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RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Feeling Better about GIPSA

Oct 18, 2010

The GIPSA saga sagas on, but there is hopeful news to report.

I know. I’d rather talk about something else, too. It’s not like there aren’t plenty of threats from outside the beef industry that should be holding the attention of every lobbyist and leader taking dues dollars to serve the cattle industry.

Stuff our organizations should be paying attention to include:

  • The EPA’s proposed dust rules.
  • The growing influence of the animal rights agenda.
  • A serious movement to outlaw the use of antibiotics in livestock.
  • Stubborn trading partners.
  • Ethanol subsidies driving corn prices.
  • Immigration laws.
  • The death tax.
     

Each of those is a serious threat, most of them driven by the activists appointed to high positions in the Obama Administration. This, as we’ve discussed earlier, is an Administration that believes that cheap—read: “efficiently produced”— food is a problem. This is an administration that is not easily swayed by “added cost” arguments.

Every dues dollar you pay should be aimed at those problems. But if you buy the industry lobbyists a beer and sit down for a chat, they head straight into the GIPSA thing. It is an intramural squabble that should be way down the list of things to fret about. But one bunch of lobbyists thinks that packer concentration is a bigger threat than any--or even all--of the above. And the other side worries that if the proposed regulations take effect, the beef industry will be pushed backwards decades.

I’d like to drop it for a while and write about something else. But every time I turn off my typewriter, the government-firsters post a simplistic argument supporting the Obama Administration’s new rule.

I call their points “simplistic” because they never deal with the questions.

How is hamstringing beef packers going to help cattle producers get a larger share of the beef dollar when it’s perfectly clear that it is at the retail—not the packer—level that margins have expanded? It’s not greed, either, though the class warriors would have you think that. Retail, pushed by Wal-Mart, is probably more competitive than ever before. But labor, transportation and marketing costs have all exceeded the increase in cattle prices.

Cattle prices aren’t “keeping up with inflation” because of the remarkable increases in efficiencies we’ve seen in recent years. No little bit of that is probably due to the increased role of more skilled and professional producers. Those thousands of producers who’ve gone out of business were, after all, the weak links. Today’s cattle producer can thrive on lower inflation-adjusted prices than could those of 20 or 30 years ago.

The R-Calf leaders know that. These guys aren’t stupid. They know they’re being disingenuous when they blame beef packers for the loss of cattle producers in this country. Some of their followers might believe it, but the leadership has studied these issues enough to know what they’re doing. How much intelligence does it take to look around agriculture and see concentration is occurring in every segment—no matter how the product is marketed?

These guys are not going to voluntarily stop with this rule. They want to see the packers broken up. They think, or claim to think, that producers would be better served with a plethora of small packers.

One doesn’t have to be a fan of big packers to see the risks associated with the GIPSA proposal. The fact that Dudley Butler, the proposal’s daddy,  is a trial lawyer-turned activist-turned boss of GIPSA—should be one glaring clue about what’s up and why just about everybody but the Willie Nelson/WORC/R-Calf lobby is so concerned.

The fact that GIPSA wants to proceed without any sort of cost/benefit analysis is another clue. It’s the same technique the Administration used in pushing its health program through a reluctant Congress.

And let’s be frank here: A very high percentage of those who support the program are “former” producers. That is especially true on the chicken side, where most of the support for this proposal comes from failed contractors while a survey of active chicken growers finds solid satisfaction.

But it extends to the cattle business too. Fellow blogger Max Thornsberry, president of  R-Calf, used to have a grow yard. But he found that he couldn’t compete. He argues it’s because of big packers, but grow yards don’t sell to packers. Grow yards buy calves cheap and resell them to feedyards.

It would not be politically wise to admit your competitive disadvantage is that you can’t afford to pay as much for calves as more efficient producers pay. Better to blame the boogie man packers and hope to get the more successful operators reined in.

To borrow the race track analogy, if you can’t drive as fast as the other drivers, the only way you can win is to get the officials to impose a speed limit.

And the hopeful news?

The GIPSA supporters are starting to sound a bit frantic, presumable because their friends in the Administration have told them they should be. R-Calf put out a bulletin last week begging its members to “flood” congress with support for the GIPSA rule.

“The Packer Lobby (that would be NCBA and its state cattlemen’s organizations) has garnered support from 115 Members of Congress to help them kill the competition rule proposed by GIPSA (Grain Inspection, Packers and Stockyards Administration). They are trying to do what they successfully did to derail the first rule for COOL (Country-of-Origin Labeling). They are trying to get the U.S. House Appropriations Committee to cut USDA’s funding for the GIPSA rulemaking process. This threat is REAL.”

Actually, the congress members want a cost-benefit analysis. That makes a lot of sense, given the fact that previous studies of the captive supply/packer concentration have failed to find significant impact on cattle prices.

In fact, objective study after objective study has found that alternative marketing agreements—value based marketing—has a positive impact on fed cattle prices and consumer demand. The Obama folks have no evidence those studies are wrong. Instead, they resort to name-calling, referring to the authors as “packer friendly” and “packer lackeys.”

They don’t want the light shone on the Obama proposals for a good reason. The rules were put together by activists with their eye on politics rather than economics.

Study the thing. And if Obama’s folks won’t study it, cut the funding.

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