#89 - Derrell Peel, Today's Market: Scary Good...or Panic Slowly?

Derrell Peel holds the Charles Breedlove Professorship of Agribusiness in the Department of Agricultural Economics. He has served as the Extension Livestock Marketing Specialist since 1989. His work focuses on livestock market situation and outlook and marketing/risk management education for producers.

Dr. Peel works in all areas of livestock production economics and marketing for all beef cattle production sectors. Additionally, he works on meat demand and meat supply chain issues and beef product marketing. He also works in the area of international cattle and beef trade and have particular expertise in the Mexican cattle and beef industry.

Transcript

Speaker 2 0:05

Hello there, and thanks for joining me for episode 89 of Practically Ranching. I'm Matt Perrier and we are here thanks to Dalebanks Angus, your home for practical profitable genetics since 1904. This week's podcast is a doozy, in my humble opinion. For starters, it's one of, if not the longest one that I've ever recorded. And honestly, I think I probably could have talked to our guest for another hour and a half, but I didn't. For another, we checked off almost every divisive topic in the beef industry. Pun sort of intended as that was likely the only lightning rod that I didn't grab hold of in this episode, Dr. Darrell Peele is a professor of ag economics and extension livestock marketing specialist for Oklahoma State University and Stillwater. For over 30 years, Darrell has focused on production economics in all segments of the beef industry across several different countries, and it shows he knows his stuff and he applies it in a very practical manner, for producers like us. You know, I like to list some of the high points of each of these episodes during this preamble. But I've gotta be honest, I'm not sure I can even remember... certainly don't have time to list everything we talked about this time. Supply and demand market fundamentals, imports and exports, alternative marketing arrangements, captive supply, commodity and value-based pricing. Packer concentration, ground beef. Trade. Price discovery, mandatory country of origin, labeling, economic efficiencies, free markets and their signals. The choice select spread... if if it affects the beef market. I think we probably talked about it. And after I was done recording, Dr. Peel dropped a quote that I think captures just why a market discussion takes so much time and has so many facets and complexities to it. You know, we were, we were visiting about how challenging and passionate these market discussions often get, especially when the market is not going the way that beef producers want it to go. And Dr. Peel used a quote that I think might be attributed or should be attributed to HL Mencken. Um, but Dr said, for every complex problem, there is an answer that is clear, simple, and wrong. And it's not just marketing dis discussions. It, it spills into politics, into, I would even say genetic selection, maybe even our interactions and relationships with our friends and family. We gravitate toward this direct, concise, obvious answer that can be shared over a cold beer or a hot cup of coffee, or a social media meme. But often there's a whole lot more to the story than what we first see. You know, in today's market climate, it's pretty hard for at least us cow calf producers to criticize the market dynamics. Dr. Peel calls today's market scary. Good. He said another counterpart of his advises, his producers to panic slowly. But regardless if we like the situation, these markets find value. They may move up, they may move down, but hopefully after listening to this discussion, we'll be a little better equipped to make the appropriate decisions for our business, for our families when these markets do go whichever way they do go. So enjoy this discussion that I'm going to title today's Beef Market, scary, good, or Panic Slowly with Dr. Darrell Peel.

matt_1_04-02-2026_070559 4:17

Have you ever had more fun delivering your message to especially cow calf producers than you have the last few years?

squadcaster-9618_1_04-02-2026_070600 4:25

Well, yeah, that's for sure. I mean, the, you know, we're obviously in a completely unprecedented situation and, and yeah, it's a lot of fun for cow calf people. Um, it, it's also challenging though, in many ways because there's so many moving parts here. Um, and, and we're coupling, uh, you know, record high prices and very strong returns for cow calf people with an awful lot of volatility in this market. And increasingly, that's almost as big a challenge right now as figuring out how to take advantage of these incredible markets that we have.

matt_1_04-02-2026_070559 4:57

Yeah, the volatility piece. I listened to you on the Angus conversation that you did back a few months ago, and, and I think you all talked about while the, Raw dollars and cents volatility is pretty wild, the percentage of the total is maybe not that much different or maybe even less than what we've seen in some of these swings.

squadcaster-9618_1_04-02-2026_070600 5:19

Yeah, part of it is just natural volatility in the market. So you look at week to week changes in prices and, and um, and I have looked at that and, and in percentage terms it hasn't changed all that much. But obviously, you know, 5% of today's price levels is a much bigger price range in that volatility than what we've seen historically. So that's part of it. But around that, um, you know, we've just got a lot more external influences that are coming in to affect the markets. Most of that's pretty brief. Um, you know, it's, it's a headline driven world right now, and part of it is because beef is kind of a, you know, a subject of focus, uh, politically and and so on. And, and that's injecting additional volatility in this, in this market. So, um, just gives us lots more things we have to keep an eye on.

matt_1_04-02-2026_070559 6:10

I remember growing up in the eighties and the nineties and, and if you ever heard a story on beef, It was not going to be favorable in the press, in, in, uh, of course we didn't have social media, but, you know, even entertainment industry, nobody ever talked about farmers and ranchers. It wasn't that cool to be a cowboy in the eighties, nineties and early two thousands. Fast forward to today, and that has all changed. You can call it the Taylor Sheridan Effect. You can call it, you know, whatever the case may be. But from a health standpoint, from a culture standpoint, um, as a chef friend of mine, Tyler Florence said, beef is back and it's bigger than ever.

squadcaster-9618_1_04-02-2026_070600 6:52

right. Um, yeah, for all of those reasons, you know, obviously we're in a protein, driven market right now, generally speaking, uh, for a lot of reasons. We've got the GLP one, uh, effect in, in consumers But you know, regardless of those broader trends, even from a health standpoint or whatever, beef is, is just incredibly popular. and some of this has really been there, I think since the pandemic. People in the pandemic were locked up. They learned how to cook. They, you know, figured out some things. And, and some of that stuff I think is still hanging around with us. I think there's some lingering effects yet on beef demand that are, that are very positive. And couple that with the fact that the beef industry has done some really positive things over the last, uh, dozen to 15 years in terms of the quality and consistency of our product. And I, when you marry those two things up, I think that's the, uh, explanation for the incredibly strong demand we have. Uh, that's very persistent in this market, even at record high price levels.

matt_1_04-02-2026_070559 7:51

Yeah, it's, it's just hard for me to even imagine. I've, From your standpoint, from an economist standpoint, are we still in a demand driven market?

squadcaster-9618_1_04-02-2026_070600 8:01

I think demand is a big part of it. I mean, obviously the supply fundamentals, set up the idea of potentially higher prices. We've got, you know, multi-decade lows and cattle inventories. We've gotten a lot smaller than we ever intended to because of, uh, drought issues and other things now that are, you know, we're still trying to figure out for sure if we got a bottom in terms of herd liquidation.

matt_1_04-02-2026_070559 8:24

Yeah.

squadcaster-9618_1_04-02-2026_070600 8:24

Um, and certainly we aren't, you know, we aren't, uh, making a lot of moves very rapidly to, to show any growth. But all of that said, you know, tight supplies by itself doesn't guarantee high prices. You gotta have demand to go with it. and maybe even more so when you start squeezing supply, um, you're gonna be rationing that supply. And if, you know, if there's not enough demand to, to really support that rationing, which leads to higher prices, you won't get those higher prices. And, and I think we clearly have, incredible demand and, uh, and that's, that's at least as much, if not more so of the secret here to, um, you know, the demand fundamentals, uh, along with the supply fundamentals.

matt_1_04-02-2026_070559 9:06

Yeah, it's, it's both. I I think it's obviously both. It always is that supply demand curve has been around forever and, and you know, on the beef side of things, really, on all of ag commodity side of things. I think as producers, we went for so long seeing demand stagnant or the beef industry through the seventies, eighties, nineties, it going down year after year after year, that the only way we could affect that price was off supply. And so I still harken back to those conversations that, um, it was all about supply. If we had a lot of calf numbers, we were gonna have low prices, period, end of story. And today I look at, at the pent up demand and just how much these folks are willing to pay for good beef at the retail counter. And yes, we don't want to overshoot the runway, but we have got to figure out, in my opinion, some way to make sure that we satisfy that demand so they don't go somewhere else and buy their beef or buy their protein or something else. And that's, that's a challenge when you look at the biological makeup of the cow and, and the environment and the range conditions and drought and everything else.

squadcaster-9618_1_04-02-2026_070600 10:17

Yeah, it really is. I mean, you know, again, the, the, uh, the supply side, um, you know, mother Nature got us here again for the second cyclical low in a row.

matt_1_04-02-2026_070559 10:27

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 10:27

bottomed in 2014 in the last cycle, and that was lower than we intended to be at that time because of drought. Uh, but we put together a very, impressive, and it turns out historically rapid expansion following that, to the peak in 2019. Then we started a slow liquidation. I described it at that time that it was gonna be more of a plateau than a liquidation.

matt_1_04-02-2026_070559 10:49

Hmm.

squadcaster-9618_1_04-02-2026_070600 10:49

That was before drought kicked in

matt_1_04-02-2026_070559 10:51

Yeah.

