Episode 32 Community Markets Keeps Wealth Local Through Local Ownership, Cooperation, and Fair Market Rules

[00:00:00] Kevin: Today's episode of the Curious Pundit podcast is the concept of community economics, which is a phrase that I heard uttered by today's guest, Mike Callicrate, who I learned of on a different podcast, and I'll talk a little bit more about that in a few minutes.

[00:00:36] Emanuel: Hi everyone, and welcome to another episode of the Curious Pundits podcast. I'm one of the co-hosts, Emanuel.

[00:00:41] Kevin: I'm the other co-host, Kevin.

[00:00:43] And today's special guest is Mike Callicrate of Ranch Food Directs in Colorado Springs, Colorado. Now as I alluded to a few minutes ago, today's topic takes a little more time to introduce. So I learned of Mike when he appeared as a guest on an episode of the Organized Money podcast with Matt Stoller and David Dayen, and that's a podcast that discusses issues of antitrust, and I'm a big antitrust guy. If you just arbitrarily name some very large corporation, my knee-jerk reaction is like, "Yeah, break them up. Break them up," right? The reason I am feeling this way is, I wish I could remember who this quote is attributed to, but it's a great quote. But the dominant feature of the modern American version of capitalism is a massive rent extraction layer that basically sucks wealth out of communities across America in order to concentrate it in fewer and fewer hands, and I have come to believe that this is a true statement. I'm gonna go up a little bit in terms of perspective. This next bit I got from economist Michael Hudson in terms of the historical timing, but if you go back to the days of Adam Smith, when he wrote about free markets, he was talking about markets being free from people who were economic parasites who were doing what he called rent extraction from the economy. So in Adam Smith's writing, the components of a price are wages, profits, and rents, and the more that is paid in rents, the less is available for wages and profits. This is one of his foundational principles. Now, in his day, rent was literally the rent of land with or without buildings, but in a modern monetary economy, it's come to be interest paid on debt and dividends paid on stock, as well as rental income of lands and buildings and potentially other things.

[00:02:46] People are now renting, like GPU access is an asset that can be turned into something that can be rented, right? So around the time of World War I, this is per Michael Hudson, the concept of free markets shifted to being free from these guys to being free for these guys. And there's an entire segment of the finance industry that is focused on basically extracting wealth from the economy for the benefit of them and their clients. So on this episode of Organized Money podcast where Mike was talking, they were talking about the problem, and then at some point, Mike uttered two words, "community economics," and I thought, "Oh, I love that phrase. That just encapsulates what I've been thinking."

[00:03:33] So I sent Mike a unsolicited email asking if he wanted to come on our podcast and talk about the solution, and here we are. So having said that, Mike, I'm gonna turn it over to you to introduce yourself, and then I'm gonna ask you, how did Ranch Foods Direct come into being in the first place and to give us like the history.

[00:03:54] Mike: Yeah. Thank you, Kevin. I'm Mike Callicrate, and I own a company called Ranch Foods Direct, headquarters in Colorado Springs. And Ranch Foods Direct sells the farm and ranch production of Callicrate Cattle Company in St. Francis, Kansas, 200 miles to the east on the Colorado-Kansas border. And so I spend my time in Colorado Springs and St. Francis, Kansas. Go back and forth every week.

[00:04:19] Kevin: At this point Mike, would you mind summarizing the issues you were bumping into back around the time that you started Ranch Foods Direct, and then how you solved those issues?

[00:04:30] Mike: At the time I started Ranch Feeds Direct, I had been blackballed by the big meat packers. We only had four big meat packers but a lot of the feedlots like mine, and I've got a, had a 12,000 head feedlot at the time, and I only had one buyer.

[00:04:45] Kevin: The fact that they had divided up territory. So basically, even though technically the four meat packers are not a monopoly because there's four of them, if they divided up the country into territories and there's only one that you can deal with from your perspective, you're dealing with a single buyer who has the authority to shut you down.

[00:05:07] Mike: Exactly, and that's what happened. So here it was between Christmas and New Year's in 1998, I had 14,000 cattle in a 12,000 head facility, which is ridiculous, but I couldn't sell cattle and I still had animals coming in. I fed cattle for other people mostly. I had a custom feedlot which other people fed with me and were very supportive of my work trying to make markets more competitive. And so I had a lot of support, cattle coming in, but no cattle going out because I'd been blackballed by the last buyer, National Beef. And I finally just said to my buyer, I said, "Look, I see the trucks going down Highway 27 from Nebraska to Liberal, Kansas, right by my front door. Why aren't you buying my cattle?"

[00:05:52] And the buyer said "I should have told you sooner, but my buyer, my head buyer, my boss has told me I can't buy your cattle anymore."

[00:06:00] They all knew National was my only buyer. And so I called Dan Glickman, the Secretary of Agriculture, and I said...

[00:06:08] " Dan, if you'd enforce the Packers and Stockyards Act, I wouldn't have this problem.".

[00:06:12] "Well Mike, in this modern day of globalization, we need big companies that can do business globally."

[00:06:19] But he did call ConAgra and Greeley, which is now JBS, formerly Monfort. He did call ConAgra, and he told them to buy all my cattle. And they did. As they got fat, they bought my cattle, and I just simply emptied out the feedlot and sent 15 workers back to town without a job.

[00:06:36] And the biggest buyer of commodities, one of the biggest, least the second-biggest buyer of commodities in the community, now we weren't buying the corn and the hay and the feedstuffs that were produced locally. And so I just shut down. But I got to thinking, you know... why don't I just sell meat instead of livestock? And so I called an animal science meat guy from Kent State University and I said, "Hey, if you were gonna have some animals slaughtered, where would you go in my region?" I'm in Western Kansas. And he said, "Oh, there's a small plant in Colorado Springs called GNC Packing Company. They do a great job. That's what I would recommend."

