Nebraska Brand law working group meetings come to a close
LINCOLN, Neb. – It is finished, but far from over.
Cattle and dairy industry reps assembled by Sen. Steve Halloran, chairman of Nebraska’s Agriculture committee, have spent more than 12 hours over four meetings discussing Nebraska’s Brand Act as part of Halloran’s interim study, LR 378, and suggesting changes to make Nebraska’s brand law more user friendly and modern. A report, to be compiled by ag committee research analyst Rick Leonard, is expected before Christmas. However, what the spring legislative session will look like as the pandemic stretches into 2021 is still an unknown variable.
The fourth and final meeting, which was hosted via remote video conference on Monday, Dec. 7, continued discussions from past LR 378 meetings, beginning with a large chunk of time devoted to the contention around a Nebraska Beef Producers Committee proposal that would exempt cattle from inspection when being moved from growyards or background facilities into a Registered Feedlot (RFL), so long as those cattle are accompanied by the sufficient proof of ownership documentation.
THE GROWYARD QUESTION
As previously reported by TSLN, the state’s largest cattle feeder, Adams Land and Cattle Company of Broken Bow, has sued the brand committee and is seeking to get the court to uphold a more than decade-old agreement it had brokered with the brand committee to exempt certain cattle moving from affiliated growyards into its RFL from undergoing a brand inspection. John Sennett, the Broken Bow attorney who has represented the Beef Producers, of which Adams is a member, has attempted to separate the lawsuit issue from the proposal that the Beef Producers have put forward.
As an aside, data may exist which could support a claim that Adams has operated without problems under the exemption agreement at the heart of its lawsuit, (the state has argued that this agreement wasn’t and isn’t authorized under current law). Because of its relationships with its affiliated background facilities, Adams might be able to show that few cattle belonging to other people have been accidentally shipped from growyards to its RFL.
However, Adams was the sole beneficiary of such an exemption agreement. If inspection exemptions were widened to all cattle moving from growyards into RFLs, it could become a bigger headache for the Brand Committee to try to locate those strays when animals are mixed up at the growyards and accidentally shipped to RFLs.
Other Beef Producers Committee members, such as Gottsch Cattle Co., have sought an inspection exemption in order to move their cattle from growyards in western Nebraska to their feedlots in eastern Nebraska outside of the inspection area. However, once cattle move out of the inspection area, tracking down and returning any missing cattle becomes a more complicated task for the committee’s four law enforcement-certified brand investigators, seeing as brand inspectors are limited to performing inspections in the brand area and some adjacent counties in the inspection service area.
Under LB 1200, the Brand Committee proposed a fix that would have seen growyards applying for and being issued a permit similar to how RFLs operate. They would pay a per-head fee based on capacity and would need to follow certain provisions, such as permanent fencing and maintaining records to prove ownership of the cattle in its pens. Cattle would have to be inspected prior to entering a growyard, unless those cattle were shipped from a point of origin in a state with a brand inspection agency and were accompanied by a brand inspection certificate or sufficient proof of ownership, similar to how the only currently authorized RFL inspection exemption works.
GOOD FENCES MAKE GOOD NEIGHBORS
The brand committee proposed several options to make the permitted growyard provision of LB 1200 feasible. One option would be if a growyard either fed only the cattle belonging to an RFL, or if the RFL owned the background facility and the cattle being backgrounded. Nebraska Cattlemen Vice President for Member Services Melody Benjamin said her organization had undergone policy discussion at its recent annual meeting about providing more robust permanent fencing requirements for permitted growyards to strengthen the existing language found in the current law. Using Benjamin’s input from NC members, a draft of that language was written and provided by Sennett to the rest of the working group.
However, Widdowson said that the reasoning for the sole-owner/sole-customer growyard provision under LB 1200 is that even with permanent fencing, there is a potential for cattle belonging to multiple owners comingling, and with the way current RFL program works, if cattle aren’t being inspected before going in to an RFL, there’s a potential for cattle belonging to someone else being shipped from a growyard into an RFL, then being shipped on to a terminal slaughter facility after fattening before brand committee investigators have had a chance to locate and return them to their rightful owners.
The Beef Producers had objections to the sole-owner/sole-customer provision because many of its members do business with smaller affiliated growyards who background cattle for multiple customers, not just the RFLs. While that objection was understandable, Nebraska Brand Committee Vice Chairman Terry Cone, a banker from Burwell who has a lifetime of experience backgrounding cattle, expressed that concern from the Brand Committee’s perspective.
“In a perfect world, [growyard fencing] is all steel,” Cone said. “But in practicality, I’ve been in lots of feedyards and lots of background yards in my life, and especially the backgrounding yards tend to be lots of barbed wire fences, so you have the opportunity for cattle to get mixed up.”
Cone said that it’s a problem for even the best operators, and that he has seen cattle crawl and jump through fences, crawl through tanks and bunks, or break out and mix up with other cattle in the growyard on the night before they are supposed to ship.
