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GAO shows “no smoking gun” in beef price drop from 2013-2016

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If you were in the beef business from 2010 to 2016, you may remember the run up in prices and then the sharp decline that began in 2013.

Why did it happen? Was it packers colluding against growers? A beef market analyst reviews the Government Accountability Office (GAO) study on the factors that led to the drop. He also comments on data showing the farmer’s share of the consumer food dollar continuing to drop.

AUDIO: Profit Matters 5-1-18

Kansas State University beef market analyst Dr. Glynn Tonsor spoke to Ron Hays of the Radio Oklahoma Ag Network after viewing the GAO report on falling beef prices five years ago.

Tonsor’s conclusion after reviewing the report, the study found no “boogeyman” to blame as the single culprit behind this volatility. The industry had insinuated that perhaps packers were doing something inappropriate to influence the market when they requested the GAO to launch this investigation. Not to Tonsor’s surprise, the report suggested a combination of drought and several variations in the dynamics of supply and demand caused prices to fall.

“To me, it’s an example where the industry is pausing and kind of looking for somebody to blame for what has been going on,” Tonsor said. “While I’m not against analysis, we need to understand what is going on in markets. The cattle industry has a long history of pausing to do some of that – to find a ‘boogeyman’ – at times and I’m not always sure that is productive.”

Instead of looking for someone to blame in these situations, Tonsor suggests that more could be accomplished if the different segments of the industry worked to increase cooperation among themselves – rather than taking a divide and conquer approach.

He also says the data on farmer share of food dollar, especially in beef, does not recognize “featuring” of product by retailers. The result is an indication of a lower value to growers than actually shows up in the marketplace.

“If you synthesize this report, there isn’t a ‘boogeyman’ around the corner per se,” Tonsor said. “That’s what the report concludes in the 2013-2016 series of why the cattle market responded the way it did and I just don’t think it’s super productive for us to keep looking for those smoking guns.”

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