[00:07:16] So I sent my first load of cattle to GNC Packing Company in the spring of 2000, and I had them cut up into meat, and I sold the meat, and I started Ranch Foods Direct. And Ranch Foods Direct has evolved from no facility, essentially just using GNC to do my meat processing, to now where we have full control of the entire supply chain from production, to slaughter, to cutting, further processing of the carcass, to retail. And we also sell into some wholesale businesses as well. But it's been a really rough road. It's been very difficult with all the market power that exists within this food system.

[00:07:55] Kevin: Now obviously, in order for this to work, you've gotta have customers who are buying your meat. So how did you, shall we say, drum up business in your local geography when it seems reasonable to believe that because you're a smaller operation, your costs of finished product are gonna be higher than the large meat packers for a variety of reasons.

[00:08:18] So how did you actually develop a market for your products?

[00:08:22] Mike: Well the first thing I did is I thought about if I am gonna sell meat and be responsible for it and have my name on it, it's gotta be really good. And so in my experience of livestock production, what really impacts quality? And so breed is a big deal. Let's use an Angus cow and a Wagyu bull. And so the Wagyu bull is the Japanese breed that marbles really well. The other thing that breed does is they calve really easy. And so we started developing heifers, and so we were breeding heifers to Wagyu bulls. And then the byproduct out of that cross was this beautiful calf that produced the most fantastic carcass that you could possibly produce.

[00:09:03] And that became the meat for Ranch Foods Direct. The other thing that I would do as a longtime livestock producer is I would get rid of the performance-enhancing drugs, the hormones, the steroids, the beta agonists, whatever they may be, because we know that they reduce meat quality. They make animals bigger faster, but they reduce meat quality and marbling and taste, flavor, and so forth, so we gotta get rid of those. And then the other thing is let's go ahead and finish our animals out, with a really highly nutritious diet that gets them ready for market anywhere from twelve to eighteen months of age and so a very tender very good eating experience. So that's the first thing I did, is I went to the market with as high a quality product as I could, in contrast to the industrial-produced product, which was included all the things that we said that we weren't gonna use. And so I talk about our beef as so good, not because of what we do, but mostly because of what we don't do. And our main customer base was really the union, meat cutters unions, and they got behind what we were doing.

[00:10:10] Kevin: That makes so much sense.

[00:10:11] Mike: Why aren't we aligned? Why aren't producers aligned with the workers in meat plants? I'm being exploited. And of course, the big deal was, people say you can't compete with the big meat packers." In a way, that's not true. In a way, it is. But the big meat packers externalize costs.

[00:10:28] First of all, they buy the animal below cost of production. Secondly, they use refugee workers and exploit them as much as they can, pay as low a wages as they possibly can. They force animals to travel long distances to slaughter which hurts meat quality through the stress of that animal. They run their kill lines way too fast to where workers are rushed, they're injured, they're not allowed bathroom breaks. There's all kinds of things that big meat packers do to make more money, and most of that is in exploitation in all directions. So I often said, if people could just taste and sense the animal welfare or the lack of it, the human exploitation, the environmental degradation, if you could only sense that in your food, would you still buy it? I would say probably not, because it wouldn't taste very good. But that isn't possible so you can't really tell as a consumer, that meat that's coming from a highly exploitive system, which the big meat packing system in today's world is. And so when we first started out, we bundled everything. So we would take an animal and break it up into quarters and halves and eighths perhaps and we sold it locally, but we also sold a lot of it to union members that were supportive of our idea. And so that evolved. GNC Packing Company called me one day and they said, Mike, "would you be interested in coming to Colorado Springs and opening up a break plant where we would do nothing but slaughter, and you could do all of the cutting, processing and so forth?" And we were paying freight from Colorado Springs on carcasses to Oklahoma City to use an old plant there that was repurposed along with Express Ranches. We were partnering on that plant. And we had some really great customers. We had the ball team in Fort Worth, the Texas Rangers. We had the American Airlines Center. Had a friend there, a guy that became a friend Chef Rene Weibel, that loved our meat, and he kept us clean on grind and the middles were going to his suites in those two event centers. We had the Hereford Houses in Kansas City. We had some really high-end restaurants around Oklahoma City and Tulsa. And so that was a big decision for me to pull away from that and come back to Colorado Springs and repurpose an existing plant here is what we did. And so we agreed.

[00:12:56] We did. We did that. And we kept that other business for a while, but what we did is we got all of GNC's restaurant customers and wholesale customers. And that turned out to be really good. And so our company actually did better 20 years ago than it's doing now as far as wholesale business. But as we progressed and went along and really developed this model of distribution to more direct to the end consumer, and in that day it was the wholesale market, we needed a lot of cattle and our cattle company came back alive in St. Francis with cattle on feed again and workers working and so we just progressed along. But as we went, we hit other barriers. So now it wasn't just the big meat packers that were cooperating to rig markets and expand their profit margins, it was food service. And so now the big problem is Sysco. Sysco leads a cartel of food service companies that in turn do business with a food management company cartel, which would involve Compass, Sodexo, Aramark. There's four companies there that, that dominate that market. But again they love to cooperate rather than compete because they know that makes them more money.

[00:14:14] Kevin: Yeah.

[00:14:15] Mike: And so now it's really that. And as I hear Brooke Rollins just today on a newscast being interviewed about how they're gonna start buying meat more directly from the local regional plants, which we desperately need as the big meat packing model fails, and they've closed big plants and it's really causing some serious problems in the rancher cattle feeding community. She's saying the military's gonna buy from local regional plants. We've got five bases here in Colorado Springs. We've got a very capable plant here in Colorado Springs that has become the regional food hub for not just meat, but for a lot of other things that are produced locally. We help distribute those. So why doesn't the military with five bases in Colorado Springs buy from Ranch Foods Direct? We used to have five school districts years ago, and we'd help develop the Good Food Project with Rick Hughes in District 11, where we would put better food into the schools, our meat, and a lot of local vegetables and fruit from our Western Slope and so forth. We designed this model to where we could really supply the schools. The first year at District 11, they saved $600,000.

