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RSS By: Steve Cornett, Beef Today

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Change for chumps

Jan 27, 2009

By Steve Cornett

For beef producers of a certain age, Congress could hardly have broached a more loathsome issue than another dairy buyout. Now? With cattle feeders losing $150 or $200 per head on every steer they sell?

Gosh, you can feel sorry for dairy farmers losing money without being chump enough to think that’s a good idea.

Yeah. I said “chump.” That’s one of the official terms for anyone who might consider such an idea. Such a person is correctly referred to as a chump. A dum-dum. 

It would come at about the worst possible time for the beef business, on the heels of this long bout of losses. You’d expect cattlemen of all stripes would get up in arms about a program that uses their taxes to subsidize dairy farmers to dump their beef into their already wrecked beef market.

Sure enough, all it took was the whiff, a mere sniff, of such an action, to stir up the National Cattlemen’s Beef Association last week. The dairy lobby sent feelers to the House of Representatives about including a dairy buyout in the stimulus bill. NCBA, bless their souls, came unglued immediately.
 
President Andy Groseta reminded Congress of the consequences of the 1986 buyout. You may not remember that awful time, but many of us do, and we don’t ever want to see it again. It came right after the industry had clawed its way out of a backlog of overdone fed cattle. And just as it looked like profitability would return, the government paid dairy farmers—some of them millions of dollars—to haul their cattle to the slaughter house. That added some meat to the market, but more harmfully, it crushed the beef industry’s already cracked morale.

I remember interviewing one dairyman who had taken a big chunk of cash from the government, sold his land on the outskirts of some town in California and plopped down seven figures’ worth of cash to buy out some poor broke rancher in Missouri. It was, as I recall, hard for me to remain polite to the guy.

Andy Groseta must remember it too. “The 1986 buy-out resulted in a 25% decrease in the price paid to producers for beef cattle and sent the cattle markets to the lowest point we have seen in the last 30 years. In total, the beef industry saw a $1 billion loss from the buy-out in 1986,” Groseta reminded Congress in a strongly-worded letter.

Within hours, state associations in Texas, Kansas and Nebraska had followed Groseta’s warning with their own, equally troubled missives to Washington. “We believe free market, supply and demand principles work best and government should not be benefiting one ag sector at the expense of others,” snorted a letter endorsed by the board of the Nebraska Cattlemen. “Additionally, the beef industry is currently suffering the largest profitability losses in history and this is not a good time to be forcing additional supply on to our markets.”

Were I writing those letters, I think I would have been tempted to end them with a snide little “uh, duh!” 
 
This is not to argue in favor of low milk prices, and the fact is that the laws of supply and demand being what they are, if the dairy industry needs to kill 320,000 head of cows to reduce milk supplies enough to return them to profitability, 320,000 head of Holsteins will probably die. Unless, of course, the dairy lobby succeeds in talking Uncle Sam into more subsidies to raise prices enough so they can buy more cows to ask the government to buyout later.
 
That would be the one I would expect. The dairy lobby has a proud track record of that sort of thing.
 
Anyhow, not since the Farm Bureau warned us of a “cow tax” have I seen as many cow people as upset by words from Washington.
 
Who we didn’t hear from was the boys at R-CALF and the United States Cattlemen’s Association, where there is apparently too much concern about implementation of the COOL law for folks to pay much attention to such matters as the government dumping extra beef into the chain.
 
You might have guessed that those guys in the protectionist groups had been unhappy with the Bush Administration’s final rule implementing COOL. Their main concern is that it doesn’t require all U.S.-product to be labeled as such. The rule would allow a packer who killed even one animal a day at a plant to label that whole day’s product as a product of U.S., Canada, Mexico.
 
That change got Canada to drop their WTO suit against the COOL law, but it failed to suit the folks who believe that many consumers will be willing to pay extra for U.S. beef. They may be right, though it seems nobody in the post-harvest chain believes it is worth the expense.
 
But for now, it’s all gone premature on us, because Obama quickly put on hold all Bush rules that have not taken effect. There seems to be a good chance that the new administration will reopen the COOL regulations for another round of public comment. As the R-CALF folks point out, the new president was among the senators who asked the Bush administration to tighten down on the multiple-origin rules. 
 
So we shall see what happens next. One gets the idea that with so many chumps in Washington the days that we may spend a lot of the next few years wondering what happens next.

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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COMMENTS (61 Comments)

Anonymous
It wasn't a government BAILOUT or BUYOUT! IT WAS PAID FOR BY US DAIRY FARMERS TO BUYOUT THE COWS TO CULL THEM! WHY ARE YOU SO CLOSED MINDED!?
10:49 AM Feb 4th
 
Anonymous
Well the average dairy is going to lose $50,000 just this spring. With milk prices at $9-10 and most people's break even is at $15. So far milk prices aren't even forecasted to get to breakeven until later in 2010.
10:48 AM Feb 4th
 

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