Have you ever stood in the checkout line at your favorite supermarket and twiddled your thumbs while all the folks in front of you slowly make their way past the cashier? Have you ever taken the time to consider what really happens with every single item in their shopping carts?
Here’s what really happens: When the cashier pushes the item past the scanning light, it reads the bar code and goes “beep” and registers on the total amount screen. Consider what that “beep” truly signifies. That “beep” means you are paying for every cent of cost and profit in getting that item to the cashier.
For manufactured items that includes costs — and the profits — of all the raw materials, all the machinery, all the labor, all the packaging, all the transportation, all the research, advertising and promotion.
For food items that “beep” represents the cost of the cashier’s labor, the cost of keeping the supermarket operating, the trucker, the processor, the packager — and the profit of every entity along the distribution line.
But, do you know what? That “beep” does not automatically represent a profit for the farmer or rancher who produced the food in the first place. It simply represents what the marketplace paid him on the day of sale — profit or loss.
Why is that a fact? Because the food producer never has a chance price his product to include all his costs, plus a reasonable profit.
Now I ask. Is electricity more important than food? Certainly not. Food is more important as a basic need. But, the price of electricity that you pay for is not set in the competitive open market. It’s set by a utility rate commission. In Kansas, that entity is the Kansas Corporation Commission.
Here’s how pricing electricity in Kansas works — and it’s similar everywhere. The Commission’s role, according to Kansas Statute 66-101 et seq., is to establish rates that are just and reasonable while ensuring efficient and sufficient service from the utility. The first step is to determine the utility’s annual revenue requirement. Five factors are taken into consideration when determining the revenue requirement. The cost of capital invested in assets is called a rate of return that reflects the actual cost of debt and a reasonable return or profit the utility has an opportunity to earn on equity invested by shareholders. The total investment or “rate base” upon which a return will be earned. The accumulated and on-going depreciation of plant(s) and equipment. The company’s reasonable and prudent operating expenses. Income taxes. The second step is to design rates that will efficiently/equitably collect that revenue requirement from the utility’s customers.
Now guess what the normal profit rate is for an electric utility? It’s around 10%. And that’s a reasonable profit rate for something as important in our lives as electricity. But I ask: If a 10% profit rate is reasonable and equitable for an electricity utility, why is it not the same for a food producer?
Well, all of the above “obfuscation” has a purpose. As my faithful readers know, when I see a problem in agriculture, I try to find a fair and equitable solution. I decided to start with the hard-pressed beef producers. Nationwide they are selling down their collective cowherd. They are experiencing severe drought and manipulated markets. In short, to stay in bizness, they need a guaranteed profit that can only be obtained by profitable prices when they sell their beef critters.
So, if bar codes work for every other entity in the beef supply chain except the rancher, it can work for the rancher, too. And, if 10% guaranteed profit rate is fair and equitable for electric utilities, that should be fine for ranchers, too.
So, I’m proposing that state utility rate commissions take on the role of setting a 10% profit rate for ranchers. And, the ranchers can cash in like everyone else in the beef supply chain by using government authenticated and issued “BEEF BAR CODES,” which will become popularly known as “Beef Beep Codes.”
Here’s how it works: The rancher determines his break even price for his beef critters and the state government issues him an exclusive Beef Bar Brand. He and his cowboys and cowgirls then hot or freeze brand that Bar Code on the right hip of every animal for sale.
Then when the critter heads up the loading chute, after weighing, a scanning light reads the Beef Bar Code and keeps a running total for all the cattle. The final price the rancher gets from the buyer is the total on the computer read out. Simple as pie and fair to all. You ranchers can thanks me later with a good ol’ filet mignon.
Food bar code branding could work for every raw food commodity produced.
A heifer branded with a “Beef Bar Code Brand” is pictured below.