[00:15:27] Kevin: Wait wait. How did they save money buying a locally produced product that was a little more expensive?

[00:15:34] Mike: Because they were dealing with Sodexo who was ripping them off.

[00:15:38] Kevin: Okay. Okay.

[00:15:39] Mike: Sodexo was buying the cheapest commodity stuff they could possibly find and forcing it into their schools through their food management company to really rip everybody off.

[00:15:49] And in fact, if you remember the... you'd have to research this and go back a bit, but New York School District sued Sodexo and they got a settlement of $20 million for not sharing these kickbacks that they had promised that they were gonna give to the school district. But Sodexo has a tight relationship with Sysco, so you don't want to get them confused. It's Sodexo Food Management and Sysco Food Service. So Sysco Food Service goes out and gathers up the stuff from Tyson, Cargill, JBS, and Marfrig, and they end up then marketing that or delivering that to the Sodexos of the world and the Compasses of the world. And they've got this deal where they're making a lot of money because they've got the power to buy the commodity cheap, but they're not gonna sell the end product cheap, and they're gonna get kickbacks at the end of the year which is a majority of their income. They're gonna get these kickbacks at the end of the year from these big suppliers like Tyson and Cargill and JBS. Now, if I would be willing to pay those kickbacks, I was offered a deal that if you'll pay those kickbacks, we can get you listed into our vendors list, and you can start selling more.

[00:17:03] First of all, I don't want to sell that much. I don't want to feed the world. I want to feed my community. Just give me the business from my community, and that's sufficient for me to make a profit, to pay workers well, and to treat livestock well, and just to be more efficient within my own geographical area. Well, that wasn't of interest. I had to compete with Tyson. There's no way that's gonna happen. So anyway, we end up the second year at District 11, as we tightened up and trained people to be scratch cooks again and really tightened up on shrinks and all these things, we ended up the next year saving nine hundred thousand a year over what they were paying Sodexo. And so here we are with honestly a far more efficient system. We're slaughtering animals in Colorado Springs where they are. There's no freight. The slaughter waste stays behind. It gets composted with animal manure and put back on the land. We're only hauling the carcass which is 30-some percent less weight than a live animal. It's coming into Colorado Springs. And we're not boxing the product like all the big packers do, so they can sell it to the big box stores and distribution.

[00:18:14] Kevin: What does boxing mean?

[00:18:15] Mike: Boxing is when you take the carcass and you cut it up into pieces, primals we call that, and then they cryovac back that and they put it into a box and it's out of here within a few days from when the animal arrives at the slaughterhouse.

[00:18:28] So they're shipping boxes. Why would you want to do that? What if you ship the carcass like we did in 1970 to all these stores from many small plants all across the nation? What if you just ship the carcass and cut it directly into retail? That's what we do. So we skip the whole box piece.

[00:18:44] That's another really major point of efficiency. And so we're saving a lot of money in transportation and just being able to slaughter animals where they are, and so meat quality's gonna get improved and then bring those carcass into Colorado Springs where they're cut up. But as that progressed, we had five school districts at one time doing a great ground beef business and we also had 22 Chipotles. Remember when Chipotle had the Food with Integrity tagline in their marketing? We were the reason they had Food with Integrity, at least on the beef side in the Colorado Springs Denver market. We were supplying them. Well, one day I get a call from Chipotle and they said we'd really like you to look at going to all 50 of our Chipotles in Denver to Pueblo, but this time we're gonna make your life easier. We're gonna actually pick up the product where you don't have to deliver each one every week, maybe twice a week. We'll pick it up and deliver it." And we were very excited because we had the equipment, the specialized equipment that it took to do that steak cut that they do in their salads and so forth. And so we were gonna get the word on Friday just how that was gonna materialize and get our orders for the new locations. Instead, when that order came in, when the phone rang, the message was, "You're done. We're not gonna buy from you anymore." And so here I had sat on $250,000 worth of inventory, raw material, a bunch of finished product, a $185,000 slicing machine designed just for their product, and now I'm done. Well, they said, after we discovered that our replacement was OSI out of Australia coming in at 30%, 33% lower than our cost, we were offered the deal "if you can match or beat that price we'll continue to do business with you." Of course we couldn't, so that was it. We lost Chipotle. The same thing happened in school lunch. And so District 11 got very efficient. They were feeding kids well. They could see it in the grades and the performance of the students. And a man by the name of Glen Gustafson, he was an administrator. He got to looking at this whole piece within District 11 and he decided "Okay, now that we're self-managed, got rid of Sodexo, got rid of the money they were ripping us off for, what if we serve food like they served our kids, which is highly processed from big meat packers, not nearly as healthy, but we can buy it cheaper than Ranch Foods Direct? What can we save then?" And they did it. They kicked us out of District 11 with a simple phone call, much like Chipotle, and we were done. And so we were really scrambling to sell wholesale. And we've had this announcement in the last couple weeks about the 660 million pounds of lean trim that we're importing from JBS in Argentina, from the Batistas mostly. And the reason that these people have so much trim is because they're losing their markets. The UK has shut off JBS. China, for the Australian JBS locations, has said, "We don't want your product. We're gonna increase the tariff to over 50%. We want to become more self-sufficient in China. We want to be able to feed ourselves and have our own food security, less dependent upon multinational corporations to feed us." Brilliant. That's what we should be doing. But JBS has lost all this business. And so they've now accumulated 660 million pounds of lean trim. And they met with Trump, Joesley Batista met with Trump. And as if by miracle Trump opens up the border, a day or so later to this 660 million pounds of trim that had probably been accumulating for years.

