I love the rosy outlook of a college student. Unencumbered by the brutal realities of the real world, they are naïvely optimistic about the workings of society.

“What are your plans after college?” A jaded old fart like myself asks with the skepticism of experience.

“I want to make a difference in the world,” the bright-eyed student replies. “After I graduate, I want to work for a nonprofit.”

“So you want to work in production agriculture?” is where my mind immediately goes when I think of a nonprofit.

Many share my supposition, but why is profit so elusive in production agriculture? Commodity-based industries are challenging due to the inflexibility of the pricing system. For a farmer, a premium price typically involves higher costs to achieve that higher price. Therein lies the problem.

An example may be useful. Last year, I had a calf without a tail. When we market cattle, we make uniform lots … same size, same age, same sex. But it is difficult putting together a uniform lot of tailless calves. So this particular calf went with a trailer load of misfits. And even among the misfits, the auction barn sold the tailless calf separately. So the question you are all asking: What is a tail on a calf worth? The answer was surprising; a tail is worth $400. At least the calf without a tail was worth $400 less than the other misfits. I told this story to a friend, and he tracked me down a few months later to show me a bill of sale … his tailless calf was worth $400 less than its contemporaries. That is the nature of a commodity; the product is worth what the buyers say it is worth.

Commodities are a funny thing. By definition, commodities are standardized. This is a key feature of a commodity, and this leads to relative price inelasticity … meaning you can ask for a higher price for your pinto beans, but the farmer down the road has the exact same pinto beans at the market price, so the buyer buys your neighbor’s beans and yours will go unsold.

Production agriculture does an amazing job of standardizing our products, but that system of standardization is in many instances antiquated. Take corn, for instance. Corn is priced by the bushel. The most common contract on the Chicago Board of Trade is U.S. No. 2 yellow corn sold by the bushel. When was the last time you measured with a bushel? A bushel of corn is equal to 56 pounds. The weighed corn is converted to bushels, priced in bushels at that rate and sold by the bushel. Unless you are selling to an international market, at which point the bushels are converted to metric tonnes. If you want to trade futures and options, the first skill you need is converting pounds into bushels.

My segment of production agriculture, the beef industry, is no better. The USDA established quality grades in 1927. At this time, the beef industry was transitioning from Spanish-based Longhorn cattle to Hereford, Shorthorn and Angus. The USDA established yield grades in 1965. In this era, my father showed the grand champion market beef steer at the Twin Falls County Fair with a 1,000-pound Hereford steer. Last year’s grand champion was a 1,450-pound Angus cross steer. The beef industry has changed in a thousand ways since 1965, but beef is still priced based on quality and yield grades from last millennium.

Not every commodity is bought and sold with government standardization. Anyone who markets hay knows this. Hay is sold based on tested quality and end use. There is dairy quality, feeder hay, horse hay and hay for export.

Australian meat is graded in a similar fashion. Each cut is graded for end use. The lowest level is for grilling and stir-fry. The middle grade is for premium restaurants, and the highest grade is for high-end restaurants. But their grading system also sorts beef into domestic or export markets. There is a classification for the Japanese, U.S. and Korean markets. I’m not suggesting the Australian system would work in the U.S., I’m simply asking if farmers and ranchers could develop a system more meaningful for the wholesaler, retailer and end consumer.

In 2019, Schaff Valley Angus sold a bull at auction for $1.5 million. Earlier this year, a performance horse sold at a roping futurity sale in Heber City, Utah, for $1.7 million. What makes a million-dollar animal? Two fools in a competitive bid auction. How do I find those two fools? I wish I knew the secret formula.

Until then, maybe we should question some of the antiquated standardization methods used in our markets. Maybe then I will find a market for my $400 tails.