“It just happens, and that’s the primary concern why we can’t water it down and give exemptions to people, because suddenly you’re not protecting everybody,” Cone said.
Cone said that exemptions could also increase the potential for fraud, giving the example of a pen being brand inspected and a few head slipping out through the fence before being shipped. A less than honest operator might substitute the missing cattle with a few head of someone else’s so that the numbers match up when it’s time to ship. While that particular type of fraud is not common or wide-spread, the potential becomes greater when those cattle aren’t being inspected.
THE COST OF EXEMPTIONS
In a response to a question from Halloran about the cost to the brand committee from granting exemptions, Widdowson said that under the current RFL audit structure, since cattle are inspected by a brand inspector going in to an RFL, the numbers of cattle in pens usually match up with the proof of ownership documentation that RFLs are required to maintain. Any discrepancies are usually easy to sort out because of that “check-in” process when cattle enter the RFL. Because the cattle are inspected going in to the RFL, they can be shipped for harvesting at a packer without undergoing shrink or stress from a final inspection.
“If we go to an exemption standpoint to where cattle are just moving around, it’s going to be a much more intensive process and take much more time,” Widdowson said. “I think the feedyards are probably going to see way more of us than they’re used to because we’re going to have to be much more diligent and probably put our hands and our eyes on the physical cattle way more than we do today, just because there wasn’t that physical inspection prior.”
An increase to the man hours would mean an increase to the committee’s expense. Sennett had earlier in the meeting repeated a statement he’s given at past meetings. His projections of the brand committee’s budget based on its annual report indicated that the committee is currently operating in the black by nearly $1 million. He used this data point to buttress his argument that whatever expenses the brand committee would incur from offering those exemptions could be absorbed without breaking its budget.
“Not inspecting cattle in a confined facility isn’t going to put (the brand committee) into the red,” Sennett said.
However, Independent Cattleman of Nebraska (ICON) member David Wright was quick to object.
“If they are in the black, which is the way it has worked in the past, that’s an opportunity for the committee to lower the fee for everyone involved, that’s the way law is written,” Wright said. “It isn’t written that, ‘Gee, they’re in the black, now some of us can get an exemption.’”
However, the very nature of revenue the brand committee collects from inspections and fees is somewhat volatile itself, and varies widely due to the movement of cattle and other factors, such as drought and market conditions. Widdowson said that the intent of LB 1200 was to make the fee structure more in-line with the services provided by the brand committee, so that the fees assessed for a service would pay for the service provided. This change would help solve a long-standing complaint that one segment of the industry is, in effect, subsidizing the inspection service for another. However, the potential fee increases for other services, such as brand renewal fees, could potentially destabilize those core revenue streams if people decide not to renew a brand.
Widdowson has also stressed that the fees included into LB 1200 were the maximum “caps” for the fees under the statute. He said that the Brand Committee had figured those fee caps by building in for seven years-worth of inflation. This measure was intended to give the brand committee room to operate without having to return to the legislature every two years to request an increase (or decrease) to the fee structure.
LB 1200’s generous $0.075 cents per-head for one-time capacity fee schedule would have provided relief that has long been sought by the Registered Feedlot sector. While a 100,000 head feedlot could see its fees reduced from $100,000 per year to just $7,500 per year, in exchange, the frequency of RFL audits would be increased, with a 100,000 head capacity feedlot needing to undergo monthly audits versus the current schedule of four audits annually.
Under The Beef Producers proposal, they are prepared to pay $0.10 per head for the one time capacity of an RFL, meaning a 100,000 feedlot would effectively pay $2,500 more in annual RFL fees than it would under the brand committee’s original proposal. Sennett said they were prepared to pay more in order to keep the audits to the current quarterly basis.
While the Brand Committee has been pretty insistent that inspections and proof of ownership are necessary to maintain integrity and protect individual cattle ownership, it has been willing to embrace technology, with LB 1200 containing a number of provisions for alternative “electronic inspection,” using authorized EID or RFID tags.
While the brand is currently the only proof of ownership that currently holds up in a court of law, EID or RFID could potentially be used in conjunction with physical brand or bill of sale as a method for proving ownership and providing the committee with a trail to follow when investigating stolen or missing cattle.
“What I see is that we’re still requiring proof of ownership through the bill of sale or the brand,” said ICON’s Don Cain, DVM of Broken Bow. “But if you’ve got a proof of ownership, and you’ve got comingling going on, then you’re using the electronic device as the perfection to identify the individual (cattle) that the proof of ownership goes to.”
While the finer points of just how “e-inspections” would work still need to be developed, tested and refined, Widdowson said that any approved method would at the very least require a tag that meets specific unique number requirements as well as certain integrity standards for readability and retention. Cattle tagged with that unique 15-number RFID number could then be registered with the brand committee, and so long as there was no change of ownership, an operator could scan the tags and transmit those unique numbers to the brand committee, then move the cattle associated with those unique numbers as needed.
