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Dittmer: Uncharted waters

Free Market Reflections with Steve Dittmer

Evidently, you all in Canada experienced some similar difficulties to ours. The meat supply that kept up with oversized demand in March and early April suddenly fell short in the second half of April into May. Our local meat cases in Colorado went days with virtually nothing in the way of steaks and roasts. Ground beef was more available in some places. But fast-food giant Wendy’s, dependent on a fresh beef supply, was pulling some hamburgers off the menu or just plain running out.

I had wondered about McDonald’s going to fresh ground beef awhile back, after building their decades-long business on frozen patties, no purge and fewer timing and delivery problems. They evidently still had both frozen and fresh and neither they nor Burger King admitted to any shortages.

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Two of our biggest plants, each harvesting 5,000 to 6,000 head a day, were shut down at the same time for a few days. Smaller ones were also shuttered. Nationwide, weekly harvest that had kept up in March and dipped only a bit going into April, was suddenly running two-thirds of prior harvest and year-ago levels. Line worker numbers were down and chains were slowed. Cattle were backing up in feedyards and placements in March dropped significantly.

One factor different in our respective situations is routing of production. Over 50 per cent of our total beef production goes through food service channels. With that market virtually disappearing overnight, plus the difference in cuts, portion control and packaging food service requires compared to retail, the early problems for packers were managing that. Then the cases of COVID-19 began to hit, drastically cutting harvest and processing capacity. With a higher percentage of your production going to export, domestic demand shifts were likely not as cataclysmic.

There has been speculation that the close housing quarters of many plant workers added to customary carpooling from distant towns contributed more to the spread of the virus than plant employment. Later study will likely prove or disprove that. Walk-through infrared temperature scanners for workers, plastic or stainless steel dividers on each side and down the middle of conveyors, masks and shields and station re-arrangements are some steps packers have taken. It was difficult for packers to secure testing capability for a while but availability eventually caught up.

One unfathomable factor likely not a problem in Canada is ridiculous unemployment rules attached to our coronavirus relief bill. Several Republican members of Congress warned during discussion of the bill that this provision would invite disaster. But the Democrats, always eager to give money away to “workers,” or the “poor” or the “disadvantaged” and get even with those greedy business owners and capitalists, insisted on it.

The provision was an extra $600 per week (!) added to normal unemployment checks for anyone laid off because of the (government-created) coronavirus calamity. That way, workers can in many cases, make as much or even more than the jobs paid them before to stay home and do nothing. Restaurant owners, for example, who underestimated how much take-out business they would get or how many workers it would take were flummoxed. They called and called their workers and were told that they were not going to work for less money than sitting at home, especially since the media had created the impression that COVID-19 was a near automatic death sentence, much like the Black Plague in the Middle Ages: get it in the morning and be dead by sundown.

How did we get here? A noted historian, Victor Davis Hanson, noted that the Greatest Generation lived through a Great Depression and a World War. They were somehow aware that life has its risks and everyone is going to die sometime. Our younger generations, not as familiar with history and no experience with real global trauma, seem to feel they should not be subject to sickness or risk. So they have gone along with this government lockdown and assassination of our economy, even shaming those citizens who regard the panic as unnecessary and attempting to eliminate all risk as foolhardy.

Both our beef industries rely on exports to Asian nations like South Korea and Japan; Canada relies on China. South Korea and Japan seemed to have dealt with this pandemic better than most countries. Their economies have been damaged but it is possible they will bounce back faster and return as good customers. China is, as always, and certainly now, a cipher no one can fathom. It is likely they were the source, have suffered more than they have let on and lost standing in the world. Their factories have been hampered in coming back online by shutdowns in other countries’ factories normally using their exports as key inputs.

Some big companies and small businesses — especially independent restaurants — are going to find recovery difficult or impossible. Like a jet losing power at 30,000 feet, it is hard to figure out who will land safely and where.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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