[00:22:38] And if you really understand how animals break down the 660 million pounds of trim represents about 50 pounds of the small pieces and stuff that comes out of the break that will be boxed or put into combo bins, crabbed back and put in combo bins, this is the trim that's left over, that's packed and sold in the ground beef market. But it comes into our country at half our cost of production. So it makes money, real money for the folks that are grinding and mostly for the cookers, because this is a product that's got some contamination on it. If it's gonna have pathogen problems, it's the outside of the carcass, the trim, where that's gonna be. So a lot of it goes to cooking.

[00:23:18] And so this became a real problem for us because we couldn't sell enough grind when we lost the school districts and we just needed more ground beef business. And so we're still at that point today as we see 300 Wendy's closing down. We've got a bunch of Wendy's in Colorado Springs that have already closed.

[00:23:36] But the big packers are losing their ground beef markets. And so now the federal government's gonna buy it, and they're gonna depress our prices even more at the farm and ranch gate, and they're gonna make it impossible for local, regional meat packers like me that slaughter to stay in business.

[00:23:53] It's gonna become very difficult. And so when I heard Secretary Rollins this morning on the news saying our military bases are gonna start buying local, I have five of them here in Colorado Springs, and we're right here ready to do business. Where's the orders?

[00:24:07] And so I see talk, but I don't see any action. And this idea that the other thing that Trump did the last couple weeks was saying we're gonna develop more local regional systems. We're gonna support more infrastructure, small local regional-type slaughter plants. Don't do that without providing the market we need.

[00:24:24] So the main market is so predatory and so full of the Syscos and the Tysons and the JBSs and the big food management companies like Sodexo, we have no market access.

[00:24:36] And so this gets back to Ranch Foods Direct. What was our solution? So our solution is to go all the way to the end consumer. One of the seven habits of Stephen Covey was begin with the end in mind. That's what you've gotta do.

[00:24:51] And this gets me back to the maker own marketplace kind of a model which Ranch Foods Direct resembles sort of a model of that at a smaller scale because we co-locate, like with our taco, and our hamburger, fries cooked in beef tallow, food trailers.

[00:25:07] It's just amazing what happens when you co-locate with people who feel the same way and see the whole model of improving our food system the same way. But it all evolves around local, regional, and owners in the business. Not people who are just working for someone else, not people that are being exploited by big corporate power, but owners that actually own the farm, own the ranch, and own the small processing plant that then distributes to the owners of food trailers, go into a marketplace that I'd describe would be a maker own market like a public market.

[00:25:45] So you've got your butcher, you've got your baker, you got your coffee roaster, you've got your brewer. Yet maybe you've got lots of other small local businesses all in one place.

[00:25:57] Like the Reading Terminal Market in Philadelphia or the Market in Wisconsin that's Milwaukee, that is just an amazing 30-some thousand square feet place of community and people that are just loving to be around each other, that are helping each other, and really rebuilding community around local food and local food vendors and owners of these further processing type businesses.

[00:26:22] And I think this is how we make urban centers better, and we also make market access for the smaller farmers and ranchers. I talk about the ideal sort of agricultural operation.

[00:26:34] And in mine, we raise our own livestock, we rotationally graze, we do all this regenerative stuff. We even have biochar and bone char that, that can go back to the soil. We make broth out of our bones, though, before we make bone char. But we make it as inclusive and as circular as we possibly can, keeping that wealth that is created from the land in the community that produces it as much as possible.

[00:27:01] As opposed to the extraction model, which is private equity and big meat packers, you know, buying as cheap as they can. And the real measurement of that, the real measurement of what's happened to rural America, in the producer's share of the food dollar. Overall, Farmers Union will tell you that about 14 cents of the food dollar goes back to the farm. Let's just look at the meat sector. In 1970, according to the American Meat Institute, 82% of what consumers spent for beef went back to the producer of that livestock. 82%. That today has dropped to 50%. It went as low as 27% during COVID. And so if you can begin with the end in mind, if you can sell direct to retail, cut out the abusive middlemen, we can then bring many more dollars back to those local communities.

[00:27:58] And the prices don't have to be higher than what the retail price is now on average. In fact, we're below those prices that's reported by USDA big box scanner data.

[00:28:10] Emanuel: I got a question before we dive into the separate other conversation that I know Kevin is dying to ask. Do people complain actually the end user, because you mentioned you kinda like allude to the answer that I was looking for. But for example, I bought some burgers that were on sale.

[00:28:24] I got them. They were really crap, so I'm not eating them. I threw them away. I'm assuming because the quality is so low, the end consumer must have some sort of complaint, "Hey, this used to taste good, and now I'm looking for something else." What's the feedback and how do usually they react? The end user is me, the consumer.

[00:28:43] I'm assuming that's where they end at the end of the day, right? Do you hear any complaints? Do you receive any kind of, I don't know, letter of complaints? Or how does this work exactly, right? Do they stop buying once they notice that the quality has been reduced?

[00:28:58] Mike: Two weeks ago, in Colorado Springs, and FBO there, the fixed-base operator that sells fuel to airplanes and services airplanes as they come in, they had a gathering. And I cooked the burgers. Luis and I... Luis is the owner of El Chapin who is located at our Fillmore store with a taco trailer and a hamburger trailer. So Luis went out, and I went out there, and we cooked 120 burgers for pilots that were flying in for this event, plus all the staff.

[00:29:26] Emanuel: Yep.