squadcaster-9618_1_04-02-2026_070600 10:52

really in 2020, but certainly 2021 through 2025 at least, or up the first half of 25, drought kept pushing us lower and lower again. It's what we had to do, not what we wanted to do. And so we find ourselves, uh, low again. And, and I think you're absolutely right. I mean, uh, consumers, uh, the demand is there. Consumers are willing to pay it, but at the same time, at, at the end of the day, there is less beef out there and some people are gonna eat less beef,'cause you can't eat it if you don't produce it. So we are, you know, some consumers are making adjustments and, uh, and it's not for lack of demand, it's just because there isn't enough supply. And if we, uh, if we don't take care to manage that supply, as best we can, and, you know, and, and of course beef gets complicated because it's not one thing. We talk about beef, we talk about beef demand, but of course beef is thousands of different products and every

matt_1_04-02-2026_070559 11:43

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 11:43

of'em is a separate market. and within that whole complex, I would say probably the ground beef market is the most critical one for us to make sure we take care of that's such a big part of our consumption. Uh, and it's, you know, beef, you know, ground beef is always kind of the go-to product for consumers, particularly in terms of, uh, eating at home. ground beef is, is the, is our value product, relatively speaking, and it's the go-to product. And, and that's where we actually got the tightest supplies right now because we've seen the biggest decreases Cal Slaughter the last three years. so we've tightened that supply up even more so than we have in general, across the board for the rest of the carcass.

matt_1_04-02-2026_070559 12:30

So that is a lightning rod issue because if we really flesh that out and look at where, during a time of expansion where people are encouraged because of prices to either retain cows or buy cow, open cows back and breed them instead of sending them into the, supply chain. Where do we get that lean trim to go along with all this white fat that we're making from these 1800 pound live weight teers? Um, where do we get that beef? I, i, I, know some different options. And what are the political consequences, both in the production side of the industry and as we hear more and more even from the White House now about, USA beef that was born, raised, fed, processed within the 50 states?

squadcaster-9618_1_04-02-2026_070600 13:18

Yeah, so it does bring in, uh, obviously brings in part of the trade picture when we talk about that. So, you know, obviously, as you well know, we produce fatty trimmings from our fed steers and heifers. It takes multiple pounds of lean beef for every pound of that fatty trimmings. If you do some simple math and there's a million formulations to make ground beef, and we use all of

matt_1_04-02-2026_070559 13:40

Yeah.

squadcaster-9618_1_04-02-2026_070600 13:41

Uh, in various ways. But, you know, in terms of kind of standard make, if you will, if you take 50% lean trimmings, and you want an 85% lean ground beef product, you need seven pounds of 90% lean to mix with it. And you'll get eight pounds of something that's 85% lean.

matt_1_04-02-2026_070559 13:57

Yep.

squadcaster-9618_1_04-02-2026_070600 13:58

So seven to one ratio of nineties to to fifties. And, and, uh, you know, and we use our, our code. and bull beef to as a, as a big part of that. That's our, that's our primary source, for that lean. But we don't produce anywhere near that. In fact, part of that's a result of our own efficiency. We don't, we get so many more pounds of beef in total in this industry from the number of cows we have, that we, we don't come anywhere close to producing that. So we've imported beef to supplement those supplies for a long time. and, and I should say before I get, too far into the trade stuff, you know, we can also grind up other parts of the carcass. So we use some round and we have been using the last two years we've used, round to grind. But you know, that's coming from fed carcasses. So we've already paid to feed those cattle. And you know, the lowest value use of it is to grind it back down to hamburger value. So as long as there's a better market out there, you wanna market that stuff to a higher valued market. And so, uh, we've always imported, uh, and I say always for as long as anybody can remember, we've supplemented domestic supplies with some imported beef. And that to the surprise of some producers, it adds value to your fed cattle because it allows us to utilize our fatty trimmings for ground

matt_1_04-02-2026_070559 15:15

Yep.

squadcaster-9618_1_04-02-2026_070600 15:15

If we didn't have that, we would do two things that were not good for the industry we would take those fatty trimmings would be rendered out in a tallow or a, an oil market at much lower values. So the ability to utilize those fatty trimmings adds value to your fed cattle. The other part of it is, again, if you do the, the average calculations right at 50% of our total beef consumption in this country is in the form of ground beef. That's both at home use as well as obviously fast food. And so, if we don't produce that. And to your earlier point, if we don't service that market, that's where we stand to lose customers and lose demand. You know, across the board when we talk about beef demand and beef competing with other proteins, it's not primarily in steak markets where we compete with chicken and pork. steakhouse, you know, they probably have one chicken item on there'cause there's somebody in a party of six that don't want beef, but that's the only reason they have a chicken product on their menu. Uh, you know, steak doesn't have much competition. But when you drive through those places with a little window and somebody hands you something in a sack, that's where we compete tremendously with the chicken industry in particular to a little pork. more of a supplement now.'cause you put bacon on everything and that enhances all of it. So, you know, but, uh, but, uh, but the, you know, that gr that ground beef market is really the place where I, it's a, it is such a fundamental part of our total beef consumption and we really, really have to take care of that market. Then sets up to your earlier point, that because of the political focus now and so on, there's been a lot of attention on imported beef and, you know, some of that's purely political. Um, Argentina is not an issue in our market. I'll just say that right now. Uh, they, they've been about two and a half percent of our total imports in recent years. they have an expanded quota now, so they may go up to three and a half or possibly 4% of our total imports. And to the extent that they increase, it'll probably just displace some beef that's coming from somewhere else. Because in fact, the market is determining how much beef we import according to those ground beef market

matt_1_04-02-2026_070559 17:34

Yep.

squadcaster-9618_1_04-02-2026_070600 17:35

And so, uh, so it's a question of what source we're gonna get it from, but, but it's not gonna change the total much, if any, in that kind of a sense.

matt_1_04-02-2026_070559 17:43

So the term compromise has kind of gotten a bad rap, I think in the last decade or so. I happen to actually like it. So I'm gonna propose a market focused compromise to you. Kind of as a rhetorical question. With all this talk and, and I'm gonna split the beef industry, the producers into two camps, those who favor mandatory country of origin labeling and those who are opposed to it or favor free trade and let the market and exports and imports and needs and usage and everything else sorted out. Is there a compromise somewhere in there where for whole muscle cuts, steaks, the high valued stuff, whether it be at retail or food service, because that's where COOL, I think forgot about where most of our imported beef came, goes through. Is there a solution here that does both and raises the tide for all boats And that is that we do import probably more, significantly more maybe lean trim for that 85, 15 or whatever grind it may be. And also adopt the culture of a bred raised, fed, processed in the USA for nearly all of our whole muscle cuts. And do you see that path going forward and everybody being happy?

squadcaster-9618_1_04-02-2026_070600 19:09

Um, I think we have it voluntary labeling,

matt_1_04-02-2026_070559 19:12

Yeah.

squadcaster-9618_1_04-02-2026_070600 19:12

you know, if it has value, uh, label it. Take advantage of that opportunity to market that product voluntarily. Mandating stuff from the top down in a one size fits all thing is gonna add cost to the industry and ultimately will not increase things. And, and that's, I mean, the research we have that we've been doing for 20 something years shows that.

matt_1_04-02-2026_070559 19:36

Yep. And, and that's where I think this is such a nuanced issue in the beef industry. And if you have 20 minutes in a conversation at the local cafe or coffee shop, you can't get to what is really driving this. I mean, nearly any of us would say, yeah, increased supply, especially outside of our us. Controlled animal welfare and health and everything else is, is gonna be bad for the industry. But when you look at it from a standpoint of... do we want this person turning away from beef and going to something else and possibly staying there when we need them to buy, when we've got a bigger supply here in six or eight years, or whenever the case may be on the next cycle, um, wouldn't we have been better off patching that like the market was telling us to do with some imported lean, trim grind to keep'em buying hamburger.

squadcaster-9618_1_04-02-2026_070600 20:34

you know? Absolutely. I mean, again, this, we've talked about the importance of the ground beef market and so on. Um, we simply cannot support that part of our industry in the US without imported beef.

matt_1_04-02-2026_070559 20:46

Hmm.

squadcaster-9618_1_04-02-2026_070600 20:47

I mean, if you had to grind up enough of the rest of the carcass, to try to support that, you wouldn't have any of the higher valued product left to, uh, to market as ground beef. And we've always done it, you know, we've got record high prices now with substantially increased imports the last couple of years because of the market we're in. Uh, and it's not. You know, we have what we have, right? Those imports are not undercutting our record market. In fact, they're supporting it. So, um, you know, we, we basically just don't need to fear trade, trade. International trade is no different than buying and selling stuff on Main Street. Trades happen in a market economy because both parties benefit from the trade. If it's, if it's allowed to happen naturally in a market setting. Markets find value. that's true for both beef exports and beef imports. And the industry's better off when we let trade work. Now you can tell, obviously I'm a very strong market economist, but, uh, I believe in markets. Markets do a lot of things really well, and very, very few cases that I'm aware of. When we mess with'em, do we make things better off on net? Yeah.

