The Big Beef

No sooner had the Government's first rollback of livestock prices gone into effect last week than the nation faced a shortage of beef. In the major U.S. stockyards, cattle receipts dropped more than 25% below last year. In Chicago, Swift, Armour, Wilson and Cudahy cut their buying of beef to a dribble, laid off thousands of workers, closed down beef operations. The meatpackers' explanation: they could not buy beef and still obey OPS regulations.

Under the rollback, packers were required to pay an average of 10% less for their beef over the next few weeks; the hitch was that market prices last week stayed high, over the packers' ceilings. Some small packers were buying at the high prices, hoping to average out by buying at lower prices later this month. But if they cannot, they face possible heavy fines and jail sentences. The big packers preferred to play it safe.

Hopeless Odds. The trouble in beef was a result of 1) an undeclared strike by some feeders and cattlemen who withheld their livestock and 2) the complex workings of the meat industry, which OPS regulations had thrown out of kilter. The feeders and cattlemen who held back their cattle hoped either to 1) kill the rollback or 2) prevent OPS from being extended beyond June 30.

The cattlemen viewed the rollback (and two more scheduled for August and October) as arbitrary, unfair and economically unworkable. The business of "feeding" (i.e., buying cattle from the range and fattening it for packers) is highly speculative. Feeders must bank on the hope that prices will be higher when they sell than when they bought.

Now feeders have stopped buying range cattle because, in the words of Ace W. Lucas, manager of the Oklahoma Livestock Marketing Association, the odds are "hopelessly stacked against you."

An even flow of cattle from the range to the feeders to the stockyards would start again only if cattlemen lowered their prices for range animals. But cattlemen are in no hurry to do that; neither do they want to sell their cattle direct to the stockyards. At this time of the year, there is enough grass on the ranges to feed cattle at little cost.

Ripe Watermelons. But in a month or so, the grass will be about gone and cattlemen will have to start moving their animals to market, despite the rollbacks. As one cattleman put it: "A fed-out cow is like a ripe watermelon. The thing to do is to get her to market."

Price Boss Mike Di Salle is hoping that this movement, plus the fact that everyone will be anxious to sell his cattle before the second rollback on Aug. 1 will break the strike. If this happens, it will mean a flood of beef for a time and lower wholesale prices. But it will also mean a shortage later in the fall, because the beef won't be coming in from the feed lots, as it ordinarily does at that time.

At week's end, Mike Di Salle, backed by President Truman, was sticking to his rollbacks. But the pressure against them was growing; the House Agriculture Committee, whose chairman had said only last month that both Di Salle and the cattlemen had "weak cases," took another tack. Said a committee report last week: the beef rollbacks were "unwarranted and should be rescinded immediately."

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