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Situational Update

Multiple Factors Affecting the Beef Industry

Edi. Note: Congress did finally pass a bill recharging the PPP program with another $310 billion. It did not include bail-out money to states for lost tax revenues from their lockdowns, so it did not remove incentives for them to open up their economies.

With all the Trump Administration’s efforts to react quickly and get help to the economy, it is obvious that this is still a government bureaucracy. The states have illustrated that all states are not the same and lower-level politicians can turn into tyrants just as fast as those on the federal level. Money promised has still not arrived for citizens, businesses, and hospitals from bureaucracies and equipment unused to handling suddenly increased demands on capacity.

Oh, and New York politicians are just as arrogant and self-centered as anyone ruling at the center of the universe would be expected to behave.

However, NCBA has found this Administration and USDA to have good receptivity to business arguments and has fully taken advantage of the opportunity. They were a key group lobbying hard to get some help for cattlemen, as Covid-19 events have hammered them, just as trade wars got the grain farmers the last couple of years.

But it didn’t take too long to figure out that the payment caps that the USDA had put on cattle operations attempting to use the Economic Injury Disaster Loans and emergency grants through SBA was just about two loads of finished cattle. Just Thursday, NCBA said it had helped secure signatures of 150 Senators and Congressmen on a letter to the White House to request lifting those caps from the $125,000 per specie operation.

As for the politics that have really affected government response to the Covid-19 situation, the biggest problem for food producers has been the difficulty in resolving conflicts between medical experts and politicians, both federal and state. The medical guys would lock us up for years, as their goal is to keep anyone from getting sick. Politicians need to step up and draw the line.

Our antipathy towards epidemiology is well known and the shortcomings in using statistics to predict biology have been vividly illustrated over the last few months. Medical experts and epidemiologists have used worst-case models to scare the heck out of the politicians, who have a natural antipathy towards looking unaware and not grim enough. The models have been wildly overblown in predicting dire results, frequently revised and about as accurate as those climate change models predicting the East Coast underwater before now.

A little power is incredibly intoxicating to some politicians, and some workers down the line just don't know when to stop. Mothers have been handcuffed in front of their kids in parks. Thousands of citations for walking the streets have been issued and hotlines set up to report lock-down violators. Los Angeles’ mayor said he was “hunting down” the one percent in his city that were not complying. Not only was the idea of cities using drones to spot violators frightening, even more, was their technical capability, giving readouts of body temperature, coughing incidence, and pulse rate from within a 190-ft. distance.

Over a premise that hasn’t even been scientifically validated, local governments have started sounding like East Germany’s Stasi, encouraging people to snitch on their neighbors. Maybe it’s a benefit of kids not being in school that they can’t be encouraged to tattle on their parents to their teachers as Communist countries do.

Colorado’s governor said workers in businesses would have to wear masks, “It’s the law,” he proclaimed. What? What happened to the legislature, to the separation of powers, to representative government?

Of course, all this not only raises Constitutional questions discussed by commentators and demonstrators across the country but drastically affects food producers and foodservice operations nationwide.

Very recent studies by Stanford University scientists in Santa Clara County California, another by Southern Cal in Los Angeles County, and one in New York have suggested that a vastly larger number of people have been exposed and developed antibodies to this virus and shown few symptoms, perhaps 50 times more than previously thought. The morbidity and mortality rate could be less by a huge factor.

Yet restaurants are still shut down in most of the country, eliminating off revenue for them and demand for the meat industry. In a tight-margin industry like foodservice, management has indicated trying to operate at 50 percent capacity to comply with social distancing demands is a road to bankruptcy.

The shaming notion has extended to the PPP program, with one of the best-known steak chains being pressured to give back the money it was granted.

To no one’s shock, the lawyers and insurance companies are squaring off already, and one key fight involves our foodservice partners. Many restaurants have business interruption insurance. Except that after the swine flu in 2009, many insurance companies slipped in a clause that excluded coverage for pandemics. Restaurants are suing to try to get coverage for a catastrophe really caused by government actions, not a disease. The federal government could decide to reimburse insurance companies for paying out claims to restauranteurs.

While the Paycheck Protection Program could help restaurants, operating at 50 percent capacity for sit-down restaurants is not workable, many experienced restaurant operators say. This one is still unfolding but it is a critical question for the beef industry, with 50 percent of our production moving through the HRI channel.

On top of all that, restaurants that have been more successful than they projected at building carry-out business and needed to hire back more employees have run into another problem. As one manager explained, he called and called and called to rehire crew and they said, “No.” Because of that clause, some Republican Congressmen had opposed, that added $600 a week to unemployment benefits, workers could make as much or more money sitting at home than working. Some employees asked to be laid off. More government legislative disincentive to work.

The whole situation is presenting problems we’ve never seen before. But human nature has proven to be consistent with historical experience over the last, say, 5,000 years. Some are power-hungry, some are not inclined to be realistic or rational, some will do what authority orders without question…but they all still eat. We’ve got to get things back in gear quickly and the restless natives are likely our best allies.

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