matt_1_04-02-2026_070559 21:56

Yeah. And, and that's the irony of the discussions that we've had in the industry for the last, I guess now 30 years, probably longer than that, but since the notion of mandatory country of origin labeling. Some of the most, I would say red-blooded American capitalists that I know are often opposed to the notion of imported beef or cattle, feeder cattle, whatever the case may be. And, uh, if, if you really look at it, if you take all the politics and you take all the passion and you take all the emotion out of it and look at it from an economist viewpoint. Um, yeah, it, it fuels what it is we do every day and pro and and maintains infrastructure in terms of feed yards and processing facilities and a retail base and, and all of that quote unquote supply chain that we talk about. That's how we get through these ups and downs of, of changing inventories and cow inventories and things like that domestically.

squadcaster-9618_1_04-02-2026_070600 22:58

Yeah, it's, that's exactly right. And, and for the most part, even though we've, you know, we, we talk around the edges here, um, and we've tried a couple things here and there, but for the most part, that trade picture, both beef imports and exports, is market driven. And it is, it does work. It's naturally, responsive to the market and it does exactly what you would expect it to do. And so in the current environment, we're exporting a little less'cause our supplies are tight, prices are high. and, and we're keeping a, you know, a higher proportion of our production home to service our primary domestic market, which is the, by far, the biggest part of the market and, and will be, uh, at the same time, you know, market demands are stimulating, increased imports, particularly to supplement that supply of non fed or lean processing beef that we need for the ground beef market. And, um. again, the market's working exactly like it's supposed to, and it, and it helps us when we let it work. So, you know, that's, that's where I come out on it.

matt_1_04-02-2026_070559 24:01

Yeah, this is probably not an original thought or, or um, analogy, but it just came to me. We run a cow calf outfit here. We raise our own hay and forage and even feed for the bulls that we develop. Most years we raise about the right amount. But in those years that we either increase our carrying or increase our inventory of cattle, or more likely decrease the amount of feed we put up in a summer or a fall, I reach out and I buy some hay. Hopefully not very much, but I, I go buy some hay on the, on the open market, but that allows me to maintain the cow herd and our customer base and, and revenue and everything else. And so it's a worthwhile quote unquote trade. Um, in times of low supplies, I go out there and buy a little extra hay and I go on and do my business. And, and that's what I think our beef industry has learned to do. Why not let it work?

squadcaster-9618_1_04-02-2026_070600 25:06

Yeah, I, you know, again, that's the nature of markets. Uh, there's so much variation, especially in agricultural markets because all of these things ultimately are tied to, you know, environments and outdoors and, and weather and the beef industry

matt_1_04-02-2026_070559 25:21

Right.

squadcaster-9618_1_04-02-2026_070600 25:21

so than a lot of other markets because still outdoors and certainly among livestock markets. And so we're subject to so much variability, not only in local areas or regions, but in total. And we just absolutely need that, that, uh, give and take that shock absorber nature that comes from. allowing us to make adjustments, uh, in any direction that we need to relative to that kind of variability.

matt_1_04-02-2026_070559 25:52

Yep. So we've, we've covered one fairly hot button issue amongst producers. Um, let's dive right into another one that, that I have seen, well, we've been watching it since the beginning of the beef industry. Consolidation, another word that has a stigma about it, that that big is always bad. And especially today, it's not just in the beef industry, it seems like everybody just loves to hate big whatever business, government you name it. Uh, the latter one I would support as well. But anyways, um, from a consolidation standpoint, in all segments, let's go through processing, feeding, even stocker operators and the grass side of things on the cow calf. Where do you see the most consolidation occurring according to the data, if you have it? In all of those different segments today? Not necessarily we'll talk histor historical perspective later, but, uh, right now, where do you see the most consolidation occurring in the cattle industry?

squadcaster-9618_1_04-02-2026_070600 26:56

Um, you know, in terms of short term trends in consolidation, I mean, we, we've got some long term trends that have been going on forever in terms of people talk about the number of farms and so on. Well, that's been going down since the colonists started on the east coast. Right? You know, where, uh, uh, we've not everybody's in agriculture anymore, and now we're down to, you know, one or 2% in terms of primary production. And so that's been going on for a long time in agriculture and in a lot of other industries. Frankly, um, in terms of, you know, in, in, in terms of more short term perspective, I don't know that I see, uh, a lot of consolidation. There's a lot of talk right now about obviously age of producers and the fact that, uh, you know, there's probably someran more trans, maybe more transition going

matt_1_04-02-2026_070559 27:47

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 27:48

in light of the market. And this is not a new thing either. I went back and looked in the last cyclical low in the last high prices we had. Um, we talked about the age of the producer and the, and the transition issues.

matt_1_04-02-2026_070559 28:01

Right.

squadcaster-9618_1_04-02-2026_070600 28:01

It's really a rolling thing. It's not a, it's not a one and done kind of a concept. It's a rolling concept. So it, it's there, it's been there, it's continuing. Maybe it's a little bit accelerated because of the market now. Um, and that, that there's a little more of that transition going on at the producer level. but in terms of what does that result in then? I'm not sure we

matt_1_04-02-2026_070559 28:23

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 28:24

I mean, um, you know, I get the question a lot about the a the impact of, of producer transition on markets. And honestly, it, in my mind, it's not, uh, not first and foremost a market issue. Because when an, when an older producer decides to transition out of the industry, you know, the vast majority of cases, the, the grass is still there. A lot of times the cows are still there. So it, you know, the only thing that's really changing maybe is the name on the mailbox. And so, it's, it's more of a people issue within the industry. It's a very important people issue. It's, you know, the demographics are changing and the composition of that, but it's probably not changing the overall resource base all that much and, and changing agriculture all that much. Now I know there's some that leaves and doesn't, you know, it goes out and so on. That's another question and really on a slightly different topic in terms of, of losing resources. But, there's a little bit of that going on as far as the higher levels of the industry. Um. I don't know that, that there's a, a rapid trend of any kind in terms of, you know, either stocker operations or cattle feeding operations. Obviously we've got some challenges of infrastructure, even at the cattle feeding industry. We've

matt_1_04-02-2026_070559 29:40

Right.

squadcaster-9618_1_04-02-2026_070600 29:40

example of that recently. And, and obviously at the packing industry, we are very consolidated, but we have been for 35 years

matt_1_04-02-2026_070559 29:48

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 29:49

it hasn't changed a great deal over that time period. And in fact, we just closed the plant and so on, we're, we're arguably a little bit less right now., I don't know that there's a, there's any real rapid trends going on at this moment that are different than what we've generally been in for a long time.

matt_1_04-02-2026_070559 30:08

So in that processing segment, as we've seen a few of these smaller regional boutique beef plants come online, do you see a trend that we actually reduce the consolidation in the feeding or in the processing industry? Or is are we in about the right economic balance where there can be room for both of those segments or the both of those types of processors? And we're probably gonna stay about where we are today.

squadcaster-9618_1_04-02-2026_070600 30:39

Well, I think, if you want to talk about consolidation in the packing industry, the first thing you need to do is back up and ask why do we have the structure we

matt_1_04-02-2026_070559 30:48

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 30:49

And, and I think a lot of people start with a presumption that the reason they're big is because they wanna mess with markets.

matt_1_04-02-2026_070559 30:55

Yeah.

squadcaster-9618_1_04-02-2026_070600 30:55

And that's absolutely not true. Okay. If you look across our economy, we have lots and lots of big companies and big consolidation in, in a lot of industries. And the driver of that is, is an economic, it's a, it's a, it's economies of size the driver of that. It's more efficient, uh, from a cost, standpoint and, and to some extent even from a marketing standpoint, in many cases. And so economics is the primary driver for why we have the industry structure we have. So if you start with that, then that changes the discussion because most of the concerns about consolidation start with a presumption that it's

matt_1_04-02-2026_070559 31:35

Right.

squadcaster-9618_1_04-02-2026_070600 31:36

and that they got there for, you know, bad reasons. And, and, and all of the research we have, and we've been, you know, we've been looking at packers for a hundred years. More formally in the last 50 years. There's been study after study, after study, uh, because it is a perennial concern and for good reason. Okay? It's you have that level of concentration, there's a concern that it could be misused. But in point of fact, study after study has shown that the net effect of the industry structure that we have is a benefit to producers and consumers.

matt_1_04-02-2026_070559 32:09

I,

squadcaster-9618_1_04-02-2026_070600 32:10

and that's still the case?

matt_1_04-02-2026_070559 32:12

yeah. I had a, uh, fellow producer one time make an observation. Um, he said, every time I hear folks lambasting the, corporate feed yard, or the packing plant or whomever for consolidating, for getting bigger, I ask them, have you ever bought any of your neighbor's operations? And he said the conversation usually stops pretty stinking quickly because consolidation makes opportunities for the good ones to get better and the inefficient ones to probably find something else to do. And, uh, as hard of a, of a fact as that is, it happens in all of our segments.

squadcaster-9618_1_04-02-2026_070600 32:54

Yeah, it really does. And again, if you go back to that premise of, you know, why we have what we have, it's driven by economic reasons. But it's a perennial target.

matt_1_04-02-2026_070559 33:04

Yep.