[00:29:26] Mike: So the guys that service the plane and do the work of fueling things up, they were all there. The ladies that work with Cutter, everybody came out and had a hamburger. And it was just the most amazing thing because every single one of them said, how do you do this? This burger is amazing. How is it that you can make a burger that tastes so good?". It's a sourdough bun made by Shawn Saunders, Sourdough Boulangerie, a local baker, who in fact incubated 20-some years ago here in Colorado Springs. He does an amazing job with just good ingredients. Luis, of course, it's just an 80/20 grind with some fat. It's got 80-20% fat. We toast the bun in the beef tallow that comes off of the burger. We put a piece of real cheddar cheese on it, and there were some folks at that gathering that ate three hamburgers. And so, they're blown away.

[00:30:22] Now, compare that to the industrial burger that you're gonna get at Walmart. It's from thousands of animals. And it could come from any one of 20 countries.

[00:30:32] Emanuel: Is it beef at least?

[00:30:33] Mike: I don't even know that, but I think it's pretty amazing that we've got all these imports coming in that don't get inspected. The big meat packers are allowed to self-inspect, and small plants like mine get severely inspected. So who's producing the safer and the better quality food? But the deal is the industrial model has allowed for so much to happen that decreases quality. For example let's take, Empirical Beef at Garden City, Kansas.

[00:30:58] They put in a new plant. It's the former BPI, Beef Products Incorporated, where they had the pink slime thing that was on ABC News that time, and it just totally killed ground beef consumption at the time, and the big retailers said, "We're not buying it." Fast food said, "We're not buying it."

[00:31:14] Then the USDA came back in and approved it for use without even a label on the package. And so now you're getting that into the market. And it hurts the flavor, the taste, the eating quality. And this is a product that gets rinsed in anhydrous ammonia to kill the bacteria and the pathogens. What impact is that gonna have on your gut and on your microflora? And so the industrial model has gotten so far off track, from the implants that we put in the cattle to the aggressive growing programs to the size and the distance in freight that those animals are traveling. It can't get any more broken than it is, and so it's not hard to compete with that on taste and flavor and how you feel after the meal. And I talk about it's not what we do, it's what we don't do at Ranch Foods Direct that makes this meat so good. We just went back to producing, like we did in the '50s and '60s.

[00:32:07] And we'd love to see that model expand. But it cannot expand in a marketplace that is so predatory, in a marketplace that is so monopolized and that is so concentrated and is controlled by so few companies, and a friendly government. So the Batista brother, Joesley , meets with President Trump, and within the next few days, we've got a deal to import six hundred and sixty million pounds, three hundred thousand metric tons, of trim from this very company. And it's absolutely devastating the markets. It took five hundred dollars a head off the calf that's coming off that ranch, and it took six hundred dollars a head off a finished animal. But the packers complain "we lose money, we've gotta buy animals cheaper."

[00:32:52] That's because Walmart has more power than the big meat packers. And they push down. Kroger has more power than the big meat packers. They push down on the packers. So the course of least resistance is to pay the producer less, and as a result, we've lost half our cattle producers since the '80s, and we have lost 10 million cows. And you wonder where all the fires are coming from. We're burning it. We're burning grass instead of making beef out of it.

[00:33:18] Kevin: There are so many pieces of this puzzle that are interlinked that this could be a five-hour episode from my perspective. That was not going to be, but it could be, right? But I wanna segue into the concept of the middle layer in the economy having so much market power that they can squeeze both suppliers on one side and customers on the other, and I wanna use a specific tangible example. Are you aware of the pricing agreement in place between Walmart and Pepsi?

[00:33:45] Mike: Absolutely.

[00:33:47] Kevin: So for the benefit of viewers and listeners, I also learned of this either on the Organized Money podcast with Matt Stoller and David Dayen, or in Matt Stoller's antitrust newsletter called Big, or possibly both, right? And this came to light during the discovery phase of some lawsuit. So there's a pricing agreement in place between Walmart and Pepsi where if Pepsi wants to use Walmart as a distribution channel, they are required per this agreement to price Pepsi higher every place that's not Walmart. So the reason that Pepsi is cheapest at Walmart is because of the agreement that requires Pepsi to be more expensive every place else. So it completely... We have this narrative in our language and in our culture that free markets are competitive, right? And the reality is the dominant feature of modern American capitalism is not competitive markets. It's a high level of corporate concentration, four beef producers processing 80% of all the beef in the country, and this happens in industry after industry. And then those people have so much political power that they're able to squeeze people on both ends. I know this is a segue into a different industry, but there's a type of business called a pharmacy benefits manager who sits between people who produce pharmaceuticals and people who consume pharmaceuticals, and their practices over recent decades have been so egregious that even pro-business Republican deep red state legislatures are either legislating them out of existence or severely limiting what they can and cannot do. Because their ability to distort the market through political power is just pissing everybody off for a variety of reasons. Yeah, and I love that in your niche of the economy, you've come up with ways to fight that.

[00:35:49] Mike: We're working on it. And we've got an example here with Ranch Foods Direct with two retail stores that are just totally amazing. So we've got that Fillmore location, which is near our original location when we came to Colorado Springs, and we developed a lot of business around that. When we first opened that break plant in Colorado Springs in an existing old facility, we repurposed it. We put in a little 800-square-foot retail space, almost as an afterthought. We were mainly focused on the wholesale market. And that market did more business per square foot than the highest selling market in Pike Place Market in Seattle. Because it's meat, first of all, because it's high-value stuff. But customers flocked there, even though it was a destination. It was down a dark street at night. It was in an industrial commercial area, but people flocked there. And so when that lease ran out and we ended up having to move, we got very fortunate. We were able to buy the old federal food service facility, which is 22,000 square feet of a well-designed food establishment that had the dock spaces, the refrigeration, the freezers. It was amazing that came up. And we put a retail store in that as well. So between the two places, the Fillmore store was a former Conway's Red Top, which if you ever read Fast Food Nation, that business is highlighted in that book because we used to sell them ground beef. As the generations evolved and the kids took over, they ended up switching to a cheaper ground beef from US Foodservice and they ended up losing their business. And we ended up then years later repurposing one of those hamburger locations into our number one store. And that store last week probably did around 125,000 in total sales. Most of it's beef because that's the main thing we have, but we have everything local in there. But the great thing about the Federal Foodservice location, it's a big enough warehouse, we can help a lot of other people access to the market. It's like today, Ahava Farms just dropped off their CSA, their community-supported ag and all the bags that go to their 200 or 300 customers. And so those customers come in to Ranch Foods, they pick up their bags and probably pick up a little ground beef while they're here, or a steak or whatever they want from our store.

