While beef prices have been making a rebound from last fall’s market bottom, dairy beef hasn’t benefited from the improvement in meat prices. That’s because the demand for our bull calves fell when one of three major Midwest slaughterhouses decided to devote its entire production line to process beef-breed steers and will no longer handle their dairy breed cousins. While this plant’s decision is significant, the depressed prices for dairy bull calves go far deeper.

To be fair, Tyson’s decision to no longer write long-term supply agreements for its Joslin, Ill., facility was a contributing factor that caused dairy steer values to drop by an estimated $100 per head. That’s the news-making headline. However, as Tyson wrote in correspondence with us, “Customer demand continues to drive our procurement needs.”

While Tyson would not elaborate on that customer demand, we have a strong hunch that “demand” equates to being cost competitive in the marketplace. That’s because we are a ground beef nation, consuming 60-plus percent of our beef in that form.

Just two years ago, when the nation’s beef herd fell to a multi-decade low of 88 million head, Tyson had no problem processing large-framed dairy steers fetching record prices. What has changed?

Meat packers now have more sources of lower-priced lean meat. Even though regulations that permitted Country of Origin Labeling (COOL) were upheld by U.S. courts, the World Trade Organization ruled that labeling meat via COOL amounted to a nontariff trade barrier prohibited by trade agreements. That caused Congress and President Obama to repeal the COOL legislation to avoid stiff trade penalties.

While our hands might have been tied on the COOL situation, we only have to look at USDA’s decision to open the regulatory doors to Brazil in 2015. That country had long been prohibited from selling beef to the U.S. due to long-standing issues with foot-and-mouth disease. By opening the doors to countries with checkered food safety histories, the Tysons of the world now have access to lower-cost lean beef. As a result, beef imports climbed 14 percent in 2015. Mexican imports due to the termination of COOL grew 26 percent, while Brazil’s sales here skyrocketed by 84 percent in just one year.

These remain fateful decisions. Not only has it opened the doors to a greater disease risk, these decisions directly depressed lean beef prices. While dairy breed beef saved the marketing day only a few years back, some processors no longer relish our animals.

This editorial appears on page 128 of the February 25, 2017 issue of Hoard's Dairyman.
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