squadcaster-9618_1_04-02-2026_070600 33:04

It's, you know, there's such a big target, and particularly in this industry, just because of the cultural differences, between buyers and sellers, I guess, uh, is the way to say it. It's just, it's, it's a, it's almost a

matt_1_04-02-2026_070559 33:17

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 33:17

I don't think the industry would know what to do if we didn't have packers to hate on. so, you know, just, I, I, I think we'd be at a loss in some ways. It's such a cultural thing. and, and maybe it has some value for that, I don't know. But, uh, but

matt_1_04-02-2026_070559 33:34

find something, Dr. Peel, we'd find something.

squadcaster-9618_1_04-02-2026_070600 33:37

Think we would. I think we probably would. And that's just a natural tendency, I think. Um, and so I do wanna go back to something else though. You said, you know, the smaller, and we've seen some smaller or relatively smaller, certainly, um, you know, interest and so on, uh, come out of this, you know, and, and, and there's a place for some of those smaller

matt_1_04-02-2026_070559 33:56

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 33:56

Um, but they are higher

matt_1_04-02-2026_070559 33:58

Yeah.

squadcaster-9618_1_04-02-2026_070600 33:58

it's almost inevitable, okay? Those smaller entities are gonna be higher cost. But in certain cases where, um, you know, they've got the kind of market, if they've defined a market well, where there's demand that they can meet specifically and, and so on and so forth, there's no reason why those can't work. But they're gonna face an economic challenge, uh, inevitably. I don't think there's any, I, I don't think if we let things operate economically that there's any reason why we're going to fundamentally change the basic structure that we have today. We got there for a reason. In fact, you know, the, the big move in consolidation that happened in the 1980s, that that led to the basic concentration we have in the packing industry now was largely done with mergers and acquisitions. It was a lot of smaller firms that wound up getting put together under bigger entities, uh, because they were more efficient to do that. And, uh, and so, you know, again, that's why we got there and that's why we're still there. And, and it's particularly true in the beef industry simply because-- I made this point earlier, but I'll go back and emphasize it again.-- We don't produce one product in this

matt_1_04-02-2026_070559 35:11

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 35:11

produce thousands and thousands of different products. And, and if you wanna think, that's an easy marketing job. Um, I, I've talked to a number of these producers that have tried to do the small scale direct marketing kinds of things, and, uh, it doesn't take very long to do that. To find out that's a big chore because there's a lot of pieces to that animal. And finding a home for all of them that that's economically viable is not an easy task. And so the bigger scale operations have much more flexibility to market products literally all over the world in order to maximize the value.

matt_1_04-02-2026_070559 35:48

Yep.

squadcaster-9618_1_04-02-2026_070600 35:48

and I'll go back and emphasize a point I made earlier, markets find value and, uh, and it, and in the case of the beef industry, that's a big challenge because, uh, you know, un unlike most manufacturing processes, this is a disassembly process. We're taking a complex input that animal, and we're taking it apart into thousands of products and trying to market all the pieces. That's a much bigger marketing chore than taking a bunch of stuff and putting it together and building a car and selling one car. it just, uh, you know, uh, that's the way most industry works, uh, is assembly and this is a disassembly process and much more complicated because of that.

matt_1_04-02-2026_070559 36:29

Yeah, yeah, no doubt about it. Uh, when we talk about having to sell the off all and things like that, you've gotta have trucks or ships full of them to be able to efficiently

squadcaster-9618_1_04-02-2026_070600 36:40

Yeah.

matt_1_04-02-2026_070559 36:40

those. Yeah, no doubt.

squadcaster-9618_1_04-02-2026_070600 36:42

you know,

matt_1_04-02-2026_070559 36:42

As opposed to paying somebody to haul'em off as waste.

squadcaster-9618_1_04-02-2026_070600 36:46

Yeah, that's right. And particularly for these smaller packers, that's a huge

matt_1_04-02-2026_070559 36:50

Oh yeah.

squadcaster-9618_1_04-02-2026_070600 36:51

because in many cases, whereas, that drop credit offals on, uh, can be a value if you can get to the market. It's a cost. If you can't,

matt_1_04-02-2026_070559 37:02

Yep.

squadcaster-9618_1_04-02-2026_070600 37:02

there's no, it's not a, it's never zero.

matt_1_04-02-2026_070559 37:04

Right.

squadcaster-9618_1_04-02-2026_070600 37:05

It's either a plus or a minus. And in most cases, in the small, uh, case, it's, it's gonna be a minus. It's gonna be an additional cost that you have to deal with.

matt_1_04-02-2026_070559 37:14

Do you have data that would, and I know this is proprietary information, um, on their part, but do you have data that would estimate what it costs for, I'm just gonna say the big four packer, to process an animal, per head, what it costs them to get that turned into the products that they're gonna sell. You know, when we go, when we take a butcher beef somewhere, it's gonna be 800, 900, a thousand, maybe more than that dollars just to process that before we have the first pound of beef. What's it cost when you're doing it in a big four plant?

squadcaster-9618_1_04-02-2026_070600 37:53

Um, you know, roughly speaking, and of course I don't have exactly detailed information because it is proprietary, but, but we've, you know, there were studies years ago. Some of them are a little bit old now, but the relative things scale up and all that. It's gonna be about 30% of the values you just talked about.

matt_1_04-02-2026_070559 38:14

Yeah, and that's what I, I had heard 275 to 300 bucks a head kinda used, which is basically what the drop credit that they can receive is quite often. Right.

squadcaster-9618_1_04-02-2026_070600 38:27

Yeah. Historically, at least, um,

matt_1_04-02-2026_070559 38:29

Yeah. It may be different today.

squadcaster-9618_1_04-02-2026_070600 38:30

sure it's quite that good right

matt_1_04-02-2026_070559 38:31

Yeah. Yeah.

squadcaster-9618_1_04-02-2026_070600 38:32

values are almost,

matt_1_04-02-2026_070559 38:34

Zero.

squadcaster-9618_1_04-02-2026_070600 38:35

they're almost so bad that in, in some cases, they're almost having to pay to get rid of the hides. and, um, but that's a, that's a. Fluctuating market value and so on. Um, but yeah, it's gonna be, you know, it's gonna be a third, at on average, roughly, roughly speaking it, it probably costs the big guys about a third of, of what any small processor is is

matt_1_04-02-2026_070559 38:59

Yep.

squadcaster-9618_1_04-02-2026_070600 38:59

cost. And again, they also have the ability to find value for not only those byproduct things that, that are a cost, but, but just finding value for all those pieces. And I was gonna say that, you know, packers produce several thousand, uh, different products, you know, out of fabrication. And not only that, there is then if you go to the further processing and some of the distributor processor types and so on, those get further amplified by a factor of. I don't know, 10 or 20 terms of the number of products. And so the, the number of products this beef industry produces, nobody honestly knows for sure, but it's, it's, it's probably in excess of 50,000 different products.

matt_1_04-02-2026_070559 39:52

Wow.

squadcaster-9618_1_04-02-2026_070600 39:53

And so it's, it's an enormous challenge. And, and one of the things I was gonna say, when you think about packers over time and people, uh, there's some really dangerous, simple ways to try to look at packer margins that are not very useful. But one of the things you have to consider is that's changed so much over time. What they do, it's more efficient. We've incorporated more and more things back to the primary level of, of processing, right? So obviously if you go back to the early sixties, packers killed cattle and, and they marketed swinging, carcasses out the back

matt_1_04-02-2026_070559 40:25

Right.

squadcaster-9618_1_04-02-2026_070600 40:26

and all the, all the further processing was done somewhere else. Then they then box beef was a major revolution in the late sixties. Uh, IBP developed and, and really, uh, commercialized box beef technology. And that changed the world dramatically for a couple reasons. One is boxes stack and ship a lot more efficiently than swinging

matt_1_04-02-2026_070559 40:46

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 40:47

Uh, but more importantly that even at that level, you're already taking out some fat and some bone and so on, and you're doing that early in the process when you can A, have a better chance to market those products as byproducts. And b, you're not having to ship all that additional weight somewhere else for somebody else to trim it off. And if they do it on a small scale, they're gonna throw it away. And so, um, and then you just keep going. And so in, in the last 15 or 20 years, uh, you've got more and more products. You know, things are not primals, they're sub primals. Now they're, they're going out in boxes in retail ready packages. And, and so, you know, at the grocery store level, there's very few places now where you can find a butcher in the back room. and, uh, and, and, and you can lament that and, and there's certainly some trade offs to that, but at the same time, that's part of the overall industry efficiency is doing that stuff sooner in the process. And, uh, and, and all of that, uh, all that additional fabrication, uh, is taking place earlier in the process. And so, the, the bar has changed on what we're talking about when we talk about packers and what all they do. It's a continually bigger set of, of things that they do and services that they

matt_1_04-02-2026_070559 42:03

yeah, that's, that's a really, really good point and one that I haven't heard brought up very often. But basically we shifted the service of breaking down a carcass into saleable cuts from the retail segment to the processing segment when we went from swinging beef to quarters to boxes, and now to case ready in a lot of cases. So. The processor has now either recouped a little bit more for what it is that they, uh, are providing in terms of service, or they lose a little bit more when the retailer would've been losing that. Um, 30 years ago. We talked consolidation. That brought us to that point. There is a hint of consolidation between segments, those being the retail and the processing segment. Um, sizable retailer, the largest retailer, has significantly invested in processing facilities, uh, frurther processing up around Kansas City area and what 50% ownership in, in one of these new startup plants in Nebraska. What does that spell for the industry going forth? Um, I mean, we might as well say it when Walmart is invested in the supply chain of the beef industry from an economist's stand.

