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February 2010 Archive for Out to Pasture

RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

How Would You Spend the Checkoff Dollar? 

Feb 24, 2010

By Steve Cornett  

Oops. Somehow, in juxtaposing and transferglating and jimmyjammying all those alphabetty things, I got the final tally wrong. The folks at CBB tell me (again, Rick Husted having sent me the thing already) the actual final ranking was B, A, G, E, C, F, D. So, what I should have said instead of "I was glad to see beef safety score so high if a little disappointed that so many ranked exports so low" was "I was glad to see exports ranked so high, but disappointed to see beef safety ranked so low."

At the Cattle Industry Convention, the Cattlemen's Beef Board asked committee members to rank seven different priorities. Let’s see if we agree with them. We’ll talk more in a minute, but give it some thought first and do your ranking. Send me an email at scornett@farmjournal.com to let me know how you rank what and why, and I’ll forward it to the people who think about these things more than we.

Your choices, a synopsis of the rationale and goals of each, follows (rank them 1 to 7):

A. Reconnect consumers with beef production.

The rationale: A lack of understanding about the beef production system leads to increasingly skeptical consumers; communicate that beef is produced responsibly and inspire pride in America’s cattlemen.

B. Educate influencers on beef and beef production.

Rationale: Politically and socially motivated influencers are using food to drive social change. Protect beef and modern beef production and support access to international markets through effective information flow between the policy arena and public issues management; ensure that decision makers are supported with factual information.

C. Demonstrate Beef’s Value 

Rationale: Position beef to compete in a changing marketplace where consumers are becoming more thoughtful in their purchase behavior, driven by increased frugality and the desire for a good value.

D. Capitalize on the Power of Lean 

Rationale: Lean protein is beef’s catalyst for improving nutrition perceptions which are known to be beef’s biggest barriers to consumption. Use the power “lean” and “protein” have with consumers to showcase beef’s nutrient advantage versus competing proteins.

E. Make Beef an Easy Choice

Rationale: Choosing beef is not always easy for consumers or processors, manufacturers and marketers throughout the food chain. Make it easy for consumers and the food industry to choose beef by strengthening the value proposition with tasty, nutritious and convenient beef meal solutions.

F. Implement Cohesive Safety Solutions

Rationale: Competing voices and ongoing challenges have eroded consumers’ trust in the entire beef safety system. Facilitate government and industry engagement to achieve a common vision for, and implementation of, research-driven safety solutions.

G. Develop and Expand International Markets

Rationale: Global demand for beef and beef variety meats continues to grow. Develop and expand exports of high-quality U.S. beef in international markets by differentiating it from international competitors through the ongoing education of targeted decision makers.

For the fun of it, after the list was read, I guessed at what the assembled cowpokes and cow folks would say. Then I ranked what I thought at the time. I got pretty close on where I thought the crowd would go. It’s like when you know the judge is going to place one calf over the calf you would place.

And in this case, it’s like trying to judge a class of full-sib Angus heifers. I mean, they all need doing and no two guys would place them alike.

Anyhow, I think I know how cattle people think, so I predicted on one side of the sheet how the crowd would vote. I figured they’d figure “this class of priorities,” if you will, at B, E, A, C, G, D, F. I figured they’d rank the top three highly because I think cattle people take it personally when activists pick on them and their product.

Not me, man. I like it when folks berate me. I ranked the class G, F, C, B, A, E, D. The way I see it, what the detractors say isn’t as important as what producers really do. I don’t think consumers are all that down on producers, production practices or beef.

On the other hand, I see international markets as the future and I see beef safety as a real PR problem. And both of these are problems the industry can address. (Actually, the industry already IS addressing both, of course, but we’re talking about relative priorities here.)

And I think now, more than usual, is a good time to be selling beef on a value basis. That’s what McDonald’s and their fellow purveyors of ground meat seem to think works at the moment, judging by the $1 whoppers and such I see advertised.

Anyhow, the way the crowd actually did rank them and their relative scores were: B, A, G, E, C, F, D. So I could have done worse guessing and I was glad to see beef safety score so high, if a little disappointed that so many ranked exports so low.

All those scores—and, by the way, there was not a real big difference in the scores, which is what you expect with a class of siblings, right?—now head for the operating committee of the CBB. They will be part of the decision-making process as the committee members decide which projects to fund in the year ahead.

Good luck to them. There is so much that needs doing—I bet we can think of another seven priorities—and so few resources to do it with. In fact, the list of priorities seems to inflate almost as fast as the value of that $1 per head checkoff deflates.

So how would you split the buck?

Steve Cornett is editor emeritus at Beef Today. You can reach him via e-mail at scornett@farmjournal.com.

 

What if Michelle and Pollan Get Their Way?

Feb 11, 2010

By Steve Cornett

Just a reminder that what has always been may not always be. A quote from a Wall Street Journal editorial this morning:

The Administration wants $10 billion to fund more nutritious school breakfasts and lunches, and here's a modest proposal: Take the money out of U.S. farm subsidies that make unhealthy foods artificially cheap. Most of the excess calories in the American diet come in the form of highly processed starches, and Tufts University's Timothy Wise estimates that since the 1996 farm bill corn and soybeans have been priced 23% and 15% below average production costs.

I’m not here to argue for or against that sentiment. I am here to remind the reader that the WSJ is the rightward tick to the New York Times’ leftward tock. And the NYT has long since bought into Michael Pollan’s arguments along those very lines.

