McCullough: 50 percent negotiated trade could be the answer
Secretary, Independent Cattlemen of Wyoming
With the advent of the COVID 19 virus, those unfamiliar with the workings of the beef industry were shocked to learn that beef packers were charging large increases for boxed beef and that at the same time had dropped the prices they were paying for the live cattle ready for slaughter, thereby making huge profits at a time when the producers of cattle and consumers were under stress dealing with the virus and weather related losses. How did this happen they ask?
Directors and members of ICOW, other independent cattlemen organizations and R-CALF USA along with other groups like Western Organization of Resource Councils and consumer groups have been battling the very issues which have lead to this breakdown in the cattle industry for more than 25 years. We are not surprised at this blatant disregard for U.S. producers and consumers. We were warning the USDA, our Congressmen and other government departments back when there were only 6 major packers. Then again when there were only 5 and again when the number dropped to 4. We raised the issue of national security when the U.S. government allowed Brazil to purchase one of the four and again when they allowed China to purchase Smithfield. No one was listening!
How did the U.S. beef industry get to this point? Enforcement of the Packers Stockyards Act was mostly ended and the big packers were allowed to self-enforce and self-regulate, while small packers were enforced and regulated to death and any new startups were refused permission to operate. Vertical integration became the goal to benefit the big packers. The mandatory beef checkoff funded the National Cattlemen Beef Association (NCBA) to push for regulations that benefited the big packers. Packers used captive supplies of live cattle to manipulate the prices downward and even go out of the cash market for weeks at a time. Packers wanted Country of Origin Labeling (COOL) ended so USA producers with the safest beef in the world cannot label their product, but the packers can label foreign beef as American by importing and repackaging thereby using the good name of USA producers for higher prices and deceiving the buying public. Shameful! To quote Leo McDonnell, “This is not a fairness issue this a corruption issue.”
What is the solution? Obviously, the ideal would be true capitalism without government favoring one sector over another. USDA inspectors of meat for safety should return to the big packers as it already is for the small packers. Packers should buy cattle on the cash market where true price discovery is. The corrupt Beef Checkoff should be ended. COOL should be mandatory so consumers can choose USA born fed and slaughtered beef that they know is safe. The USDA needs to put animal health first and stop all imported beef and live animals from foreign countries that have serious animal health issues such as Foot and Mouth Disease.
But realistically, we can now help R-CALF USA to get Congress to pass bill S. 3221 with the amendments that will require the big packers to buy 50 percent of their cattle on the open cash market and thus end their ability to manipulate the market downwards to benefit themselves; that prohibits unpriced contracts which the packers use to benefit themselves when they manipulate the market down before paying the feeder for the contract cattle; bans packers from ownership and control of livestock for more than a few days; makes it unlawful for packers to not provide carcass data used to compute price and eliminates the “business justification” packers have used to avoid prosecution; prohibits retaliation by packers; restores mandatory COOL; clarifies that farmers need not show harm to competition to show a violation of Packers and Stockyards Act. This is a comprehensive bill to restore competition to our marketplace.
One final and important point: R-CALF USA is unaware that the beef packing industry was restrained in any way in its ability to timely procure the cattle they needed when the cash volume was at or above 55 percent from 2004 through 2005. Perhaps this fundamental observation will help the cattle industry arrive at the necessary minimal percentage for weekly cash cattle procurements.
The Independent Cattlemen of Wyoming are in full support of R-CALF USA’s efforts to restore competition and fair markets for all segments of the Beef Industry.
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A short essay by Justin Tupper, Vice President, United States Cattlemen’s Association