squadcaster-9618_1_04-02-2026_070600 43:26

I would say it's, it's kind of the same thing that you, that we sort of talked about before. I mean, anytime you have, uh, that level of concentration, you're gonna keep an eye on it because, even though I made very strong statements, and they're very true about the net value of concentrated industries, they do come with a risk that,

matt_1_04-02-2026_070559 43:46

Right,

squadcaster-9618_1_04-02-2026_070600 43:46

they're big enough to, to mess with things. it turns out that their ability to do that and their motivation to do it is much more limited than everybody thinks it

matt_1_04-02-2026_070559 43:57

right.

squadcaster-9618_1_04-02-2026_070600 43:58

But, uh, uh, but you know, as a general rule, I mean, you know, economists would say, yeah, we need to keep an eye on these things and we need to periodically study them and, and make sure that things have not changed. Uh, and I think that would be true in this case as well. Again, I think the motivation for Walmart to do this is not to control the beef industry. It's to be able to, control a supply chain or to, to, to have a, a supply chain that allows them to, to market, products more, more efficiently and for higher value. You know, they started, they actually put in a processing facility in

matt_1_04-02-2026_070559 44:35

Georgia. Mm-hmm. Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 44:37

was kind of their first one. Again, beef is lots of different products and you know, you might remember, I have to go back and look at what year it was, 2011. Somewhere along in there, there was a fairly big ripple effect in the market and big news for a few days that Walmart was gonna start marketing choice

matt_1_04-02-2026_070559 44:57

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 44:59

Right. And, um, and, and if you look at what really happened there, and, and I don't get this from them, this is just observing it from the outside, um. You know, prior to that and, and, and in general in the industry, prior to that we had lots of retail beef marketing. That was what we called no roll.

matt_1_04-02-2026_070559 45:17

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 45:19

Right? Uh, and then we, you know, eventually we started grading a lot of it, but we didn't, we didn't market it necessarily under grading, if particularly if it was Select Because that was no role and, and so on. But what's evolved is, is that, um, and, and when people talk about the choice select spread and all of that, you know, the real break in this market is not choice and select, it's between low choice and upper two thirds

matt_1_04-02-2026_070559 45:46

right.

squadcaster-9618_1_04-02-2026_070600 45:47

Almost all of your premium beef programs are focused on upper to upper half or upper two thirds choice. basically what Walmart did, uh, this is my version of what I think they do, they sort of said, you know, that low choice market's just kind of low hanging fruit. it's sitting there. We can, we can move up from select to low choice. It arguably is not necessarily a big step in quality, but it's a big step in marketing

matt_1_04-02-2026_070559 46:15

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 46:15

now we can market it as choice beef

matt_1_04-02-2026_070559 46:17

Yep.

squadcaster-9618_1_04-02-2026_070600 46:18

and it is choice beef. That's the way the grading system works. And the beef industry probably benefited from that because we found a, a place to utilize that low choice product in a way that was better than what it had been been used before. My point is that those kinds of opportunities, uh, for marketing, those are all the things ultimately that add value to the industry that, uh, that we all benefit from.

matt_1_04-02-2026_070559 46:42

Well, I'm old enough to remember, and I thought maybe this was where you were going in the late nineties, right before I think as I like to say, the turn of the century. Um, Walmart came out with their house branded beef. I think it was a partnership with IBP at the time, and it was a atmosphere sphere packaging. They'd injected something in their, there you go. Modified at MAP and it was absolutely trash beef that they were trying to upgrade and sell as good enough by tenderizing it and by whatever else. And they put a lot of money into. It absolutely fell on its face and they learned a valuable lesson. And the ability of Walmart, who was supposedly everyday low prices, they were just trying to cut every cost out and sell it cheaper than anybody else. They learned a valuable lesson that beef is not the place that you compromise on quality. And when they came back and first said, we're gonna be selling choice and not select, instead of selecting probably no roll, like they were in that, in that, uh, branded program and now in some segments trying to sell Prime,

squadcaster-9618_1_04-02-2026_070600 47:58

Yeah.

matt_1_04-02-2026_070559 47:59

they have in a microcosmic way, they have told the story of what beef can do. And what quality beef can do, and that is drive sales in every other aisle and around the perimeter of their store and everything else. I mean, I've, I've used it before on this podcast. We're almost a loss leader. I think the way I understand that notion in Walmart's eyes, we've, we want to be what gets people in the door for them, or they want us to be what gets folks in the door. So they'll go and buy the higher dollar bottle of wine and olives and mushrooms and everything else that they can make a bigger margin on. And what a great place to be as an industry. Uh, they don't care if they make a bunch of money off their beef. They'd like to, but uh, they just wanna get people in the door,

squadcaster-9618_1_04-02-2026_070600 48:47

much per unit.

matt_1_04-02-2026_070559 48:47

right.

squadcaster-9618_1_04-02-2026_070600 48:48

have to make as much per unit. Uh, for one thing, it's a, it's a, it's a high valued product to begin with, it, and it's a high, it's a high valued, uh, chunk of the store, if you will, in terms of total dollar sales. But to your point, and, and there's been some stuff, I don't have exact statistics, but on how many dollars, um, beef adds to every cart

matt_1_04-02-2026_070559 49:11

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 49:12

from, from the consumers that come to the store to buy the beef, to your point. And so, yeah, that's exactly right. And again, it, it's, we we're coming full circle to some extent.'cause we said earlier that the, the, the, the other half of that story is what the beef industry has done to raise the quality of

matt_1_04-02-2026_070559 49:29

Right.

squadcaster-9618_1_04-02-2026_070600 49:29

with, you know, routinely producing 85, 80 6% choice and better beef now, you know. It was not that long ago that it was 55 or 60%. So we've, we've, you know, the product's there and, we are creating a lot more value and it, and it, it's pretty easy to market that stuff. But things like places like Walmart and honestly, Walmart started some of that stuff in the Southeast. I think partly because, and I'll, I, I shouldn't probably use names, and I don't have a lot of detail, but just in general, you know, that's a stronghold of Publix

matt_1_04-02-2026_070559 50:05

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 50:06

and I don't know if you're familiar with them, but they're a pretty unique grocery chain. and I think in order to compete better with them, I think that's part of the reason Walmart started some of this higher valued beef marketing stuff in the southeast. That's my observation. I can't, I can't definitively say that's for sure, but that's what it looks to me like. And so, you know, again, everybody, uh, as you said, raising the tide for everybody here to some extent, uh, through that process. And now you've got Walmart doing these other ventures and I think it's because they've figured out that to the extent that they can develop supply chains and supply chain relationships that help them ensure that quality of beef, uh, they're better off and we're all better off.

matt_1_04-02-2026_070559 50:48

Yeah, no, no doubt about it. You mentioned choice Select spread in in, uh, the conversation there last week. I think it was that it inverted as it occasionally does. at what point do we say, you know, what, or at what point will the packer say We talked about no roll. When does select become no roll? Because it's not worth any longer. Paying that USDA greater to stamp it on there when there isn't much of a market for it. And at that time, do we then turn to a CAB choice or mid choice, upper two thirds choice, choice spread in our industry lingo?

squadcaster-9618_1_04-02-2026_070600 51:26

You know, that's an interesting question. I mean, obviously there's a, there's a sort of an administrative discussion there about how you would go about making those changes in the grading system. And, and I don't know how that would come about. I think it would be a fairly,

matt_1_04-02-2026_070559 51:39

Yeah.

squadcaster-9618_1_04-02-2026_070600 51:40

lengthy process

matt_1_04-02-2026_070559 51:41

Especially when government's involved.

squadcaster-9618_1_04-02-2026_070600 51:44

put a new, put a new split in the market. Uh, I think within the industry, everybody sort of understands the things we're talking about here. And I mean, get data now on ungraded beef, ungraded now actually doesn't mean what it always did. There was a time when ungraded was no roll.

matt_1_04-02-2026_070559 52:02

Right.

squadcaster-9618_1_04-02-2026_070600 52:03

And it, and it was, you could assume a quality associated with that. to the extent that you've got more programs of high quality or, you know, quality programs that are not based off of, or are not marketed based off of, official grades or USDA grades, they're, they're not bothering to grade it. But that doesn't mean it's a lower quality product. It just means they've got a different marketing scheme. I

matt_1_04-02-2026_070559 52:26

Yep.

squadcaster-9618_1_04-02-2026_070600 52:27

we use commodity grades as a default when we can't do better, if you wanna think of it that way. And I don't mean that to, to make it sound like the grades are not valuable. They're very valuable. But in commodity ag, most commodity ag products started with some sort of commodity grading system to provide a, a benchmark, if you will, uh, in the absence of more product differentiation and more product branding. Um, you know, obviously the chicken industry, it's all branded,

matt_1_04-02-2026_070559 52:56

Mm-hmm. Yeah.

