Tariffs...

You're not alone if you didn’t know what that word meant a month ago. But now, it seems like every time you turn on the news or open up Facebook, that word is somewhere in the headline. 

We’ve recently had a few people ask us how tariffs will affect our prices and what they should expect from our farm. As farmers who care about what our customers are concerned about, we’ve decided it’s time to share our thoughts on how tariffs might affect meat prices in general, how they will affect our farm, and how you can protect yourself from the uncertainty of what lies ahead!

First, a brief disclaimer: This blog post is written by farmers, not politicians, economists, or financial advisors. These are our thoughts and opinions about what might happen, not what will happen. 

Our goal with this blog is not to be political or start an argument about whether tariffs are right or wrong. We want to share the little bit we know to help you be better informed about how your food gets to your plate. 

With all of that out of the way, let’s get started!

How tariffs might affect meat prices - 

Most ranchers and farmers (in America) sell their products at the “Market Price”. This market price is controlled by a few factors: supply and demand, government policy, futures speculation, and global trade. Once the market price is established and the farmer is paid, meat packers and grocery stores will each add their cut until the final retail price you see at the store is presented. As expected, tariffs on imported goods will likely affect the final retail price (Good or Bad).

It is estimated that 91% of Beef, 90% of Pork, and 98% of Chicken consumed in the U.S.A. is raised domestically. The remaining percentage of meat consumed often comes to America in the form of very lean, ground meat to blend with our rich meat and serve as patties and chicken nuggets at restaurants. Contrary to popular belief, most of it DOES NOT end up on supermarket shelves.

America exports around 14% of all the beef we produce, 24% of all pork, and nearly 20% of all chicken. If you do some simple math, you can easily see that we grow enough meat to replace the amounts imported from other countries to supply ourselves with food. So, we're sustainable for supply and demand from a strictly numerical standpoint.

However, if we investigate this topic further, you will find some reasons for concern and why a price spike may be imminent. While America produces enough meat, we do not grow it cheaply.

Let’s take beef, for instance. As I said before, 9% of all beef consumed in the United States is imported, primarily as lean ground beef from Australia, New Zealand, and Brazil. 

Naturally, this product is less valuable than many of the high-value cuts we export. Since our environment is better suited to growing healthier and higher-quality animals than these countries (yet we consume large amounts of ground beef as a country) it makes sense to import the cheap cuts that the consumer wants and export the higher-value cuts that are hard to sell. 

Hence, it leads us to the direct point for a price change. Every product plays a specific role in the supply chain. It would be nearly impossible for farmers and butchers to grind those high-value cuts and offer them at the same price as the lean ground beef that restaurants are using for their burgers, while being able to stay in business. Oftentimes, the margins are so slim in the livestock world that little bubbles and changes mean the difference between sinking or swimming.

Another significant factor that must be considered when determining the impact of tariffs on the price of meat is the input costs associated with raising animals. For animals, this means feed.

Most of the main ingredients in commercial feed, A.K.A. (Corn and Soy), are grown domestically. However, there are a lot of specialty feed input imports that make up the rest of the total daily rations for animal feed in our country.  

High protein seed meals like canola or peanut meal are often imported from Canada and South America for cattle and swine feed use. In other cases, during droughts (which the western U.S. faces right now), our country imports large amounts of hay from Spain and Chile to feed our beef herds.

Any increase in these input costs would likely be put on the backs of the farmers first, and then the end consumer. Based on the previous history of farms in America, the small, family operations that take deep pride in producing a quality product will be replaced by larger “corporate” farms whose primary goal is making a greater profit. Once the majority of the food being produced gets into so few hands, it will be much easier for the prices to become lopsided and exaggerated.

Other price increases these tariffs may cause in large-scale agriculture include the price of many conventional fertilizers used to fertilize the feed grown in the United States, the chemicals used to prevent weeds and pests from entering the fields, and the equipment used to harvest the fields. 

There are some areas for concern in the large-scale beef industry. Much of the outcome has yet to be seen, however, and it’s this uncertainty that causes much heartache and stress for everyone involved. As part of our goal of helping you be confident in the food you put on your table, let’s look at how tariffs will affect our farm!  

How tariffs will affect our farm - 

A couple of ways we operate our farm allow us to be insulated from these highly volatile market prices. We can do this by limiting our reliance on outside inputs and, most importantly, building a relationship with you, our customer.

Red Hill Farms is continually striving to be 100% self-sufficient. What does that mean?

Our goal is to one day not rely on any resources not found on our farm to produce food from our land. By relying on nature and allowing our soil to work as intended, we can pull nutrients from the environment and make them available to our crops and livestock. Hence, the need for chemicals and synthetic fertilizers imported from other countries is drastically reduced. 

We’ve already started doing this! For instance, this year, we plan to use only 20% of the same chemicals and synthetic fertilizers we used in 2010. We can help our soil thrive by encouraging microbiology in the soil to take the nutrients already found in the atmosphere and pump them into the roots of our crops. A couple of key practices we implement to help this natural process are - 

Reduced tillage - We limit our tillage to keep the roots in the soil intact, which gives microbiology a place to live.

