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RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Cattlemen Shouting Into the Wind 

Aug 23, 2010

The upcoming USDA-DOJ hearing, scheduled this week in Fort Collins, Col., bodes to be more fun than a chicken fight.

And probably louder.

From a recent R-Calf missive, we learn that buses and car pools have been organized in, at least, North Dakota, Wyoming, South Dakota, Nebraska, Kansas, Washington, Idaho, Louisiana, Mississippi and Utah.

We might assume that the “representative sampling” represented by those attendees will favor more governmentwell control of the packing industry. And, I suspect it will be vocal.

At the same time, the National Cattlemen’s Beef Association and the National Pork Producers Association are begging their members to show up as well, and plan a pre-hearing press conference, confab, and the night before — with free grub— to get their message out as well.

NCBA does not favor more governmentwell control of the packing industry.

(I know “governmentwell” is not a word. But it should be. We’ve got too many well-intentioned government efforts underway these days for it not to be. For purposes of this post, it shall be.)

Your reporter is being dispatched to the hearing and will report, for Beef Today and Top Producer , as objectively as his college training and 40 years of journalism experience require him to be. That is how it should be. This will prove a crossroads for the industry and it should be approached with an open mind. You have only to read Dr. Max Thornsberry’s accompanying editorial (How GIPSA’s Competition Rule Disrupts the Packers’ Plan to Control the Cattle Supply Chain) to see there are some compelling arguments as to why the governmentwell should step in to protect the poor old helpless cattle feeder from himself. Oops, I meant protect cattle feeders from “packers bearing contracts.”

On the other hand, there are arguments to be made on the other side of the issue. And that’s the sort of thing an opinion blog is free to tackle.

Today, let’s just consider the basis for all the anti-packer rhetoric we hear. Let us sum it up with this quote, also from R-Calf, in appealing for supporters to attend the Ft. Collins hearing: This is Rural America’s greatest opportunity to begin reversing the unacceptable decline we’re all experiencing in our country communities, and all it takes is for every concerned citizen to be there.

Now, if you can look around your neighborhood and honestly testify that packer concentration and captive supplies are responsible for a significant percentage of the decline in your rural community, please let me know. I’d like to see it.

The decline in our communities is the result of many other factors. I would argue that farm programs—CRP and support programs that promise modest profits for very efficient operations and losses for less efficient operations—have had more to do with that. And let’s remember that consolidation has not been limited to agriculture. Mom-and-pop everythings have disappeared the last 30 years.

Better highways and better cars have contributed to the growth of regional cities at the expense of smaller towns. Farmers have fewer kids, and those kids have more attractive opportunities in town. Technology has made large scale agriculture more profitable, and its expense has limited its use to smaller operations.

There are a lot of reasons that a big cow operation can produce beef cheaper than I can. They have scale. They have management expertise. They don’t have to trailer-haul their cattle to the nearest auction to let some order buyer scalp them so he can buy a newer BMW.

There are things I can do to offset some of those factors, though. I can feed my own calves at a commercial feedlot. It might not make money every year, but year-in, year-out, it will. Especially compared to jackpotting the things at a sale barn so that three or four middlemen can take a cut.

Fortunately, I can, by feeding them at a feedyard with marketing access and expertise I can realize the full value of the cattle through value-added programs that require cooperation between the feedyard and the packer. Fortunately, I know that if some of my cattle don’t fit the packer’s needs, he will be able to sell them to another packer who does need them.

At the moment, sure, it might not pay. That’s because the feeders who understand the market are bidding me more for my calves than I think they’re worth.

And we want to stop that because?

Why do we want to limit my options by putting shackles on the folks who sell the beef I produce? To keep them from making so much money? Even though, over time, their increased productivity has reduced their margins?

Or just to keep them from “chickenizing” the beef industry?

The chicken outfit commissioned a study last year that you chickenization phobics should consider. (Read it here). I’ll admit it’s commissioned by the chickenizers themselves, so I know the Dr. Maxes among us won’t give it much credence. But the USDA numbers should be credible enough for even them.

In general, producer numbers have been declining rapidly in animal agriculture for many years. However, the chicken industry has been somewhat of an exception. According to USDA Agricultural Census data the number of farming operations selling broiler chickens was virtually unchanged from 1987 to 200. Farm operations selling hogs declined from 238,819 to 74,789 over that same period. Operations selling fed cattle declined from 190,008 in 1987 to 76,396 in 2007.”

If the real meat business model is so vastly superior to poultry’s, why are their producers holding steady while ours go out of business? Has the poultry model or the beef model contributed more to the “unacceptable decline we’re all experiencing in our country communities?”

We’re not going to cure an illness we’ve misdiagnosed. If we can keep governmentwell out of it as much as possible, we’ll adjust. We’ve got the freedom now to do that.

I just don’t see why so many people want to change that in the ill-fated hope it will somehow reverse population losses in their neighborhoods. They seem, to me, to be shouting into the wind. When you do that, you have to shout REALLY LOUD.

I bet there’s some of that very kind of shouting at Ft. Collins next week.
 

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COMMENTS (6 Comments)

homegrowncat
oh, and one last thing. You mentioend the word "monopolistic: in your post. Be careful in talking about economic terms. It the cattle industry was monopolstic, that would benefit the cattle sellers. I think what you're looking for is the term oligopsony.

Oligopsony-A market condition in which purchasers are so few that the actions of any one of them can materially affect price and the costs that competitors must pay.

monopoly-Exclusive control by one group of the means of producing or selling a commodity or service
10:26 AM Aug 30th
 
homegrowncat
Something else, one of the panelist at Ft. Collins talked about how she and 6 other familes joined forces and bought a USDA inspected processing plant and now slaughter cattle in the area and do direct marketing. Instead of bitching about packer control of the market, why can't more ranchers do this? Form a COOP and build or buy a plant. Do more direct marketing. Do more regional processing, more regional direct to consumer sells.

If you don't like your current market, nothing in the laws of economics says you can't create another market.
10:16 AM Aug 30th
 

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