squadcaster-9618_1_04-02-2026_070600 52:58

Um, you know, most. Eggs. Now, there's a few that are still sold as the, you know, USDA graded, but a lot of those are branded, uh, mo A lot of the pork now is branded. In fact, probably the majority of it is in many cases. Again, beef is harder because it's a much more complicated animal. We produce a much bigger set of products. And so it's, it's a, it's a bigger challenge, but we are seeing that that segment has grown, that, that that ungraded or that, uh, or sometimes it's graded and, and the, the USDA grade is incorporated into some sort of proprietary

matt_1_04-02-2026_070559 53:34

Right.

squadcaster-9618_1_04-02-2026_070600 53:35

will, or program grade. But the point is, you know, ultimately that's a developmental issue. You can make the argument. That's kind of the goal of a commodity grading program is to eventually become not necessary, and sort of work its way out of,, out of necessity.

matt_1_04-02-2026_070559 53:52

And with all that product differentiation we see today, grass fed, non-hormone treated, no antibiotics, never ever a GAP 4... You name it. All these different programs, quote unquote, that quite often were started from a at least perceived consumer demand and then passed back through to encourage producers to fit for that. Do you, I think I'm interpreting your comments, right? Do you see us moving away from at least using that USDA grading system in marketing those to the consumer and possibly doing away with it completely? And if so, what's the timeline for that in your crystal ball?

squadcaster-9618_1_04-02-2026_070600 54:34

your spective? Well, I, I think that's a, that's a path that you could argue in and, and some commodities have followed that. But realistically, I don't think it's gonna happen anytime

matt_1_04-02-2026_070559 54:46

Okay.

squadcaster-9618_1_04-02-2026_070600 54:46

think we'll continue. I think it's a good thing that we continue to see around the edges of that these, these, uh, value added programs. I don't wanna call'em niche programs, although in most cases they are realistically, I mean, they're small, uh, but they have value. And, and you know, and that kind of relates back to the earlier comments about small processors, if that's all done right as a, you know, coordinated, well planned and executed that can work well. But are we gonna work our way out to away from commodity grading beef? I don't, certainly not, uh, anytime soon.

matt_1_04-02-2026_070559 55:23

Okay.

squadcaster-9618_1_04-02-2026_070600 55:24

gonna be a lengthy process. And I think what's good here is, and what you would hope would happen is that we continue to provide incentives for people to sort of chip away around the edges finding ways to do those value added programs. One of the problems with the beef industry or one of the challenges? Not a problem, it's just, it is what it is. But one of the challenges is that, uh, the way I look at it, you know, cattle are very different

matt_1_04-02-2026_070559 55:49

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 55:49

raise'em in lots of different environments. So we have this wide range of, hate to say qualities'cause it's not so much qualities just variation in the kinds of cattle and the way they work and the environments they have to work in. So we got all this variation out there that's quite, quite specific. You can think of that in some sense as, as a type of differentiation. Then we get to basically the cattle feeding and the packing sector where things are much more complicated or much more concentrated. And they're concentrated, as we said, because of the, the economies of size and the efficiencies of treating them as much as possible, like commodities at that point. Right. So we, we sort of take something that's very differentiated. kind of make it like a commodity so we can maximize the cost efficiencies of handling it in large scale systems. And then once you pull the hide off of that animal, you turn it back into this vast array of differentiated products. And so the industry's trying to do lots of things. trying to be different products, and then commodities and then different products. And, know, and again, that's, that's not a a, that's, that's not a bad thing or a good thing. It just is what it

matt_1_04-02-2026_070559 57:02

yeah,

squadcaster-9618_1_04-02-2026_070600 57:03

And I think it will continue to be one of the challenges of the industry. So, um, you know, it's, it one model would be more like the chicken model would be to integrate all of that differentiation from top to bottom. I don't think that's gonna happen in the beef industry.

matt_1_04-02-2026_070559 57:18

yeah. We hope not.

squadcaster-9618_1_04-02-2026_070600 57:19

think there's too much value in. Basically

matt_1_04-02-2026_070559 57:23

Yeah.

squadcaster-9618_1_04-02-2026_070600 57:23

we have right now, we're gonna work around the edges of it a bit at both ends. We've got some specialization at the pro, the primary production level. We've got some specialization in the product marketing level in the middle. It's gonna be pretty hard to beat those large scale cost efficient operations that, that, uh, that save the industry a lot of money, uh, going up and going down from those levels.

matt_1_04-02-2026_070559 57:45

And probably add a lot of value too, uh, as we look.

squadcaster-9618_1_04-02-2026_070600 57:48

lot of,

matt_1_04-02-2026_070559 57:49

And

squadcaster-9618_1_04-02-2026_070600 57:49

a lot of value and they save a lot of cost,

matt_1_04-02-2026_070559 57:51

it's every one of those margin operators. It's the stocker operator that commingles calves into more like groups. It's the feed yard who does the same, it's the packer who takes this menagerie of, of, grades and of sizes and everything else, and, and sorts them into boxes that hopefully when they hit that retail or food service backroom, they look the same. And, and those are services that I don't think we realize. We just think that those next margin operators, quite often, and I'm speaking as a cow calf producer, we think those margin operators that buy our calves, our cattle, uh, are, are just quote unquote growing them or just putting on more pounds, more marbling, more whatever else. But that differentiation, that sorting and putting things together may be a bigger value to us, and it trickles down eventually to us than we realize.

squadcaster-9618_1_04-02-2026_070600 58:42

Yeah, absolutely. That's exactly right. And you know, even at the, at that and packing level, we think about that and it, and, and we we're sort of described it as still being kind of commodity like, and, and

matt_1_04-02-2026_070559 58:55

Sure.

squadcaster-9618_1_04-02-2026_070600 58:56

you know, again, to take advantage of the large scale and the cost efficiencies. And yet you look at how much we've changed fed cattle pricing. I mean, one of the things that's a source of of controversy in some sense are, you know, alternative marketing arrangements we call'em now.

matt_1_04-02-2026_070559 59:11

Sure.

squadcaster-9618_1_04-02-2026_070600 59:11

interesting the way terminology's changed over time in the 1990s. There was, because we had seen, as you noted earlier, beef demand eroded through the seventies and the eighties. And we realized we had a problem. We were losing demand'cause we were not getting the job done from a value standpoint. So we, so we promoted value-based marketing

matt_1_04-02-2026_070559 59:33

Yep.

squadcaster-9618_1_04-02-2026_070600 59:33

to send better signals back to the primary producers, the cow calf producers to, to, uh, to improve quality of

matt_1_04-02-2026_070559 59:41

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 59:41

And so, so value-based marketing. Well then as soon as we started doing that, it led to changes in how fed cattle were priced,

matt_1_04-02-2026_070559 59:50

Yep.

squadcaster-9618_1_04-02-2026_070600 59:51

right? Because prior to that, you know,

matt_1_04-02-2026_070559 59:54

One size fits all.

squadcaster-9618_1_04-02-2026_070600 59:55

any motivation to lead that charge. If

matt_1_04-02-2026_070559 59:57

They didn't want to.

squadcaster-9618_1_04-02-2026_070600 59:58

they still

matt_1_04-02-2026_070559 59:59

Yeah. Yeah.

squadcaster-9618_1_04-02-2026_070600 1:00:01

I mean, if you're a big packer, you gotta kill'em all anyway, you know, the easiest way to do that is just to get the average right and buy'em all on the

matt_1_04-02-2026_070559 1:00:09

Yep.

squadcaster-9618_1_04-02-2026_070600 1:00:10

But what that doesn't do is, you know, that that doesn't reward the guys that are doing a better job of producing cattle and producing higher quality cattle. And it, and it over rewards the guys with, sorry cattle because they still get the average. And so that's what changed in coming out of the nineties with value-based marketing. Then we developed grids and formulas and other things that, that did improve those value signals significantly in this industry. But then all of a sudden we got worried about captive supplies and, uh, it, it's the same thing.

matt_1_04-02-2026_070559 1:00:43

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:00:43

and, and, and, and then eventually we quit using the term captive supplies. Now we call'em alternative marketing arrangements, and they're generally viewed as a bad thing when in fact. They've probably explained a lot of the reason why we're so much better off today in terms of the quality improvement we've made in this industry, and the fact that we're enjoying tremendous consumer demand by providing them a much better product that they want, uh, consistently. And, uh, it's, it's a, it's a big reason why we are where we are today.

matt_1_04-02-2026_070559 1:01:13

I completely agree, and I've talked ad nauseum on this podcast, but somebody that is just tuning in. We quit rewarding folks for being a low cost producer and buying the profit in by getting undervalued cattle. Bought at a less value and then marketing them as average at the fed cattle level. because they went along with the pen next to'em that was gonna grade way better, yield way better, et cetera, et cetera, et cetera. We in incentivized the producer to do the right thing all the way from conception to consumption. And, and I, I agree. That's, that's why we are where we are.

squadcaster-9618_1_04-02-2026_070600 1:01:49

doing that much better. We still got a ways to go.

matt_1_04-02-2026_070559 1:01:51

Sure.