Limited to No Chemicals - Chemicals and synthetic fertilizers often harm our soil biology, which is one of the reasons why we are currently transitioning our whole farm to Certified Organic. 

Animal Impact - Using animals, we can speed up the decomposition of plant material and give the microbiology more food and places to live.

By relying on our soil's microbiology and how we manage our farm (all things we can control), we can significantly reduce our reliance on outside inputs. While the way we farm limits our efficiencies—or at least how "Big Ag" describes them—and in some ways costs more than producing in a conventional system, the less money we spend on outside inputs, the more protected and stable price we can offer you, our customer. 

Since we’re on that note, another way we insulate ourselves from these ever-changing prices is by building a relationship with you, our customer. 

In the past, our farm would “market” and sell all of the goods produced on our farm through grocery stores and wholesalers. This was an ideal way to move many products with limited time spent marketing and telling you about our products, bringing the products to customers on our end. However, we relied too much on the market price, which can quickly turn a very profitable crop into a cheap money negative crop, depending on yields and prices from neighboring states and countries. 

By building a relationship with you, we can examine our products directly and determine what it costs to grow them when setting our price. We pride ourselves on transparency in everything we do, including our pricing. 

Just 2 months ago, we increased our beef prices, not due to tariffs or any political changes, but due to the rising costs of raising beef. One of our main input costs while raising beef is the cost of replacement (feeder) cattle. When we send an animal to the butcher to turn it into delicious and nutritious food, we have to replace it with a smaller animal so that we will have another animal to sell again in a couple of months. The price of these replacement cattle has skyrocketed due to the COVID-19 pandemic and, more importantly, the drought in the west that we have previously discussed. 

The animals we get are born out on the pasture, and rely on grass to have enough of their mom’s milk to grow. The farmers who raise these calves see no rain in the forecast and choose not to keep so many momma cows because they cannot feed them all. From there, it's simple math: with fewer momma cows = fewer baby cows = fewer feeder cows, ultimately leading to higher prices. It’s all supply and demand. If it were to begin raining today, this ripple in the supply will take years due to how long it takes to raise a calf until it is ready to be bred and give birth. (Approximately 2 years from the day it is born until it can give birth to its first calf)

We are trying to counteract this ever-increasing cost of replacements by birthing these replacement cows on our farm to have less reliance on the “market price”. The only issue is, it’s not as simple as it sounds. We still have to feed another herd of moma cows alongside our finishing herd, and we hold the risk of losing the cow throughout its entire 2.5-3 year life, not just through the last 16 months that it resides on our farm.

However, we see the considerable benefit of more market protection when raising our calves, and we are rapidly moving toward starting a momma cow herd. 

That was a long explanation of why our beef prices are what they are. While being 100% self-sufficient and not using any outside inputs is virtually impossible (ex: employees, butchering, packaging, and other things that are too difficult to grow), we can insulate ourselves from the outside prices by relying on ourselves and not government and outside intervention. Another way we can insulate ourselves is by connecting with our customers.

We connect with our customers by allowing folks to visit our farm, see how we do things, and by encouraging questions. You deserve to know how your food is being raised, and we want to show you. Today, we can share how we grow food on our farm with social media, our website, and good old-fashioned face-to-face conversations.

Our goal in becoming 100% self-sufficient and building a relationship with our customers is driven by the main idea that we no longer want to be controlled by outside prices and people who aren’t involved in our farm. We want to not only be able to farm the way we want to farm, but we also want to involve you in our farm, and ultimately, to create a better future for everyone involved.

So, what should you do to protect yourself from higher food prices?

Here’s a link to our online store, where you can get all of our products delivered right to your door, and all your problems will be solved!

Just kidding!

The best thing you can do is get closer to your food. What do I mean by that?

Many farms are local to you and want to get to know you better and serve their products right to you. Many of us farmers will gladly take the time to show you around our farms or answer any questions about why things are done the way they are. In our experience, these questions help us think deeper about our methods and practices and how we can change to produce a better end product! Buy directly from these farmers who care about you. Don’t force them to sell their products at the market price where they can barely break even. 

Some farmers choose not to sell their products directly and don’t want to build customer relationships, and that’s okay. However, I strongly encourage you to find a farmer who values you and your desires. They will produce their food with you in mind.

In closing, it is often said, “You hold more power in your wallet than you do at the voting booth.” I believe that statement couldn’t be truer.

You can change this world by choosing where you spend your money. If you support local farms, many of which help other small local businesses, you can protect yourself and others from these highly volatile and seemingly ever-changing prices. Thus, it gives you peace of mind that you will continue to have the ability to eat meat, the most nutrient-dense food on the planet!

Make a difference in the world, and source your food from local farmers who care about you! 

Shop food from local farmers, who care!

Helpful links used in writing this BLOG - 

https://www.ers.usda.gov/data-...

https://www.fsis.usda.gov/insp...

https://www.statista.com/topic...

https://www.usimportdata.com/b...

https://www.usmef.org/export-d...

https://usmef.org/export-data/...

https://www.nationalbeefwire.c...

https://www.ers.usda.gov/data-...

https://www.tendata.com/blogs/...

https://www.shipit.com/post/an...

https://www.afia.org/feedfacts...