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December 2010 Archive for Out to Pasture

RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Beef’s Big Year

Dec 27, 2010

It’s the last column of the year, so I sat me down and made a list of candidates for most important developments of the year. In the order in which they popped to mind, here they are:

1. Ethanol and corn prices—I get calls when I pick on ethanol, but I don’t mind. I’m right on this issue. It’s a boondoggle for tax payers and it makes grain cost more than it should.  I admit that, boondoggle or not, it’s been good for land prices and the farm economy in general, but what happens when the country—or the tea party—wakes up and kills the programs?

2. Declining cattle numbers—We’re finally going to turn this corner.  Maybe this will be the year. It sounds like the economy is improving. Exports are looking better. I remain convinced it will be like a light switch and we’ll move to new plateaus. The longer we put it off, the more violent the final market reaction will be. I hope.

3. GIPSA’s proposed rule—USDA’s Grain Inspection, Packers and Stockyards Administration introduced a set of proposed rules aimed at what they call “restoring competition” in the cattle market. This, despite their own studies indicating there is plenty of competition in the cattle markets.  I’m thinking they’ll have to scale back some, but sometime next summer they’ll most likely impose most of the rules. This is part of the pattern of the Obama Administration using its regulatory powers to achieve goals that are unpopular in Congress. They’ve got the same idea on public lands and environmental policy. A Republican congress can slow them down, but there is enough populist sentiment in the GOP to make me suspect they’ll let the GIPSA rules go.

4. GIPSA/Department of Justice and their joint effort to “repopulate rural America”—The GIPSA rule is part of it, but the effort goes much, much deeper. The Obama Administration—perhaps the least farm-savvy administration in history—would like to de-commercialize agriculture.

5. Eastern livestock—The demise of the biggest order buyer in the country didn’t touch all of us—the markets hardly noticed—but it hit several thousand of us very hard. I notice that the National Cattlemen’s Beef Association is asking for some federal assistance for the producers caught in the mess.  The more we learn, the more it sounds like Eastern’s owner, Tommy Gibson, had to know he was running a shell game. If so, they should put his dried up old carcass in jail until St. Peter knocks.

6. Korean free trade—We’ve given up on forcing them to take all our beef, and in return got a free trade agreement even the Senate can live with. This is all putting more pressure on producers to do more about animal I.D. Korea will be a significant market, but only for cattle with certified birth dates. Now that we’ve started rolling over for that <30 month rule, maybe we can make more progress with other traders as well. We’ve given up on an important principle here, but time will eventually heal the mad cow scare. Our specialty involves young fed cattle, anyhow. All it takes is some bookkeeping.

7. Chinese announcement—The Chinese have agreed to reopen talks on beef. The news of talks would be more exciting if it weren’t for the fact that I don’t trust them. You’ve got to wonder how serious they are. I doubt they’re going to be real serious without us reminding them of the size of our big stick and I’m not sure how they’ll take that. If we do get a shot at their market and their economy continues growing, it will be a big deal. Big enough to justify taking a chance on them.

8. The “shellacking”—Without that shot over Obama’s bow, who knows where the tax bill and estate taxes would have gone? It will be interesting to see how all those anti-pork, budget hawks approach the next farm bill. I’m no fan of where farm policy has brought us, but I’d sure hate to see a bunch of "Palinbrains" get too aggressive in dismantling things.

9. Estate tax—Speaking of which, how can that not be in the top 10? It applies to most beef producers. Since it’s just for another 2 years, I suppose it’s even more important for the estate lawyers who will get to redo all those wills this year and again two years from now.

10. Michelle’s “Let’s Move" kids food campaign—Ms. Obama’s chores involve getting kids to eat healthier food. Early on, that may not be too good for beef. But we’ve watched the government “do good” before, haven’t we? So it guess we should say “if” not “as”—the program impacts children’s eating habits, the sugars and inactivity that should get most of the blame for fat kids, should take the main blow and maybe more mothers will be made aware that beef is good for a young body.

11. Antibiotics for livestock—Their days are numbered. Beef cattle will fare better than the competition.

12. Missouri animal welfare billHard to say if that silly bill passing is more important than the bills that didn’t pass. But it signifies that the animal rights army is still on the offensive.

13. Temple Grandin—So many people saw the movie and it did such a good job of showing what we’re about in the cattle industry that it has to be the most significant effort ever in the war for the public’s attitude about animal welfare

14. Humane watch—These guys are doing a lot to keep the Humane Society of the United States honest, and if the HSUS was honest about their goals and how they spend they wouldn’t be nearly the problem they are.  Every year about this time, my wife drags me off to a bunch of parties and I get to talk more than usual to people outside agriculture. At such times, I get pretty morose about the future of the whole animal welfare movement. Most people don’t think like we think about the relationship of animals and humans.

I didn’t rank any of these top to bottom because so much depends on what happens next. But several of those are underlying big trends that you may not be able to predict, but you can’t ignore. These are times when change comes faster than any of us expects.

Attempt at Satire of GIPSA Plan Fails

Dec 13, 2010

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.

Allan Sents      
Marquette, KS

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?


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