New packing plant already looking to the future

Cutters at the CS Beef Packers plant section out ribeyes and send them on down the line.

The ink was hardly dry on the National Cattlemen’s Beef Association (NCBA) Taskforce’s Subcommittee framework for boosting fed negotiated cash marketing when a long list of associations—mostly but not all cow-calf and stocker operators—went around the framework and straight to Congress.

Some 17 cattlemen’s groups signed a letter to Senate Agriculture Committee Chairman Pat Roberts (R-KS) and House Agricultural Chairman Collin Peterson (D-MN-7), asking for hearings on a bill introduced by Nebraska Sen. Deb Fischer (R).

The bill called for a contracts library, more marketing information and within one year, the “secretary shall establish regional mandatory minimums,” established by USDA’s Agricultural Marketing Service, of the “quantity of cattle purchased for slaughter by a packer in that region each slaughter week, the minimum percentage of such cattle that is required to be purchased through negotiated cash purchases or negotiated grid purchases…” The requirements would apply to federally inspected plants processing as few as 482 head/day.

Of the associations signing, only four—Illinois, Iowa, Nebraska and Minnesota—would have a substantial contingent of cattlemen who regularly sell fed cattle directly to a packer. Is there a single member of Congress who has sold to packers directly?

Groups petitioning Congress are often asking Congress to do something to someone else. Yes, cow-calf and stocker operators are part of the industry and fed cattle marketing indirectly affects them. But they are asking Congress to do something to someone else—feeders and packers.

The associations explained that the industry was recovering from two “black swan” events: the Tyson fire in August of 2019 and the COVID-19 processing bottlenecks. The news release said,

“This legislation would assist producers as they fight to recover from residual consequences and provide long-term structural changes to the cattle markets.”

In one sentence, these groups pointed out a problem with how they were proceeding. The Tyson fire and the COVID-19 crisis were in the “acts of God” category. You can go to church and pray something like that doesn’t happen, but building in the industry redundancy to make such things not a problem are prohibitively expensive. The industry had never seen anything like either and we may never again.

Congress may have some members who consider themselves god-like, but the legislative body can do little or nothing to prevent or help the industry cope with “black swan” events. That leaves the “long-term structural changes to the cattle markets.” Putting “long-term” and “structural changes” in the hands of Congress is, frankly, a terrifying proposition. On the one hand, the statement admits that the move is long-lasting and far reaching. On the other, they’re giving Congress the charge of making fundamental changes to a system that has proven itself successful in improving the product the consumer is demanding and paying record prices for. The system needs some adjusting but does it really need structural change?

American consumers were panicked when they couldn’t get enough beef this spring. Many of them are pleased enough to go to the meat case and pay $15-20 for a Choice rib steak or double that at a steakhouse. How bad is that?

The cow-calf stocker guys weren’t complaining in 2014 when calves were bringing fabulous prices and it was taking nearly two grand to lay in a feeder to the feedyard. The problem is the cow-calf operator is not a margin operator. He is the first guy in the production chain going out and the last guy in line when the money gets passed back. That is because of the biology of the business and the necessary steps in the production chain. Retained ownership, breed programs, AMAs and alliances were, in part, attempts to allow the first/last guys a share of profit later in the chain. But not every cow-calf or stocker operator has the time, management skill and scale to participate. But is that the system’s fault?

Not all issues of economics, efficiencies, scale and operational realities can be perfectly solved. I think most of the industry is willing to discuss some more ideas for handling complex interactions. But congressmen and government bureaucrats? I don’t see them having the solutions for the cow-calf guy being the first/last guy in the chain when the industry invented the solutions above have helped, but not solved that structural problem.

The bill in question does not specify enforcement details. It just refers to the P&S Act and if one does some digging elsewhere, provides for a $10,000 penalty/violation (7 USC Ch. 9, SC 193).

This issue is complex and Congress is a dubious source of solutions. — Steve Dittmer, WLJ columnist

(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter.)

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