Under such a setup, the committee would then have an electronic record to indicate cattle have moved from one point to another. Rather than assuming the cost and stress of running cattle past a committee inspector for a physical brand inspection, an e-inspection could be performed by the operator and verified by the brand committee to meet the proof-of-ownership requirements at a significantly reduced cost compared to physical inspections.
For producers who are already using an approved EID technology to identify animals and track performance data in their herds, it could be a potential cost saving measure and also eliminate some of the associated man hour costs for the brand committee with regard to sending personnel out to perform physical inspections. However, the price point and cost of purchasing the tags and reader equipment, plus the potential issues of inherent faults and errors that comes with any technology means some operations may be unwilling or unable to shoulder the cost of adopting EID for use with their cattle.
THE DAIRY INDUSTRY
Chris Bousquet, the executive director of the Nebraska Dairy Association, said that while he appreciated the bulk of the discussion being about beef cattle, he said that the dairy industry gets no benefit from the current brand law, and that he believes exempting dairy cattle from the brand law will not cause issues.
“It won’t tarnish the integrity of the brand inspection, and the livestock verification/identification issue for the beef industry,” he said. “We get it. We understand that the beef industry has a problem with their fencing, and that our worlds are completely different. The dairy industry operates completely different from the beef world.”
Bousquet said that he was carrying the message from the dairy farmers that the industry feels that if the beef industry feels it needs brand inspection, they are fully for it. He added that any animals that the dairy industry puts in to the beef supply, such as dairy animals that are destined for slaughter, would undergo the brand inspection to verify proof of ownership.
Because some dairy farmers in the brand inspection area background their heifer calves at heifer development yards in other states before returning them to the farm to enter the lactation stream, the dairy industry has proposed an inspection exemption for dairy calves under-30 days old when moved out of the brand inspection area without a change of ownership. This would also provide for bio-security at dairies and eliminate the possibility of brand committee inspectors from accidentally introducing a disease to the facility.
“Even those couple changes would make a world of an impact for us,” he said. “If you want to inspect our beef animals, we’re all for it. Let’s inspect them.
“But I think it’s very apparent after listening to the discussion that this program and the Brand Inspection Committee is intended for the beef industry and not for the dairy.”
Steve Wolfe, a dairy producer from Kearney who sits on the board of the Nebraska Dairy Association said that the brand might have applied to the dairy industry about 20-25 years ago, when dairies weren’t confined and cows were on pasture where they could comingle with cattle from other dairies.
However, that’s not the case today.
“We’ve followed the swine and poultry industry,” Wolfe said. “I’m not so sure that’s a good thing, but that’s the way it’s gone. We’re totally confined. The closest dairy to me is 40 miles, and I’m not going to have comingling.”
Wolfe said that he understands the concerns about exempting the dairy industry from inspection, but he argued that half of the counties in the state, namely the counties to the east of the brand line, are already exempt from inspection.
“If they wanted to be part of the program, they’d get with their counties and lobby to be part of the brand area,” he said. “The swine industry and the sheep industry are exempt. The poultry industry is exempt, and we’re following that because we’re totally confined, and I can see those concerns from the feedlot side as well.”
But ultimately, the dairy farmers feel that it’s a beef issue, and that they aren’t gaining anything from the brand inspection issue, and that their exemption won’t deter from the issue.
The dairy industry would also like an exemption for adult female dairy cows. Under the dairy industry’s proposal, Wolfe said inspection exemptions would only apply to milking cows at dairies that are registered and permitted as a dairy with the state (of which there are 22), and only apply to animals that are actively producing milk for human consumption.
“We have to have a state dairy permit to sell milk, so that would be easily obtainable,” Wolfe said. “Someone with milk cows in a shed out back wouldn’t qualify under that.”
Benjamin expressed NC member concerns that some beef calves are indistinguishable from dairy/beef cross calves, with the implication that exempting dairy calves from inspection could provide a potential avenue for a would-be thief to smuggle stolen calves across state lines under the guise that they’re transporting dairy calves. However, illicit activity with dairy calves would be much more difficult given the registered dairy permit requirement contained in the industry’s proposal.
ICON’s David Wright was insistent on protesting the exemptions, but Wolfe tried to argue his point.
“We’re not exempting dairy cattle (from inspection) when they go to slaughter, because that’s when they become beef cattle,” Wolfe said.
THE END GOAL
Halloran said that the information shared during the process will be helpful as the agriculture committee works to develop legislation this spring.
Rick Leonard said that the summary of the discussions will be available for working group members to comment on before Dec. 31, at which point reports are usually finished.
“I would invite anyone who wanted to offer comments about the value of the brand law, its utility, and its purpose,” Leonard said. “Do we have a statement that the brand law still is an important part of the livestock sector?”
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