squadcaster-9618_1_04-02-2026_070600 1:01:51

challenge. You know, and, and, uh, and the fact of the matter is, uh, I've said this for years and years, a as long as anybody can make money with, sorry cattle, sorry cattle will never go away.

matt_1_04-02-2026_070559 1:02:02

Yep. That's right.

squadcaster-9618_1_04-02-2026_070600 1:02:03

and, and historically in this industry, more money's been made with sorry cattle than was ever made with good

matt_1_04-02-2026_070559 1:02:07

Mm-hmm.

squadcaster-9618_1_04-02-2026_070600 1:02:08

But we're getting better. We're moving towards the right way of rewarding those good cattle appropriately and encouraging production of those and hopefully discouraging production of the sorry cattle. And then, and they might go away eventually. Um, you know, there's lots of challenges. It's a big industry and we operate in lots of different environments.

matt_1_04-02-2026_070559 1:02:26

No doubt.

squadcaster-9618_1_04-02-2026_070600 1:02:27

uh, but we've, we've made a lot of progress in the last, uh, 30 or 40 years.

matt_1_04-02-2026_070559 1:02:32

I would agree. So every economist that I have on here for the last three years or whatever, I've, I've been, and you've walked right into this discussion, I was gonna give you a pass, but, uh, since you brought up value-based marketing, alternative marketing arrangements, captive supply, whatever, whatever, your political leanings, uh. Tend to, to, to term how we sell fed cattle today. Most of those arrangements are based off of a base price that is generally a cash price in that region, western Kansas, Texas panhandle, Nebraska, whatever the case may be, cash cattle in that region up and down from there is, is where those values are associated? Do we still do, and this discussion gets brought up every time the fed cattle price goes down. Now when it is 2 35 or wherever we are this week, no one talks about that. We do a terrible job of, of establishing that quote unquote average cash price. Do we do, do we have enough cattle in that arena to still continue to use that going forth as the base for value-based marketing?

squadcaster-9618_1_04-02-2026_070600 1:03:43

Yeah, so what you're talking about is what economists would call price discovery as opposed to price determination. Okay. Supply and demand determine price levels, but how do we know what that price level is at any point

matt_1_04-02-2026_070559 1:03:53

Yep.

squadcaster-9618_1_04-02-2026_070600 1:03:54

in the market? And that's price discovery. And,

matt_1_04-02-2026_070559 1:03:56

Yep.

squadcaster-9618_1_04-02-2026_070600 1:03:57

and, and I, I'll just say this upfront, I mean, that is a, that's a source of continuing, research on the part of economists. it comes under the broad heading of thin markets. And, and the real question, of course, is how thin is too thin. And it's not a simple answer. It's not a, there's no magic formula that says you need this percentage of the cattle or any product traded in, in a cash basis to have viable price discovery. There's a lot of things that can affect that. Um, and, and, and I'll say two things. One is that, that I do think that's a very legitimate concern that we must continue to monitor and try to, from our standpoint, research. Uh, in terms of making sure that we don't get too thin. But the other side of it, uh, is that the research we have in lots of different markets and so on, is that it's probably the, the answer of how thin is too thin is it's probably a lot thinner than a lot of people think it is. You don't need a huge percentage of, of anything traded in a market usually to, to real, to really understand the underlying supply and demand factors that determine that price level.

matt_1_04-02-2026_070559 1:05:09

Yeah,

squadcaster-9618_1_04-02-2026_070600 1:05:09

Um, you know, it's, I, I've used this analogy before. If you go to the farmer's market every week and there's 10 guys selling sweet corn out of the back of a pickup,

matt_1_04-02-2026_070559 1:05:19

you're gonna back.

squadcaster-9618_1_04-02-2026_070600 1:05:20

really need to talk to all 10 of them to figure out what the value of sweet corn is, right? You talk to one, maybe two, and, and you know what the price of sweet corn is this week, and, and, and from week to week, it's probably not gonna change a whole lot unless something dramatic happens. There was a bug infestation or something that really dramatically changed the supply demand conditions. Uh, it doesn't take a big percentage of of price discovery there to know what that market is. And I think, you know, that's the point here. But it is a very, I, I'm much more, as an economist, I would be much more, um, concerned on an ongoing basis about monitoring and researching and continuing to evaluate, price discovery and, and market, uh, uh, thinness, um, as opposed to worried about packer concentration. Okay. Um, uh, I think, I think the thin market and, and it's simply because of the way we have chosen to market cattle. We don't have to have cash prices. I mean, there are industries that operate just fine without publicly reported cash prices. Okay. There's other ways to do it, but if you're gonna do it, as you said, if we're gonna use these alternative marketing arrangements that are based on a. Base price of whatever it is, then that base price certainly does need to be an effective, viable, uh, cash price or, or, you know, uh, representation of the underlying market value. so without

matt_1_04-02-2026_070559 1:06:48

Literally changing

squadcaster-9618_1_04-02-2026_070600 1:06:49

a whole lot of things, uh, and I think there's value in that. There's value in having publicly reported prices. Um, but they, they're a little bit of a public good. Um, you know, a lot of people have an incentive not to participate in providing that, that publicly reported price, because for them, uh, personally, it's more economically efficient to utilize a formula and let somebody else come up with that base price. that's the dilemma. And that's a very real dilemma that, that economists are concerned about. And that's something that we continue to watch very, very closely, uh, and continue to look at. And, uh, I don't think we have a problem right now. Um, but I do think we have to, we have to monitor that, um. Particularly, I mean, I would, I, I don't wanna say particularly, but, but it's even more so when you look at some of the regional, some of the regional, uh, issues.

matt_1_04-02-2026_070559 1:07:41

Yeah, the Texas panhandle.

squadcaster-9618_1_04-02-2026_070600 1:07:42

a lot of variation in the way the fed cattle industry works in different regions. So, so yeah, I think that's probably a very legitimate, uh, one that, that uh, we continue to, to monitor very closely.

matt_1_04-02-2026_070559 1:07:53

Yeah, the Texas panhandle always gets the brunt of those, of those blames because It is pretty thin. But look at what has happened, and this is, this part is a supply driven thing, I believe. Look at what has happened to those yards since we closed the border because of the new world screw worm, and they have so many fewer Mexican cattle that we're generally fed and processed in that Texas panhandle area. They were positive Nebraska on a cash price. Maybe still are. I haven't looked re recently, but that tells me that, that that market still responds to the supply and demand fundamentals, even though there are as few cattle being harvested or or being sold in cash in Texas Panhandle.

squadcaster-9618_1_04-02-2026_070600 1:08:39

expanding. Yeah. Yeah.

matt_1_04-02-2026_070559 1:08:41

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:08:41

And, and again, that, that sort of illustrates, uh, you know, where we started this is that, uh, you know, markets work very well. Sometimes what we wanna monitor is, is, is more of a challenge, but that doesn't mean the market's not

matt_1_04-02-2026_070559 1:08:55

Yeah,

squadcaster-9618_1_04-02-2026_070600 1:08:55

It, it sometimes means that we don't necessarily see the things or, or have the information publicly available that we would like to have. But again, have some choices here and, and, and if we want to have publicly reported prices, we need to make sure that they are effective and that we have a, a way to get those. so, um, but I think it's there. It's, you know, as you said, the market's still

matt_1_04-02-2026_070559 1:09:18

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:09:19

Um. are pretty resilient and they're pretty resourceful. it's pretty darn hard to stop market forces, uh, even when you want to. They, uh, they'll find a way

matt_1_04-02-2026_070559 1:09:30

Uh, and, and for the last five years they have in the beef industry anyway, they have found a way up and to the right year after year after year. And it's beat anything I've ever seen as far as a bull run in any commodity, but especially in our beef segment. If that had been down and to the right, um, your job wouldn't be near as much fun. And we would be pointing the finger at everything. But as it is, we're nodding in agreement with the market forces and saying, well, it's about damn time. Yeah.

squadcaster-9618_1_04-02-2026_070600 1:10:03

Yeah, yeah. That's right. That's exactly right. And, and well stated. The only thing that's an interest as an economist, interesting and, and admittedly sometimes frustrating, is that we can't, you know, I get frustrated when people only want markets to work one direction. You know, I don't think that's, I don't think that's really reasonable to, uh, uh, to have that. And, and you know, it's a little like when I used to teach our intro to ag econ class, I would tell students that, you know, the nature of markets is that if you do good things and you're efficient and you're doing something that people want from the standpoint of demand, you get rewarded. On the other hand, if you're doing something that nobody cares about or you're doing it badly, or whatever, the market's job is to take that away from you and give those resources to somebody who will do it better.

matt_1_04-02-2026_070559 1:10:52

Yep.

squadcaster-9618_1_04-02-2026_070600 1:10:53

And, um, that process is always painful and it never is fun and, and nobody likes that part, but that the market works both ways. I mean, this thing, this thing cuts both directions.

matt_1_04-02-2026_070559 1:11:03

Time I hear someone on our row crop side of things talk about needing the government to step in and help with the, the situation that they're in today, I just shake my head and as a free market capitalist, I go, the government is why you are where you are today. It's why I switched all of our corn and bean ground to forages a year to five years ago. It it, it's not allowing producers to make rational decisions when the government intervenes and messes with the market.'cause we have a huge global glut of corn, wheat, and beans and the, the market is trying to tell folks that and say it might be a better idea to run cows or whatever on those, on those marginal acres. And, um, yeah. So that's, a whole nother podcast, probably.