That argument holds that farm policy is aimed at providing cheap calories. Cheap wheat makes cheap Twinkies. The Pollan Principle holds, further, that subsidized food production also creates excessive energy demand and pollution.

Anytime I bring this up, I am reminded that the farm lobby is too strong to fail. Their success with ethanol makes me think that may be so.

However, if we have both sides arguing against cheap calories, at a time when the national deficit is under attack on both sides, you’ve got to wonder just how strong the lobby really is.

I’m not going to spend a lot of time today on what it would mean to producers if the U.S. got serious about subsidizing asparagus and apples instead of corn, wheat and cotton.

But I’m sure the current administration would like to do that. You don’t have to read as many USDA press releases as I do to know that these guys have a different view of how the farm-to-plate process should work.

I’m not even sure I disagree with them. 

I’m just wondering what the impact would be on the system—and the producers who’ve been working in that system for generations—if they really manage to get the change they want.

Goobers and Goliaths

Feb 09, 2010

By Steve Cornett

1. goober—Basically a goober is just a kindhearted, rather oblivious goofball. It's a term of endearment really. It comes from the ancient Scottish verb "to goub", which has to do with doing a dance and smiling sheepishly while doing so, exposing the goubs in one's teeth.
Source: t
he Urban Dictionary

Since the Cattle-Fax presentation at the NCBA convention last week, I’ve been dwelling on how their message is digested in different sectors. I’m particularly furrowed of brow over the way the folks I call the goobers—soft of tissues both cardio and cranial—react to numbers.

To overly summarize, we lost more cows and more cow people last year. Consolidation of operations continues. Cattle-Fax is looking for things to be better this year than last year but not as good as everybody wishes. They’re enthusiastic about the outlook for exports, but fretful about the impact of recession and joblessness on the far-larger domestic market.

So, just as a guy with some calves to sell later this year, I left encouraged. But as a Beef Today guy charged with thinking about the future of the business as opposed to my own little deal, I am perplexed by the chances of a well meaning, but Shrek-footed government, coming to “help.” Not now, guys. Please! We’re almost through this thing.

Let me reference a couple of points from the Cattle-Fax presentation that need to be considered as the whole agriculture industry prepares to do these public hearing cogitations on industry structure. You noticed that the Obama-Holder Department of Justice has filed to undo a done-deal merger between dairy giants Dean Foods and Foremost Foods?
 

The reason given isn’t that they’re scared Dean will use its market power to raise consumer prices. No, they’re concerned about buying power—Dean keeping milk prices too low for producers. Significant stuff full of portent for the beef industry as well as dairy. The idea of regulating corporate power to keep prices HIGH tests some pretty untested waters. And it has a lot of goober appeal.

The Dean move gives you an idea of where USDA and DOJ leadership want to go with the hearings they plan to begin next month.

And so back to the Cattle-Fax presentation. They said their survey last year indicated two-thirds of all the cattle on feed were owned by feedyard companies. Not by ranchers. Not by what we call investment feeders. By feedyards themselves. They said feedyards lost a calculated $2 billion, more than $100 per head, last year.

They lost all that money because they paid too much for feeder cattle. So if you sold 500 lb. calves last year, you can thank the overbuilt feeding industry for about 20 cents for every pound you sold.

That $2 billion didn’t evaporate. It was transferred into the pockets of cow-calf producers.

The feedyards are owning so many cattle these days because nobody else wants to. There’s too much risk. Unless you’ve got a vested interest—a feedyard or packing plant with fixed overhead  or a cow-calf operation with nothing but opportunity cost to risk—there’s just not enough upside potential to justify the huge investment.

Feedyards can write off some of their expense against their yardage and feed markups. So they can feed “cheaper” than you and I can, and so they can afford to pay more for feeder cattle than you and I can.

Moreover, they’ve got lots of savvy on hand. They’re good at getting fund managers and Chicago speculators to assume much of that risk. So, as the Cattle-Fax people will tell you, feeders didn’t really “lose” $2 billion last year. Some of that money came out of feedyard's feeding profits and a lot of it came out of Chicago.             

But, given the drop in corn prices, about all of it went for those calves.

This is something you should think about as you prepare to testify at those DOJ-USDA hearings. You may think that “big is bad,” and I’m not going to argue that big is necessarily good. But for years, I’ve heard some cattle people—the ones I call the goobers—berate two things: Futures markets and bigness among feeders and packers.

They seem to think that cow-calf producers are disappearing because of such powerful interests. How much faster would we be leaving the business if it weren’t for that extra 20 cents we snuck out of feedlot owners’ pockets last year?

I keep a spreadsheet primed on feeder cattle prices and breakevens. If ranchers and cow farmers had to make do with what an independent, would-be investor cattle feeder can afford to pay, cow herds would be melting away faster than a Houston snowfall.

I’ll concede that part of what’s going on is big guys buying market share; just outlasting the competition. That won’t be permanent. Left unchecked in perpetuity, the last feeding corporation might some day be able to dictate prices to producers. The day may come when the last packer can dictate prices to consumers and sellers. 

But no study has indicated we’re anywhere near that, and it’s not for lack of studies.  I just hope that enough people understand all this to help USDA and DOJ avoid the easy—and let’s face it, politically popular—answers.

Steve Cornett is editor emeritus at Beef Today. You can reach him via e-mail at scornett@farmjournal.com.

This column is part of the Beef Today Cattle Drive e-newsletter, which is delivered to subscribers biweekly and includes beef industry analysis, market information as well as the latest beef headline news. Click here to subscribe.


 

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