[00:38:10] That's all about the collaboration that can happen. In this warehouse we've also got a raw milk supplier. So they bring their raw milk in a couple times a week, and their customers pick up this beautifully produced cream-top raw milk that just tastes amazing and is full of great nutrition. And then we've got another CSA that comes in from the Western Slope, which is mostly fruit and sweet corn this time of year. There's just a lot we can do but we need the support.

[00:38:40] But one other thing that's interesting about Federal Foodservice is they were one of those smaller local regional foodservice companies that distributed in the region from Pueblo to Denver, and they got knocked out by Sysco. In fact, we got knocked out with them because Federal Foodservice was distributing our beef to restaurants from Pueblo to Lamar, Colorado, down the Arkansas Valley. And Sysco came in and predatory priced us out of all those accounts except for one in Lamar that hated Sysco, but they were too far away. It was the only establishment we had. It was the end of the line, and we couldn't afford to deliver them. But, for restaurants that don't wanna do business with Sysco, they've been going to Restaurant Depot to pick up their own supplies. Guess who's buying Restaurant Depot? Sysco.

[00:39:26] Kevin: I know. I learned about that. And restaurants are, like, scared and angry about the fact that merger is likely to go through.

[00:39:33] Mike: Yeah and Kevin, you talked about the Pepsi-Walmart relationship. Lina Khan was gonna stop that.

[00:39:41] Kevin: She was going to.

[00:39:42] Mike: But Trump fired her. If Trump believes in competition and fair and free markets, why in the world would he get rid of his top antitrust cop? Lina Khan was an amazing enforcer of antitrust laws and was only getting started, and he fired her.

[00:39:59] In fact, Kamala Harris wouldn't even say that she would keep Lina Khan because she was taking so much corporate money that didn't want antitrust enforcement. So we really honestly didn't have much choice. We've gotta get away from corporate rule.

[00:40:13] Kevin: Actually, I've got a specific comment directly about Lina, something she said ironically on an episode of the Organized Money podcast after she got fired. But I can tell that Emanuel has a question or a comment and he's been trying to break in.

[00:40:27] Emanuel: About Walmart, didn't they pull one with Visa as well with the payment? I think they did a few years back. They stopped accepting because they didn't give them enough kickback, right? I think they did for a couple of months and then Visa came back to them and then they agreed to the terms because obviously they were losing a lot.

[00:40:43] Mike: A lot of concentration there too, Emanuel. You know, why is it that they get $2 to $3 out of every $100 that, that goes through a small business? They're lucky to...

[00:40:53] Emanuel: We pay for it with.

[00:40:54] Mike: And this is a small business that's not even making any money most of the time. Because of the predatory nature of the market. But we need the Robinson-Patman Act enforced again, and this is what Lina Khan would have been working on right now.

[00:41:07] Kevin: The Lina Khan quote I wanted to share, like at some point one of them, either Matt or David, asked her for her approach to antitrust, and her answer was like, like everybody needs to hear this. She said, "Basically, there's two pieces. First is to understand the law and then apply it."

[00:41:28] Mike: Right.

[00:41:28] Kevin: That's it. That's her approach.

[00:41:30] Mike: And it's like the Packers and Stockyards Act that specifically and clearly says what a meat packer does so much as has the effect of reducing competition, they can't do it. They cannot discriminate. Those are words in the act that make it very clear. Yet we've got a judge in an Alabama courtroom that says... don't enforce the act. In fact, let's apply the Sherman Antitrust Act on a Packers and Stockyards case. The Sherman Antitrust law was to protect consumers from monopoly. The Packers and Stockyards Act was to protect producers from monopoly power.

[00:42:12] Kevin: Yeah.

[00:42:12] Mike: And so this judge basically guarantees that we can't win that lawsuit against IBP and Tyson in that Alabama courtroom. The jury awarded us 1.28 billion dollars in damages, which we didn't care about. What we cared about was the next step in the litigation, which would have been the injunctive relief, which would have made the packers become competitive, whether that was breaking them up or whether that was making them get rid of their captive supplies. Any way we would be on our way to restoring competition in the meat industry again. The judge reversed that jury verdict and took it away from us, and in fact made us pay Tyson's court costs of eighty thousand dollars. That was the Pickett versus IBP Tyson case. The failure of that case, gave the big meatpackers the green light to ignore all antitrust laws, and specifically the one designed to regulate them from cooperating, from manipulating markets, from stealing the producer's share of the consumer dollar. And the Supreme Court refused to hear the case. It moved all the way to the Supreme Court. They refused to hear the case. The John Roberts Supreme Court would rather hear the Anna Nicole Smith family feud case.

[00:43:27] Kevin: There's another industry where, in my mind, something very similar happened recently, and that Google was sued for monopolistic practices in two areas. One is search, because they own so much of the search technology stack, and the other is advertising, because they own so much of the high-tech Internet worldwide web advertising technology stack.

[00:43:50] And in both cases, they were ruled to be a monopoly, and in both cases, no remedy was applied because they're too important for a variety of reasons. I'm just shocked by logic behind that.

