AFF Sentinel Vol.2, #56

Real Freedom Vs. Free When Some Say It's Okay

Someday our control of genetics and management of animals may be so perfected, we will produce cattle of known eating quality and yield - similar to knowing the horsepower, top speed and expected life of an engine before it's ever fired up. Until then, we need some ways of trading in this unknown product. Those trading methods need to simultaneously allow the buyer to pay no more nor less than what he can profitably sell now, while encouraging, through premiums, the production of more of what the buyer can make money on in the future. All of this must reflect as accurately as possible satisfied demand from the consumer.

That's what value-added selling and contracting is all about. Value-added selling means paying more for real value. Most contracts include a schedule of premiums and discounts paid depending on what we find out is the animal's post-slaughter value. With a biological product, the production chain not only needs flow management, but some businesslike way of dealing with the unknowns as well.

Putting additional layers of government regulations and bureaucracy on the market is not the way to carry the industry forward. Ted Schroeder, professor of livestock marketing at Kansas State University, said government regulated markets are always less efficient and less effective at coordination and meeting industry and consumer needs than market-driven solutions.

We don't even have to take anyone's theories or word to prove that. The theories of centrally planned and regulated government economies have been thoroughly tested by socialist and communist governments around the globe. They have proven such economies are abysmal failures.

Schroeder feels the most useful place for government in this system is supplying the information everyone can use in discovering true value. If there is a need for more government reporting on forward contracting prices, conditions and trends, the GIPSA final report should provide guidance in this area. But Schroeder feels the proper role of government is to facilitate information collection and dissemination so businesses can negotiate effectively... not mandating the transactions or forms of commerce.

Would the industry benefit from totally abolishing the cash fed cattle markets? How much faster would we weed out poor genetics and poor doers if fed cattle could not be sold live for cash, based on averages? How many decades would we gain? If packers and the rest of the food chain always paid based on actual post-slaughter value (instead of averaging out the bad with the good), how much more accurate would the price signals be going down the cattle production chain?

Neither the cattlemen who would benefit from such a system nor the packers, retailers and foodservice people who would love it, have proposed a ban on the somewhat haphazard, misleading method of cash cattle sales. However, can you imagine the cries of outrage if someone did propose such a bill -- restricting marketing freedom, in the interest of reducing the roulette factor for consumers... truth in labeling, as it were? We suspect the boot would not fit so well on the other foot.

What is the reason for trying to drive everyone back to cash cattle? We suspect some folks want to be able to sell whatever they produce, without penalty of a critical market. They do not want to go through the hard work and make the changes necessary to produce only what consumers value. That's the lazy way out. It is not the recipe for making an industry innovative, responsive to the customer and ultimately successful.

Link to HR 4257 Rep. Pomeroy