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February 2011 Archive for Out to Pasture

RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

No Peace for Beef’s Leadership

Feb 21, 2011

If anything became clear at the annual confab/cat-fight of the Cattlemen’s Beef Board and the National Cattlemen’s Beef Association, it’s that the rift between the two sides is taking on the intractability of Mideast peace efforts.

Not officially. Officially, everything was patched up. They agreed on a long-range-plan and all.

But drift into the hallway and scratch the veneer of congeniality, and you get a whole different story.

What’s up is this: USDA and the leadership of the CBB want as much divide as possible between the checkoff and the policy division at NCBA. Some pretty stout NCBA policy leaders collared reporters to talk about the checkoff becoming a “government program.”

They’ve got an argument. USDA’s official CBB overseer told that group that “the secretary would like a wider range of choices” for board members. He wants more diversity in terms of size and type of operation. In fact, the current administration was more selective in its choices of members of all commodity boards—and they’re looking to see more representation from outside the traditional industry power structures. They want more truck farmers and direct marketers.

The CBB does not, of course, directly choose its members. Cattle groups with bonafide credentials make nominations to the secretary of agriculture. Historically, secretaries have simply rubber-stamped nominations.

Secretary Vilsack—with his bent toward smaller operations and rural renewal—is different. He has the ability to shift power from the haves—the NCBA, Farm Bureau types—to the have-nots like R-CALF, the National Farmers Union and other administration-friendly, groups.

NCBA (which you’ll recall officially endorsed George W. Bush and, more recently, cheered Republican operative Karl Rove at this very convention) is not well positioned to expect favors from Mr. Vilsack.

What is worrisome here is that some NCBA folks are so off-put by all this that they’re prepared to attempt to kill the beef checkoff program. I’m not saying there is a majority. But there are some pretty hefty ones making that argument.

Kill it, they say, and return to a voluntary program. They believe—and not without having some groundwork done, apparently—that they could put together a more effective—or at least more controllable—voluntary program with the help of packers and other industry members.

It’s a bit ironic, a cynic might note. The Livestock Marketing Association and their friends in the “family farm” movement got miffed at NCBA and the checkoff because they thought NCBA was focusing money on retained ownership, inter-sector cooperation programs that would hurt its auction-members’ business.

LMA tried for a recall. The family farm outfits almost got the program killed before it was saved by the checkoff lawyers making the argument that the checkoff was “government speech.”

Now, as this new kind of secretary actually imposes the government’s will—at least the will of this administration--onto the program, it’s the other side arguing the program will be used against them.

This reporter is a big fan of the beef checkoff program, but convinced it should not be used to affect industry structure either way. You can not take my dollar and use it to promote policies that put me at a competitive disadvantage; Nor, I would argue, should you take importers’ dollars and use them to put foreign beef at a competitive disadvantage.

You can only use my mandatory dollars to enhance beef demand.

That seems evident, doesn’t it?

There is plenty of room for other programs. Nothing keeps Tyson from advertising its beef against Cargill’s brand. And there should be nothing to prevent them working with producers to develop a new, separate, beef promotion program with no government strings attached. That would not necessitate killing the checkoff program. It could be additive.

In fact, it would preclude the need for the increased per-head checkoff that would require an iffy rewrite of the checkoff law and an even iffier referendum.

I’ll be frank with you folks. I’ve been watching cowboy leadership a long time. I don’t think these guys are going to make peace. It’s become too personal. There are people on both sides of this who could make peace, but I’m not sure they’ve got the pull to drag everybody else along. I’m not even sure who’s righter and who’s wronger.

But I’m sure what USDA—at least THIS USDA—thinks.

The Association should forget CBB’s power structure and get busy building new programs to bring new—less restricted—dollars into making beef a more popular, affordable and predictable food choice.

How to Help Eastern Livestock’s Victims

Feb 07, 2011

Editorial opinion: USDA should be required to cover Eastern Livestock’s bad checks at least enough to offset the agency’s failure to fulfill its legislatively-mandated oversight of the company’s bonding requirements.

It looks like it will take Congressional action to get that done. USDA shows no signs of following up on early promises to make special credit available to those victimized the Eastern’s failure to pay for cattle.

I don’t think the government should be responsible for subsidizing producers’ mistakes. But, if P&S were a private entity that had promised to police bonding, and had dropped the ball this badly, it would be liable. I suppose the government isn’t legally liable because it’s the government. But it is morally liable. When you promise to do something, whether that is pay for a load of cattle or oversee bonding regulations, and don’t, you should pay up.

That’s just my idea, but I think it’s only fair. Those people trusted P&S.

Short of something like that, things look pretty dim for the hundreds of producers, truckers and auction markets holding worthless Eastern checks.

Two of Eastern’s hardest hit victims—Jim Odle of Superior Livestock and John Queen, a former NCBA president and an owner of Southeast Livestock exchange—were among speakers at NCBA’s Live Cattle Marketing Committee last week in Denver.

 

Both suggested that those left with hot checks when Fifth Third Bank shut Eastern down should take action against the bank.

 

“That’s where your money is,” one committee member said. “Eastern’s broke.

 

They think the bank’s officers knew for a long time that the country’s largest cattle buying firm was in trouble and they suspect bank officials timed the legal action to coincide with the biggest cattle marketing week of the year in order to “trap as much money as possible” in their bank.

 

By forcing Eastern into bankruptcy, Fifth Third got first claim on all assets—leaving people holding hot checks with no recourse but the company’s bond.

 

One of the committee members suggested that the best chance cattlemen and others holding hot checks might have of getting anything meaningful might be a class action suit against the bank, forcing officers to testify about the factors impacting the timing of their decisions.

 

Beyond that, the committee and NCBA itself, in the final board meeting, renewed the call for USDA to treat the bankruptcy as a “disaster” and make low interest loans available to the victims.

 

One committee member from the Southeast told your reporter that some of his neighbors had delivered their whole calf crop to Eastern and were holding nothing but worthless paper.

 

“Their bankers are saying ‘let’s hold off on more loans until we get this sorted out.’"

 

The trouble is, it looks like even when things are “sorted out,” those folks will be very little better off unless something happens. They’ve been defrauded, and there seems little chance they’ll ever get all their money back. A loan—no matter how low the interest—is a far cry from fair payment—especially for the typical cattle producer in his 60s.

 

But it would be better than nothing, I suppose. The directive adopted by the committee and full board says that USDA said shortly after Eastern’s problems became public that it would work to make low interest funds available to the victims, but has not yet done so. NCBA directed staff to “work aggressively with members of Congress and appropriate federal agencies to immediately make funds available at low interest or no interest….”

 

The association also wants congressional investigation of the P&SA’s auditing procedures on auctions and dealers.

 

That’s all fine.  It just isn’t enough.

 

I’m not sure of all the math here, but Van Dewey of Rabo Agri-Finance pointed out to the committee that Eastern’s purported $2 billion in annual sales amounted to $2.9 million per day. Had their bond been enough to cover 2 days’ business, it would have been nearly $6 million rather than the $875,000 it actually was.

 

Given the fact that they were apparently floating checks for 10 days or more before the crash, that $6 million probably would still contribute a mere pittance to the victims, but it would at least be a larger pittance.

 

Your reporter is not big on government interference. But this was as much a “man-made disaster” as any of the “natural disasters” USDA typically recognizes. In this case, at least part of it was because the government wasn’t doing what it was supposed to do; what all those producers and truckers trusted it to do.

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