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Old Hands Try Old Tricks to Cripple Cattlemen's Marketing PDF Print E-mail
Written by Steve Dittmer   
Wednesday, 17 June 2009
AFF Sentinel Vol.6#18

Congress and Obama To Criminalize Methods of Producing Top Beef?

Opponents of the current wide array of cattle marketing options are hoping to harness today's trend toward overbearing federal government interference to cripple programs cattlemen use to make money from hard, smart work.

The Senate bill would damage or eliminate the branded and natural beef programs, breed alliance marketing programs and basic forward contracts many cattlemen use to lock in marketing dates and premiums, leverage improved genetics and secure financing. Much of the best quality beef in supermarkets and restaurants comes through special programs anchored in contracts between cattlemen, packers, retailers and foodservice chains.

The legislation would turn back the clock on livestock marketing options, allowing only cash sales, contracting for delivery in less than seven days or auction market sales.

The senator who introduced the bill (S. 1086) again, said the legislation would "stop years of unfair and manipulative meat packer practices ..." Yet it is cattlemen who originally asked for forward contract opportunities, cattlemen who founded many beef alliances and cattlemen who initiated agreements with many packers and retailers. Some of the best quality beef, enjoyed by consumers at fine steakhouses and at home, comes from business alliances governed by contracts among cattlemen, packers, retailers and foodservice operations. If the chain of business agreements between cattlemen and packers is broken by Congress, the whole arrangement becomes no longer viable for many participants.

Cattlemen who commit to supplying cattle for premium programs invest heavily in top genetics and tightly manage breeding, animal health and nutrition programs. They need the guarantee of extra dollars at marketing time to recoup their investment. Natural programs, which require cattlemen to forego cost savings from growth promotants and incur losses from animals that drop out because of sickness, likewise need contractual protection that their extra costs will be eligible for reward.

Instead, these senators are trying to punish these top-notch cattlemen, outlawing an opportunity to make money and serve consumers. They want to make it criminal to bring to market, identify and brand beef with characteristics consumers prize and willingly pay premiums for!

Sen. Mike Enzi (R-WY), Byron Dorgan (D.-ND), Chuck Grassley (R-IA) and Tim Johnson (D-SD) claim they are attacking packers but unquestionably, it is cattlemen they will hurt, through loss of premium programs and revenue and long-term damage to consumer demand. For years, consumer surveys showed shopper and diner displeasure with beef unpredictability. It is the improved beef consistency and predictability - plus additional consumer- requested categories like natural beef - that have been major factors in resurging beef demand and record average cattle prices in the last decade. Astonishingly, these Senators oppose these better outcomes for cattlemen and want to return consumers to more hit and miss beef meals.

Enzi actually referred to packers who participate in these programs as "bad actors," blatantly disregarding contracts as agreements approved and signed by both packers and cattlemen, not some one- way extortion forced upon cattlemen by packers. In fact, for many smaller cattlemen located farthest from major packers, alliances and branded programs are a great opportunity to get buyer attention and premiums from packers.

Charges that packers force cattlemen into contracts because packers own fed cattle don't hold water because government-verified data show packer- owned cattle only make up about five percent of total production. Packers don't "control" contract cattle until they have purchased them from a willing seller. Manufacturing businesses worldwide protect their production ability and their customers by contracting for raw material months or years in advance. Why shouldn't packers be able to, especially given the huge volumes of perishable, specification meat they contract to provide to customers?

Charges of uncompetitive markets are belied by record average price trends for record supplies of beef for most of the last decade. Numerous independent studies have found markets competitive. Enzi actually said packers had the opportunity to "manipulate local market prices," yet cattle markets have been national for decades.

Enzi claims his legislation would stop the packers' ability to "manipulate prices." However, the Senator did not explain why -- if packers had that capability -- they've been manipulating prices to lose money for most of recent years. That fact is indisputable: all but one of the major packers are publicly traded, publicly reported companies and all are required to report profit and loss figures to GIPSA.

Incredibly, the senators claim their legislation would provide "more options" for cattlemen, allowing them to "continue choosing the best methods" for marketing. The truth is that many of the best options for both cattlemen and consumers would be snatched away by government fiat.

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Last Updated ( Friday, 31 July 2009 )
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