[00:44:07] I wanna make like a really high level statement. So we have this notion in discussions about the economy of what markets are and how markets operate, the concept of a competitive free market, and that the government should not interfere in the operation of the market. But the problem with that whole framing is in order for a market to operate, there have got to be rules. There's no such thing as a market without rules that the participants understand. Throughout the entire course of human history, a subset of everybody would make rules that everybody would follow. They would either just follow them or they would agree to follow them or they would argue against them and they would get changed, et cetera, et cetera, right? So there's no such thing as a market that does not have government interference because by definition, whoever makes the rules for all practical purposes is the government. And I'm actually coming to the belief that as economies get larger and more complex, what we call government is an emergent property of that complex system.

[00:45:14] It just happens. You can't not have it. So the reality is the people who make the rules shape the operation of the market. There's no two ways about that. So the concept that there's such a thing as markets free of government intervention, like that entire framing is out of sync with how markets actually work. And then we have this other idea that somehow economics is different and separate from politics and morality. So we have all these deeply mathematically rigorous models of how economies work and the economists, and these guys tend to fall under an economic school of thought called neoclassical economics. They don't care that their models do not describe the world we live in, right? And these models which are mathematically rigorous and do not describe the world we live in are used by policymakers to figure out what we should do. Inflation is higher, we need to raise interest rates to dampen demand.

[00:46:20] Well, if inflation is higher because the Straits of Hormuz got closed because of a war and the supply of oil is diminished, how are you going to lower inflation by dampening consumer demand? I don't get the connection between how that's gonna work, and yet that's what the mathematical models say we need to do, so we do it, right?

[00:46:41] So there's this huge disconnect in my mind from how the world and how economies actually work and all of the models that these economists are working from. And it's costing us... if we would just fess up that political power is what determines how markets work, boy, that alone would be a major victory.

[00:47:00] Mike: Yeah, Citizens United, right?

[00:47:01] Kevin: I don't know how to get there, though

[00:47:02] Mike: Repeal Citizens United. But Kevin, what you said about rules and the importance of rules in an economy to keep markets fair and competitive and everyone on equal footing. It's like St. Francis High School has a football team. They're going to the Bronco's stadium in Denver to play the Denver Broncos. So they go out on the field, and first of all, the kids at St. Francis don't get to wear protective gear. There's no helmets, there's no pads. They're going against the Denver Broncos. And they go out on the field, and they flip the coin, and the refs leave the field, grab a beer and a hot dog, and they go to the seats to watch. What happens on that field? How long will that game last? I mean, that's what we're dealing with. It's small, little guys like me who process 30, 40, 50 animals a week, sell into its local regional food system, our communities, and we're going up against Walmart? Walmart? And dollar stores? I talk about how Walmart kills and consumes the prey, Main Street, and their businesses, and the dollar stores come in and eat the decaying remains.

[00:48:16] Kevin: Yeah.

[00:48:17] Mike: And if you just look at the advantages that Walmart and dollar stores get with their suppliers, where a small local grocer is paying more, he can go to Walmart and shop for his grocery store because his access to goods brings him a higher price. It costs him more than the actual product on the shelf at Walmart for every consumer. Now sure, there may be less in the package. There may be some deception around value and all of that. They pull everything they can. And we finally got Lina Khan in the position in the Federal Trade Commission to actually make change.

[00:48:53] She's the one that wrote the article Obama's Game of Chicken. Back then, Obama during 2010, had these hearings all over the country about meatpacker concentration and all of that, and it really looked like they were gonna do something about it, and then they didn't. They reversed everything and just left us all hanging out to dry. And so Lina Khan then comes back again, and she becomes the FTC chair and we're just so happy that, now we just need the political support behind her to really start to fix a few things, and the Trump administration fired her. And the Trump administration is working as hard as they possibly can to look good, especially to the cowboys, the ranchers, and the farmers. But you know what? They're not doing it. You don't do it by importing six hundred and sixty million pounds of trim at half of our cost of production.

[00:49:44] Emanuel: One of the reasons we started this podcast is to learn. And I feel like I learn in 50-something minutes more than others supposedly pay good money to learn in university or college or at least in economics, first of all, but also something local. And probably this should be just the first one out of a series of podcasts as well, where Mike can be also a, a guest at one point in the future.

[00:50:07] Hopefully in six months from now or one year you can come back and say, "You know what, Emanuel? After the administration have seen your podcast with Kevin, they decided to do the right thing. So thank you so much for the support." Wishful thinking. Nevertheless, we need to be there. Before passing along to Kevin to give his last remarks as well, I just wanted to say that I'm European.

[00:50:27] I grew up European, so we don't grow up with this culture of beef as much as it is in North America. Hamburgers, yeah, we tasted a little bit, but we used to call it more different type of meatballs. Steaks, we see them in, only in cartoons like the T-bone and the ribeyes and all the other, right?

[00:50:45] But since I came to North America, I developed a taste of this, and I'm learning more and more each day and eh, it tends to be expensive to buy and eat a good steak, especially a good restaurant, really cooked. I recently went to Calgary and experienced a little bit of the cowboy flavor of what it means.

[00:51:01] Many of our audiences are not actually from North America, so many of the things that you mentioned may not resonate with them. That's why perhaps for another episode we can come in and talk a little bit about more. But that, I wanted to say my essential two cents and then pass it along to Kevin.

[00:51:15] Before also let people know where they can find you. If you have a website or you also have a front-end store where you can... I'm assuming you're not cooking the burgers for everyone yourself.

[00:51:27] Mike: That's right. Well, if you'll go to MikeCallicrate.com, C-A-L-L-I-C-R-A-T-E, MikeCallicrate.com, you'll see on there the Ranch Foods Direct websites and other things that we do. The cow pool where you can buy a portion of a cow if you want which is the most efficient and low-cost way to buy and to process and sell an animal. So that's how you find me is at MikeCallicrate.com. I've got a blog and a listserv. The blog goes back 20-some years, so you can search it for whatever you want. Might wanna search the District 11.

