AFF Sentinel Vol.4#36

Premiums to Cow-Calf Producers, Feeders Could Be Prohibited By Legislation On Livestock Ownership

Colorado Springs, CO Oct. 23, 2007 Proposed legislation, especially Senate Bills 622 and 305, could be up for a vote Wednesday. They would have devastating effects on livestock alliances, branded programs and prices and premiums for cattle and pigs.

Washington observers tell us the Senate could vote to take away livestock producers rights this week by making illegal the alliances, "natural" programs and branded programs in which producers, feeders, packers and retailers share ownership of livestock. Such programs have boosted beef quality & safety, provided premiums to producers and boosted feeder cattle prices by providing new markets.

Retail prices have set record after record in the 21st century. The growth in overall beef demand has been unprecedented, stemming from increased quality and consistency and new convenience- oriented products. Pork producers have been enjoying top prices. Yet populists want laws to forbid the tools that have evolved to fuel this progress.

Consumers demanding the same quality and tenderness every time requires consistent management of the meat production chain. Retailers and foodservice outlets need tons and tons of meat every day - of the same quality and aging and size they needed yesterday. The vagaries of producer whims to produce this or that and deliver it only to the cash market when it's convenient for them do not fit the modern food system. Food and meal sellers need to know what they are going to get every day. And they want to know it months into the future. They have contracts with ketchup suppliers and soft drink suppliers to run their operations smoothly. Why should Congress pass laws so that they could not get such contracts with meat packers because meat packers have been forbidden to contract with their suppliers - cattle and pig feeders - to supply them with beef and pork? Why should Congress be micromanaging the supply chain to steakhouses and groceries and fast food chains?

In a letter to Senate members last week, R-CALF demonstrated its lack of comprehension of the modern food system, begging them to roll back the quality, profitability and consumer satisfaction gains of recent decades.

Decrying current trends "restricting market access," R-CALF demanded a return to cash only sales of livestock. Yet that truly would be a step back in time restricting market access. Today's market, with forward contracting, alliances, join ventures, the futures market, selling live at auction markets, selling "in the beef" and selling live cash direct, provides the livestock producer with more marketing options than ever in history. In fact, many smaller feeders have taken advantage of alliances and marketing agreements in preference over cash markets to distant packers at prices determined by market conditions occurring within a week or two of optimal slaughter time.

R-CALF's outright hatred of packers blinds them to the facts: that packers are the intermediate channel to the consumer, that packers are dependent on hundreds of much smaller feeder suppliers and that the demands of large processing facilities and even larger customers provide competition impetus the cash market could not begin to properly satisfy on its own. Instead of the lack of competition R-CALF contends, the fierce competition for a smaller supply of cattle has forced packers out of business and forced the survivors to pay more for cattle than they can make on their contracts and sales, causing large losses in recent years. R-CALF somehow interprets lower slaughter hours and fewer shifts as signs the packers are making so much money they don't want to make any more.

Proposed legislation would micromanage packers by forcing them to buy at least 25 percent of their supplies on the cash market, when they already buy over 60 percent of their supply cash direct, on average. Other legislation would forbid packers to own cattle at all, yet only five percent of the cattle fed are outright packer-owned. Other legislation would ban packer participation in alliances.

The "ever shrinking cash market" R-CALF decried is because many cattle and pigs are going through lucrative, more planned business options the marketing agreements and contracts provide. Alliances are successful because they can yield anything from $10-50 more/head to their producer participants. Cattlemen, pig producers and packers sign contracts because both parties are getting something they want. Both have other options, if those were preferable. Why should Congress make livestock businesses second-class citizens, unable to do modern business like other industries?
They should be allowed tools other businesses use to manage production and supply to satisfy consumer demands. That includes sharing ownership of cattle or pigs in alliances and branded programs with packers or retailers.

There is a very real danger that the U.S. Senate could take away the rights of livestock producers. If they wish to retain these rights, they need to contact their Senators now.

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