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OCM Part V - Opposing Innovation and Adaptation PDF Print E-mail
Written by Steve Dittmer   
Tuesday, 18 January 2005

Over the last four issues, we've begun delving into the Organization for Competitive Markets (OCM), an agricultural "anti-trust organization."  Attorneys and activists hope to use anti-trust laws to break up the packers and retailers, eliminate contracting and alliances as tools for cattlemen.  By default, everyone would be forced back to auction markets as virtually the only available widespread market left for selling cattle.  Feedyards would only be allowed to sell to packers direct on a cash live basis.  No contracts or grids would be allowed.

Would you like to be involved in a business where the "mark-up" is 10 percent or one where it is 50 percent?  Of course, without knowing the costs that need to be covered by that markup, you can't really answer that question.  But perhaps the odds are better that there will be a few points of profit left out of a 50 percent markup than a 10 percent markup.

Dairy producers have been doing that very thing, even using their coop and checkoff funds to purchase or buy stock in valued-added sectors like cheese factories, ice cream and frozen treat companies.  It gives dairy producers a chance to participate in sectors where the margins are better than just producing milk.   It also spreads out their risk and diversifies their capital use.

Of course, OCM not only discourages that kind of thinking, they want to destroy the efficiencies of scale at the packing and retailing level to lessen those margins. They want us to go back to the days of many small packers, eliminating efficiencies of scale and capital that enable the big packers to weather the tough times in the packing business.  That would further reduce packers' ability to pay for raw material (cattle) and, by making animal products more expensive, make them less competitive at the retail and foodservice level, compared to poultry, seafood and produce.  One only has to watch the drop credit to see a pretty responsive measure of what higher costs do to packers' ability to pay more or less for cattle.  Overall, the competitiveness of the meat industry against competing center-of-the-plate industries would be compromised.

OCM claims the bill that would have banned packer ownership of livestock as one of their signal accomplishments.  That's a whole subject in itself; an un-American precedent that would hobble or eliminate the very alliances that enable the smaller cattle operations, as well as larger ones, to participate in the better margin segments of the beef chain.

OCM has also developed the Cattlemen's Competitive Market Project (CCMP), a special effort to fight concentration in the packing and retail industries, so-called "captive supplies" and wage anti-trust efforts.  This project has a board of directors of ranchers, feeders and auction market operators, plus an "attorney advisory committee."  It will be funded by a per-head collection taken at auction markets and feedyards on a voluntary basis.

Interestingly enough, they claim not to oppose what they term "value-added marketing ventures."  Yet they specifically oppose alliances that work with "existing packers" because they view those ventures as "captive supplies."  But they have worked for legislation that would make it illegal for they themselves to start a packing plant, because if they owned the plant, they would not be able to own the cattle.  So exactly how they would expect alliances to slaughter and process cattle is quite a puzzle.

Their bottom line here again is raising enough money to bring lawsuits and nurture legislation that would break up the free enterprise agricultural system that has evolved over time.  Not that our present system is perfect or doesn't need fine tuning.  In fact, it is the very changes and adjustments that are evolving in the marketplace today that these people do not like.  But many cattlemen in America believe adapting, innovating and fine tuning the present system does not require laws spelling out who can own cattle and when, setting limits by law on how big feedyards or packers or retail chains or steak chains can get, or denying cattlemen the right to contract with any sector of the food chain they wish. That's the message the AFF is intent on spreading.

Next Time: An Op/Ed column ? Liberals First.

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