I mentioned in August that there was a chance that we might have to make a mid-year price adjustment but wanted to watch things a bit longer before making that decision. While it is true that we undershot on price for this “catch-up year”, we are going to leave price where it is for now and look at it again in January. What were the causes of our concern? The explanation follows.
The three year drought has changed the economics of our operation. For 3 years, cattlemen have been reducing their herd size because they could not feed the momma cows. The Texas herd is now at 1950 levels. While Texas is the largest producer in the nation, other big producing states have fallen victim to the same drought. When you sell your producers for lack of grass, you are simultaneously reducing the number of calves to sell in the following years. When the buyers are competing for a smaller number of calves to send to their feedyards for fattening, the price goes up. So why does the cost of commercial beef cause us financial pain? We get 25% of our calves from Clay’s Buckhorn Cattle Company, raised by Clay and Julia Gay, under our same protocol. We pay whatever the market price is plus 10 cents per pound and we still have to finish them at JVF. This has made the cost of collaborative beef nearly double in price over what was paid before the drought began.
The cost of beef has had a cascading effect on pork. The beef packers have been filling their void by buying more pork. In the case of pork, that price has been effected twice; once because there is more demand for pork and even more so because the CAFO operators have been dealing with an outbreak of a virus that has reduced their herd. So pork prices have soared. Under the same arrangement that we have with Buckhorn, we now pay our pig breeder 3 times what we did when we started our home delivery program. Our little pigs will then spend on average another 9 months in our wooded paddocks and pastures before they are finished and ready to go.
So that’s the story on our financial sustainability. We will take a manageable reduction in sustainability this year and will wait until January our re-visit our pricing. Thank you for sticking with us in these inflationary times.