We love nothing at Beef Today so much as an open, honest and civil dialog. Hence, we believe we’ll lead this issue of our newsletter with a letter from Allan Sents, a bright, well-respected Kansas cattle feeder who happens to see things quite differently a lot of other bright, well-respected cattle feeders.
But first, let me acknowledge the “ridiculous” charge. Let me admit that the verb “attempted” must be correct. I got several replies indicating my “attempt” at satire failed to hit the mark. I blame the need for extensive editing to fit the magazine, and so we shall provide, as well, the original work after Allan’s response.
It is my impression, though I’ve not seen the contracts, that the Cactus deal is based on a grid payment. It is, however, based on the open market price. Allan’s point about the big contractors letting the rest of the industry do the work of bargaining is alarmingly correct and presents the industry with a cat in need of a dehiding.
It’s just that I’m not sure GIPSA’s plan is the best way to skin this particular feline. Anyhow, his note follows:
Recently, Steve Cornett attempted a satirical editorial claiming that GIPSA rule change proponents want all producers to get the same price per pound or dollars per head for cattle of differing value. I have been to a lot of meetings with this discussion over the last 15 years and I have never heard anyone advocate that position. Steve, what credible source do you have suggesting that? How can you print something that ridiculous?
The big issues are market access and the lack of full packer participation in establishing the market week in and week out. At the Fort Collins workshop Friona Industries claimed to have a unique product worthy of special consideration. If they truly have a unique product that requires extra steps to create, then they deserve a "special deal" to secure that production just like other “natural” or specialty products require.
But, what about the other four of the top five? Their "deals" have nothing to do with a quality product, only to secure supply. If people believe in a free market system, why don't they trust the market to supply the necessary numbers when participants are receiving a fair price?
How can this issue be addressed without pointing out that Alternative Marketing Agreements started with Paul Engler and Cactus Feeders supplying numbers to IBP. These agreements spread only to the biggest suppliers predominantly based on their ability to supply numbers not quality products. I would argue that when those biggest players have access that the smaller producers don't, that efficiencies and innovation are lost because of the restrictions being placed on the other market participants.
The largest players have passed off the effort, expense and responsibility of establishing the market to the weaker players. Many argue that that outcome has decreased the competitiveness in the marketplace and led to thin packer participation as well. When the four major packers are all bidding for cattle we see an active market like we saw in late November, when only one or two of them are setting the market things often are disappointing.
The proposed GIPSA rules do not discourage pricing cattle by what they are ultimately worth. That notion seems to be coming from packers hiding behind the frivolous lawsuit claim. Yet, if their practice truly is based on rewarding "value" then they have nothing to fear. We’ve had ambiguous language in the P&S Act for the last 89 years and no run of frivolous lawsuits. Many producer associations have polarized the issue.
I belong to the United States Cattlemen’s Association and the Kansas Cattlemen’s Association because those groups are committed to rational discussion leading to sustainable solutions in our industry. Hopefully, more industry participants will recognize an issue generating this much controversy has some causes that need solutions. Working together for a solution has to have a better outcome than arguing about if or when a broken system will ultimately collapse.
The attempt at satire that stirred Allan to words, in its original form, follows. It will still make you huffy if you disagree, but that’s the whole point of satire, you know. To get you to look at yourself through others’ eyes.
Seeking simple fairness
I know who you are. You’re one of those guys who’s always trying to do a better job of managing. You’re careful with your range; Johnny-on-the-spot with your wormers and fly control; good about watching winter nutrition; studious about genetics; willing to pay $5,000 for a bull when you could get 5 bulls for that at the sale barn.
Fine. If that’s the way you want to run your deal, that’s fine. But maybe that’s not how I want to live my life, thank you. Maybe I’m not the most attentive manager, as if that’s all that matters in life. Maybe I don’t always get around when I should. But I’m not just here for the money. I’m here for the quality of life. How fair is it that I have to compete with Type A money grubbers like you?
Sure, my calf crop is below average. I have fewer calves to sell and they don’t weigh as much as those delivered by you better managers.
So every year, you get more money than I do. Where’s the fairness in that?
What I’d like to see is the federal government mandate that people pay me more for calves than they pay you for your bigger calf crop. I foresee a backwards scale that goes like this: Say calves are worth $1 per lb. If I get a 70% calf crop, and they weigh just 500 lbs., I only get $35,000, while you, with your attention to detail get a 100% calf crop and a 700 lb. weaning weight. You get $70,000.
Do you see how unfair that is? Year after year, you get more than and I get less. If this goes on, I’m going to be “driven out of business” by people like you. In fact, 800,000 farmers and ranchers have been driven out of business in the last 40 years.
We need a “more level playing field.” We need this to be more “fair and equitable.” Happily, we’ve got just the government that wants to help.
So let’s get GIPSA to require buyers to pay for cattle on a sliding scale. All it takes is a rule. Sure, it will take some paper work—buyers will have to keep records on who they pay what and you and I will have to document how big our calf crop was and what they weighed.
But that’s just record keeping. No worries.
Oops, I picked out the wrong management input there. What I meant to do is ask GIPSA was to level the playing field on the way cattle are marketed, not the way they’re grown. I meant to endorse the Obama Administration’s plan for “restoring” competitiveness and eliminating favoritism and discrimination in the cattle market by having trial lawyers and urban-based juries decide what is and is not a fair way to sell cattle.
Instead of making everybody pay the same per head, let’s require everybody to market cattle the same way and require that buyers offer everybody--from the seller who is a longtime, reliable supplier whose calves the buyer knows and whose calves the buyer wants year after year or a trader just off his latest cease-and-desist order—the same deal.
Yes. That’s much fairer. That levels the playing field just like Secretary Vilsack and Attorney General Holder promise. That will keep the good marketers from putting the poor marketers out of business.
Sure, we’ll give up some efficiencies, reduce incentives for herd improvement and weaken consumer price signals still more. But that seems a fair price to pay to protect people who don’t want to try new stuff, doesn’t it?