[00:51:58] Kevin: The fact that you have a listserv shows that you go back decades.

[00:52:03] Mike: Right, exactly. What's that? That's not Substack, is it?

[00:52:06] Thanks for the opportunity guys.

[00:52:07] Kevin: So I actually have two ideas or concepts I wanna get out before we end. The first one is, and I think I got this directly from Lina Khan in an interview somewhere. I think she was still the FTC chair at that time. And she said it just simply takes a long time to bring antitrust because it has to go through the legal process.

[00:52:28] So you file a lawsuit, there's a discovery process, it gets assigned to a court, et cetera, et cetera, right? And it just takes years to unwind. So if an administration comes in who is opposed to the very idea of pursuing antitrust legislation, there's ample time for it to get shut down. Now, she didn't put it in those words.

[00:52:49] I'm, like, retroactively interpreting something she said that I think is meaningful. But the other concept was a little excerpt of a speech that current Canadian Prime Minister Mark Carney gave in Davos at the last Masters of the Universe meeting. And basically, I'm not gonna get it word for word, but basically it was, as a nation, you have to have control and autonomy over food, fuel, and defense, or you're surrendering much of your sovereignty. And I mean, he's right. The very first thing that I think all modern nation states ought to focus on is being food self-sufficient. As the world breaks apart into regional powers if you're dependent upon imports from a country that you have an adversarial relationship with, if things go bad, they can just stop sending you food, right?

[00:53:46] And then what do you do, right? To illustrate a point, a lot of people don't know this, and for what it's worth, when I learned that, I was shocked, but the largest food exporter in the world is the United States. The second largest food exporter is the Netherlands, And I'm like, "How did the Netherlands become the second largest food exporter in the world?" It turns out the answer is really simple. So World War II, Europe was basically bombed back to the Stone Age, and at the end of the war, tens of thousands of Dutch people died of hunger because there wasn't enough food in Europe because the war had devastated the productive capacity of every industry, including agriculture, right?

[00:54:28] So the Dutch government basically said, "Never again," and they prioritized food production. So they have industrialized, I'm gonna call them indoor farming. So they have like greenhouses and apparently like they're growing bananas somewhere, and I don't know how good they are, but in these greenhouses.

[00:54:46] But as a result of that, they've made food production a high priority to the point where, tiny little Netherlands is the second largest food exporter in the world.

[00:54:55] Mike: It's also important to know now that you brought it up, United State- the United States is a net food importer. We produce a lot of corn...

[00:55:04] Kevin: I know, that blows me away. We are the largest food exporter in the world, but we import more than we export.

[00:55:10] Mike: Well yeah, and then we don't produce food. All those acres of corn and soybeans all across the country, Midwest, pulling precious water out of the Ogallala Aquifer to produce corn below cost of production so that Tyson and Cargill and JBS and all their feedlots can have cheap feed, the pig factories and the chicken farms can have cheap feed. None of that is for human consumption. It goes to meat. What are we doing putting corn in our cars? Why are we making biofuel out of precious disappearing water of the Ogallala Aquifer?

[00:55:42] Kevin: Yeah, I agree. And I remembered the second example I was gonna provide and then like the closing concept, right? So the second example is the current conflict between the United States and Iran. I learned just recently, and I'm gonna confess, I do not fully understand the military implications of what I'm about to describe, but I was still like, "Really?"

[00:56:04] So Iran has steerable hypersonic missiles, and basically what my interpretation of that is these missiles fly really fast, multiples of the speed of sound, and they can change their trajectory in flight. But what's most interesting is apparently the United States does not have steerable hypersonic missiles. So the fact that Iran has this armament capability and the Netherlands has this food production capability, these did not happen by accident. These happened because of government priorities and government policies. So if we go back to the concept of leave the free market alone and blah, blah, blah, it just works and it reaches equilibrium and all that good stuff, right? The emergence of a large, robust middle class after World War II basically happened for the first time in history, and if you peel back the layers, it didn't happen in spite of government intervention in the market, it happened because of it, right? And yet we just ignore that, right? We just pretend that didn't happen.

[00:57:14] Mike: Right. Yeah.

[00:57:15] Kevin: Anyway, those are my closing comments. We really need to in my mind, embrace the concept of industrial policy, embrace the concept of markets are shaped by the people who make the rules. And there's a Senate candidate in Michigan who came on my radar somehow, and I'm not sure exactly how, but he's disadvantaged because he has an Arab name and there are certain stereotypes about all that.

[00:57:41] But his campaign slogan is, "Money in your pocket, money out of politics, Medicare for all." And I'm like, yeah, if I lived in Michigan, I would really be paying attention to this guy. Yeah, let's do those things, right?

[00:57:54] Mike: I totally agree. Abdul El-Sayed, he's a good man.

[00:57:58] Kevin: Yeah, that's the guy, right?

[00:58:00] Mike: He's a medical doctor.

[00:58:01] Kevin: I don't pay a lot of attention to politicians around the country that I'm not personally able to vote for, right? But every once in a while, one bubbles up and it's like, wow, okay. Yeah, let's do that.

[00:58:13] Mike: Absolutely.

[00:58:15] Emanuel: That being said mikecalicrate.com. I ran out of pen, so that's why you see me type a lot instead of taking hand notes. Curiouspundits.com is the website where you'll find this episode and links to all the things mentioned here, links to previous episodes, to future episodes, links to our profile on Spotify, Apple Podcasts, Stitcher, or any other platform you like to listen to your podcasts.

[00:58:42] Give us a follow, a like, a share, and hopefully a positive review. If you liked something we said or disliked or disagree with something we or our guests said, you know, feel free to reach out to the website. There's a contact form. Until the next episode, my name is Emanuel.

[00:58:57] Kevin: My name is Kevin, and thank you for listening.