Rich Blair: GIPSA
November 5, 2010
Allow me to first say, I have been an active participant in the cattle business for the past thirty years, and thoroughly enjoy the people and love the business. I’ve always been involved in the cow-calf side of it, but also have run stockers and finished cattle in both farmer-feeder and commercial yards. My grandfather, uncle, and great uncle have been past presidents of the South Dakota Stockgrowers. I have watched the futures market on a tick-by-tick basis for all of that time and understand what bargaining position means to the fed cattle market and packer-feedyard manager dynamics. I have spent the last twenty years trying to add value to a commodity product and have tried to help anyone that will listen do the same.
I have followed the proposed GIPSA rule from day one and have tried to analyze it with an open mind. I attended the meeting in Fort Collins, CO, and visited with numerous producers on both sides of the issue. I have read every article, both pro and con, that I could find (and I have found more than several). My initial opinion was that it couldn’t be that bad, but I have come to the conclusion that it is worse than most can comprehend.
In my own opinion, the proposed GIPSA rule will be a colossal failure to most of the cattle industry. The only parties that look to benefit will be a few trial lawyers and animal rights activists. The unintended consequences will far outweigh any benefits to the industry as a whole. After over thirty years of pointing to the packer as a boogeyman, nothing has been accomplished. It doesn’t make sense to continue to blame the packer as the primary adversary to the cattleman. Numerous studies have been made and countless hours and money has been wasted trying to fight the packer, and what have we gained?
Yet many in the cow-calf industry continue to blame the packer for stealing their money. In fact, the cattlemen and feedyards who have tried to work with the packer in the past few years are the ones that are the most successful today. Look at U.S. Premium Beef as an example who, have paid the top twenty-five percent of the cattle premiums of $65-$75 per head each of the last four years. That’s nearly $15 per hundredweight on a light, five-weight calf. It is interesting to me that the proponents of the proposed rule put out the talking point that the distribution of consumer beef dollars to the producer has declined sharply in the last thirty years, but by their own data at the same time the packer share has shrunk as well. My point is that the GIPSA rule is all about the packer and it appears to me the packer has lost margin, too.
For the most part, producers who rode the bus to Fort Collins went to tell Secretary Vilsack that things weren’t working back on the ranch. In reality they aren’t working because of factors that the GIPSA rule doesn’t address. Those factors being higher corn prices that have taken, on average, $150 per head off the price of feeder cattle since 2006. The loss of exports due to BSE has cost producers $75-$100 per head annually since late 2003. The rise in costs of fuel and insurance has taken a big bite out of producer, packer and industry profits as well. In the past five years, those four factors have cost cattle producers way more than any packer schemes possibly could have. If Secretary Vilsack really wants to keep people in rural America, he needs to promote animal agriculture. With today’s technologies and equipment, crop production can be done on a large scale with few people, but animal agriculture is still very labor-intensive. How about the USDA giving us a little help on increasing meat demand instead of promoting meatless Monday’s.
Another glaring problem with the proposed GIPSA rule is in its vagueness. It’s like Nancy Pelosi saying we have to pass the health care bill to find out what’s in it. No one agrees what the regulations mean or how it will affect the marketing of cattle. I have been a market-observer long enough to know that uncertainty in the cattle market is always bearish. We can’t wait 5, 10, or 15 years for the court system and USDA bureaucrats to finalize the rules and give us their interpretation of what they mean.
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This rule attacks the wrong boogeyman, is extremely vague, and will leave it up to lawsuits and bureaucrats to decide how live cattle price discovery will work in the future. In the mean time, the industry will be thrown into chaos and the packer will be forced to bid lower. Indifference and lack of involvement on your part in this rule does not make you immune to its far-reaching consequences. We won’t get a “do-over,” or a mulligan. You can call me a packer lover or any other name you wish, but you better hope you don’t call me “the guy that was right.” Take the time to comment on the proposed rule and educate yourself about it before you do. The comment period closes Nov. 22, so do not delay. Any industry Web site has addresses and e-mail accounts to send comments to.