having the same risk, the same returns, the same everything else, that's definition, definition of, of communism, right? I mean, it's almost, there's no incentive to be more efficient. There's no incentive to do a better job of marketing. There's no incentive to uh to a profit

Glynn Tonsor: 1:01:41

be entrepreneurial, right? So I mean, I know this is getting geeky, but it's not just the average return per head, it's the risk you took to get there. So there's multiple components to that. Um, you know, when I use the term risk reward just to, everybody can follow us here, but it's not just the average per head, it's how much was at stake around it, right? So I mean, if you gotta have$3,000 tied up to make 20 bucks, that's a pretty risky environment, right? A simple example, 20 bucks doesn't tell the story. Well, I understand, you you, get but, uh, that same 20 bucks with 50 bucks on the table is a lot more appealing, right? So I think your listeners get that. But my, my plea for your listeners, and your listeners are probably a little biased on this compared to the whole country, I suspect, but, um, we as a country need to recognize that it's possible for both sides of a transaction to be better off and not equal. both sides are still better off doing it.

Matt: 1:02:34

Well, I love that because just a week or two ago, I was on a panel in, in Salt Lake with the American Angus Association, uh, annual meeting. And the panel was a blast. It was really cool. But we, we talked about, and it was cattle fax data. We talked about the fact that from the 1980s through 2020 years, where the average, and you've seen this slide that Randy block and, and have probably used, You may, you may help put it together, but the average profit per head for the entire beef industry chain was 32 bucks. From 1980 to 2000. From 2000 to 2020, it was 340 something. Now, what it showed was this bar chart of, of the different segments, cow, calf, feeder, stalker, packer.

Glynn Tonsor: 1:03:24

How it's split

Matt: 1:03:25

How much of that They broke that. Yeah, it was split up. Um, but the fact of the matter is, thanks to all the things that we've talked about over the last hour or so, um, increased consumer beef demand being the driver, we've been able to grow that pie from. 30 bucks or less to 300 and some bucks. Now we've got something to actually fight over. Prior to that, all we were doing to make money was stealing from our neighbor and making sure that we capitalized on something, management wise, genetics wise, or whatever, that somebody else up ahead or below us in the industry chain, uh, didn't do well. And the folks that could, that could steal that profit. I, I shouldn't use this, the word steal, but could capitalize on someone else's mismanagement. They made a lot of money in this business. I think it's better to, like you said, have economic signals out there to grow the whole pie, grow the whole industry, put more value from the consumer into it, and then we can figure out how to create those win-wins and, and make sure that we, that we both get to share

Glynn Tonsor: 1:04:31

right? Right, Well, on a different way to drive that philosophical point home is, you know, if, if you're somebody that's gonna retire tomorrow and you have a W two job, so we're not talking about passing a ranch on and you know, multi-generational thing, you're just a regular W2 worker and you're gonna retire this month, you're probably not as worried about frustrating your boss and so forth. You have a long horizon. Conversely, if you're fresh outta college and got college debt and whatever, and you need to work 40 years, you're a little sensitive to that. Right? One of them looks at the win-win for the long haul. One of them doesn't look at the win-win for the long haul. We do a lot of this elsewhere. more productive workday, comes from that isn't ready just to like, flip the bird, tell their boss where to go. Right. That doesn't work well on any operation. Um, I'm basically asking all of us to flip the bird a little bit less is the the point. and to

Matt: 1:05:21

probably a Go ahead.

Glynn Tonsor: 1:05:23

All I was gonna say, Make sure your listeners know if I flip the bird is, you know, just, I don't need you. We'll go on and do this without you. I suspect your listeners know what I it's not productive to regularly do that, is what I'm really trying to highlight.

Matt: 1:05:36

Yeah, I'd say that not just our listeners, but, uh, all of society, whether we're talking about, uh, keeping a job or economics or just driving in, in traffic at 5:00 PM we could probably, probably all learn a lot from that statement. So,

Glynn Tonsor: 1:05:51

And it's easy to say, I'm sitting here doing a recording to you, or I'm not behind the wheel during rush hour traffic. So isn't a stressful spot. but I sincerely believe, you know, this comes from a, you know, proud father of three thinking about what's in the head for my kids as much as anything. I want society to get better on that stuff. And, the way we raise and market cattle is a sub-component of that. I think seeing logic holds.

Matt: 1:06:14

Well, when I can, uh, when I can turn an Ag Economist into a philosopher on practically ranching, I think that we've, uh, we've done our job, but, uh, No, I agree wholeheartedly and. As always, appreciate uh, your time and your thought for all of us in in the agriculture business, and I will make sure and include some of those in the notes, the ag manager.info and your email address if folks have questions and wanna reach out and, and, uh, dig a little deeper. But there is, you're exactly right, there's a wealth of information there on ag manager.info and, always, always enjoy getting to that and getting to hear you as well. So thanks a bunch for your time and we'll look forward to visiting again soon.

Glynn Tonsor: 1:06:56

Sounds good. Thanks for having me on.

Matt: 1:06:58

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