squadcaster-9618_1_04-02-2026_070600 1:11:56

podcast. It is a whole other podcast. And, and this is, but to follow up the statement I just made, uh, you know, I would say in a very broad brush, uh, simplistic way, if you never let anybody go broke, there'll never be any real profitability for anybody in that industry. You know, that's kind of what you just said, is that if you, you know, if you institutionalize inefficiency and bad incentives, then it's not gonna work for anybody.

matt_1_04-02-2026_070559 1:12:22

Yep. Well that's,

squadcaster-9618_1_04-02-2026_070600 1:12:24

and we do have some places where we've done that. I think. Yeah.

matt_1_04-02-2026_070559 1:12:26

Yeah, we've seen it within our industry, no doubt about it. And you can look across the fence at some other commodities and things that, uh, yeah. Would, would still ring true today. So. Dr. Peel, I appreciate you being on here. Uh, this might be the first time that I've ever had an economist cornered, and I'm not even gonna ask you to make a prediction, uh, because the last time I heard you make a prediction was in the summer of 24, so almost two years ago at the Livestock Marketing Association Convention in Oklahoma City. And I think you were on a panel and I was on a panel, and you, I think, if I remember right, predicted that fed cattle in the next year or so were gonna be the$2, and that was gonna make calves in that three to$4 and that, or yearlings and three to$4 and calves and that five, maybe$6. And I've never seen a bunch of sale barn owners and managers shaking their head. And so happy, but so disbelieving as what I saw that day. And guess what, um, you weren't quite right. You, you understated where we ended up. Yeah. And so that's, that's when you all miss, like that we're tickled pink, but I'm not gonna make you make any more predictions that are another 20% higher.

squadcaster-9618_1_04-02-2026_070600 1:13:49

that same time as when I came out with that at, at, at the Oklahoma Cattleman's meeting, I said 4, 4, 3, 2, 4,$4, five weight calves,$3 eight weights and$2 steers, fed steers. And uh, and that was the summer of 24,

matt_1_04-02-2026_070559 1:14:04

Yeah, that's when it was.

squadcaster-9618_1_04-02-2026_070600 1:14:05

it was three even. I don't remember. But, um, and, and I, me a while to screw up enough courage to say that, uh,'cause I knew it was gonna shake some folks up, but, uh, but it did. And, and like you said, uh, but then once we, once we took that out, in terms of, of having achieved that, then, you know, well, what's next? And the next one is much

matt_1_04-02-2026_070559 1:14:26

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:14:27

that one I could sort of see. And we still haven't started the process of the clock ticking on what's gonna put an end to this thing. know, until we have definitive evidence that we have significantly started any heifer retention, then we haven't even started the clock on what, uh, what turns the corner on this thing. and the highest prices should happen after we start that clock before, we, uh, before we, you know, increase enough production to, to turn the corner on the price side. So the, so we're still going higher, but boy, if you did ask me how much higher I am, very, you know, I don't know

matt_1_04-02-2026_070559 1:15:09

yeah.

squadcaster-9618_1_04-02-2026_070600 1:15:09

we're in such uncharted waters now. I just think that they're still gonna go higher in the, you know, I don't think 26 is the peak, probably because we have not started saving enough heifers yet to the process of tearing up our playhouse.

matt_1_04-02-2026_070559 1:15:24

Yep.

squadcaster-9618_1_04-02-2026_070600 1:15:25

And, um, and so, um, you know, pretty set. I mean, we gotta save some heifer calves. To ever change this thing and, and we haven't. So if we start in 26 7 and a heifer, we can breed her in 27, she calves in 28, by the time that calf is weaned and through the feedlots, we're at the end of the decade before we change beef production,

matt_1_04-02-2026_070559 1:15:46

Yep. Which is just wild to even consider.

squadcaster-9618_1_04-02-2026_070600 1:15:49

see that timeline changing a whole lot at this point. But, but what happens in the meantime in terms of just exactly how high we go? That I can't tell

matt_1_04-02-2026_070559 1:15:56

Yeah. And, and,

squadcaster-9618_1_04-02-2026_070600 1:15:57

honest. And,

matt_1_04-02-2026_070559 1:15:58

and while we should, no, maybe I'll back up. While I should be licking my chops about that, it scares the tar outta me. From our margin operator standpoint, from our consumer standpoint, you, you name it. Um, i'm one of these, yeah. I'm one of these. I, I wish we could stay where everybody has an opportunity month in, month out to make a little money and keep the playhouse, as you said, together and, uh, not have this blow off top that I, we haven't hit yet. I don't think, uh, that could really be disastrous actually to the long term sustainability of the industry.

squadcaster-9618_1_04-02-2026_070600 1:16:40

Yeah. You know, um, for several months now. And it is increasingly, I've described the market as scary good.

matt_1_04-02-2026_070559 1:16:46

Yep.

squadcaster-9618_1_04-02-2026_070600 1:16:47

Um, I have, I, I, I know an analyst, uh, that, that I talked to occasionally in Australia, and the term he's using now, I thought it was kind of funny. He says, we're telling our guys to panic slowly.

matt_1_04-02-2026_070559 1:17:01

Well, I, I knew if I kept you on here long enough, you would write the title for this episode, and I think you or your Australian counterpart may have just done it Panic slowly.

squadcaster-9618_1_04-02-2026_070600 1:17:14

Um, that, you know, I, uh, I haven't been using that widely in a public setting, but, but I do think it's actually probably pretty, pretty appropriate maybe, uh, to describe this scary good market that we're in because we are enjoying it, at least as cow calf producers. As you said, not everybody's enjoying this a lot.

matt_1_04-02-2026_070559 1:17:33

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:17:34

uh, we've got lots of margin

matt_1_04-02-2026_070559 1:17:35

Oh yeah.

squadcaster-9618_1_04-02-2026_070600 1:17:36

the cow calf

matt_1_04-02-2026_070559 1:17:36

Yep.

squadcaster-9618_1_04-02-2026_070600 1:17:37

But at the same time, everybody, understandably, and for very good reason is nervous. Um, we're nervous about all the outside forces that can impact us short term as well as just, you know, uh, once you're in uncharted waters, then, uh, you just never know what to expect.

matt_1_04-02-2026_070559 1:17:53

Yep.

squadcaster-9618_1_04-02-2026_070600 1:17:54

You know, could we see something completely new and unforeseen develop out of this? Who knows, at this point I don't see it. I don't, you know, we're watching for it, but, um. Uh, it, it, it is scary. Good. Or maybe you should panic slowly,

matt_1_04-02-2026_070559 1:18:10

Mm.

squadcaster-9618_1_04-02-2026_070600 1:18:10

know. Mm-hmm..

matt_1_04-02-2026_070559 1:18:11

So that might be a good place to, uh, to quit on it. But, uh, yeah. Dr. Peel, thank you so much for being here, for all that you're, that you do for the beef industry and all segments. Um, it's, it's fun to talk about markets when we're at this level, but honestly, it, it's more informative to talk about'em when we're at the other side of things we just can't look at it very rationally at that point'cause we're scared and we've got a lot of emotion wrapped up in it. But, uh, yeah, always good information and we appreciate all that you do to share it.

squadcaster-9618_1_04-02-2026_070600 1:18:41

Well, thank you so much. I appreciate it. I enjoy it, obviously. And you're right. I mean, the times when we could probably do more good to help people is times when it's hard, harder to get'em to listen

matt_1_04-02-2026_070559 1:18:51

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:18:51

ways. Um, but it's, I'm, I'm getting to enjoy this too. For the most part. It's kind of fun to be in, uh, in this situation, although it is scary, uh, every time I get up there and say, we're at record prices and we're gonna go even higher, I, I

matt_1_04-02-2026_070559 1:19:05

Yeah.

squadcaster-9618_1_04-02-2026_070600 1:19:05

In the back of my throat. I've done it enough times now I'm getting a little bit more used to it, but, but at some point in time, that's not gonna be true. And, and so I'm trying to, uh, you know, trying my best to, to keep a pulse on when that might happen. I don't see it, uh, in the immediate future though, for sure.

matt_1_04-02-2026_070559 1:19:21

Yeah. Well, any cattleman with gray in his hair or her hair, um, as they hear you say that in the back of their mind, go, yeah. But we know it's not gonna last forever, and we do have to prepare for that inevitable and make smart decisions and and you know, yeah. It's part of cyclical nature of the beef industry that we've seen for centuries, really.

squadcaster-9618_1_04-02-2026_070600 1:19:44

really. Yep. You bet.

matt_1_04-02-2026_070559 1:19:46

All right. Well thanks a bunch Dr. Peel. We appreciate you being here.

squadcaster-9618_1_04-02-2026_070600 1:19:49

You are very welcome.

Speaker 1:19:50

Thanks for tuning in to Practically Ranching, brought to you by Dalebanks Angus, all the best to you and your family. May God bless each of you and we'll talk again soon.