Cattle Feeders Head Contends
NCBA Aware Of Market Problems

AMARILLO — The National Cattlemen's Beef Association is aware of the market situation, says Dr. Richard McDonald, president and chief executive officer of the Texas Cattle Feeders Association.

Returning from NCBA’s summer conference in Reno, Nev., McDonald says two major items of discussion at the conference were packer concentration and the checkoff program.

Packer concentration is being blamed for much of the decline in cattle prices over the past few years, and the beef checkoff is being credited for an increase in beef demand for the first time in 20 years, yet both remain controversial topics.

"At that meeting we had an opportunity to go back and review some of the policies that are on the board that affect the marketing of cattle to see if there were other policies that needed to be added to the books to give NCBA more things to strive to accomplish," McDonald says of the summer conference.

McDonald adds that one of the things the TCFA board wants is for Congress to move more aggressively in their studies of the cattle and beef markets.

TCFA officials met in July with House Agriculture Committee staff members here in Amarillo a week after the Senate ag committee began their own hearings in the nation's capitol.

"They indicated that they would be starting their investigative hearings in the very near future," McDonald says of the House ag committee staff.

At the NCBA meeting in July, McDonald says, discussions included whether or not any adjustments needed to be made in the NCBA's position on concentration in the industry.

"The other thing we uncovered was the chance to keep moving our checkoff program," McDonald says.

The Eighth U.S. Circuit Court of Appeals stayed a ruling by a federal district judge that would have stopped collection of beef checkoff money.

"That means we're able to continue the checkoff," McDonald says. "That means we're able to continue some of the programs that we have going on right now. Probably, the one that is the best of all is the summer grilling program. It's in 6000 retail stores. Not only is the national organization working on that, but 34 state beef councils are supporting that."

McDonald says it's a key to trying to increase the demand for beef.

The most recent survey of cattlemen in June, he says, showed that 66 percent of producers favor the checkoff.

"More important than that," McDonald says, "70 percent said they were glad that we have a checkoff so there are programs that can compete with the advertising programs of both the pork and poultry industries since that's where our real competition is."

McDonald says TCFA has been working with NCBA on these programs.

"The communities in the Texas Panhandle are extremely dependent on cattle feeding, and with their dependence, it's in all of our best interests to do those things that we can do to try to get us back into a profitable situation," McDonald continues.

Speaking two days before the Organization for Competitive Markets and R-CALF hosted a price crisis meeting in Amarillo (see related story), McDonald says TCFA maintains its position that the federal government should stay out of the cattle and beef markets.

Consequently, TCFA and NCBA oppose legislation like the Johnson amendment to the farm bill, which would have prohibited packer ownership of cattle.

While the amendment made it through the Senate, it was eventually deleted from the final farm bill in conference with the House. Still, McDonald says the issue is far from dead.

"We definitely expect something similar to the Johnson amendment being brought up," McDonald says. "Sen. Grassley has already said that he will introduce a particular piece of legislation. He'll try to tie it to the appropriations bill. It will say that 25 percent of the packers' purchase must be from the cash market. The other thing that a lot of people have a concern about is that he's also saying that where producers have worked together to form co-ops, and these marketing co-ops have their own packing plant and they're developing branded products, they will no longer just be able to buy from themselves."

Co-ops will have to buy cattle from outside their organizations under the proposed legislation, McDonald explains.

"That's giving a lot of people heartburn," he says.

Such proposed legislation would place possible restrictions on producer-oriented and producer-generated programs, McDonald contends. Grassley's proposal could have far-reaching impacts on cooperatives and marketing alliances that cattlemen have formed with packers.

"The whole intent is to enter the government into regulating the ownership in the marketing of cattle; that will still be hotly debated in the industry," McDonald says. "That's not going away."

The TCFA board of directors reviewed the issue a couple of times already this year, McDonald says, and initiated a 20-person working team, known as the Marketing Improvement Committee, that involves five people from Texas, five from Kansas, five from Colorado and five from Nebraska.

"Those 20 individuals will come together and come up with recommendations that they can report back to their respective organizations," McDonald says. "It's not up to those entities to go forward with those recommendations but to be a working group to develop the suggestions. The boards will consider those suggestions, and we'll go from there."

This will take time, he says.

"We haven't gotten to where we are overnight," McDonald notes. "As we work through this, we need to make sure that what we're asking for is what we need, a realistic solution to problems. Everybody is trying to move as quickly as we can, but it's not going to be done in the next 30 days."

The Marketing Improvement Committee is an outgrowth of Paul Engler's initiative late last year to work with other cattle feeding states and packers to find solutions to marketing and price problems in the cattle industry.

"We said when the Johnson amendment was introduced last December, ‘Let's look at this, let's see what it does do, let's see what it doesn't do, let's see how we maybe can make some improvements,’" McDonald says. "’Let's see what we need there and what we don't need.’ This is an outgrowth of what I call a six month ongoing effort. It's not like we just woke up yesterday and there it was."

McDonald agrees that that market losses continue to hit cattle feeders hard, and he says NCBA and TCFA are increasing their efforts to address the problem.

"Industry analysts say that in Texas alone, cattle feeders have lost nearly $550 million in equity in the last 18 months," McDonald says. "Nationwide, $2.5 billion in equity has been drained from our industry since 1999."

He says TCFA and NCBA have some concrete and proactive plans to help cattlemen with their market situation, including calling for aggressive enforcement of antitrust and anticompetition laws. More recently, he says, they've called for increased surveillance of the futures market.

At their summer meeting, McDonald says, the NCBA board of directors called for a Congressional investigation into impacts on producers from packer and retailer concentration and possible statutory changes to antitrust laws and anticompetition laws to give producers the same protection as consumers.

NCBA is also working on integrating new mandatory price reporting information into formula and grid contracts as alternative base prices, McDonald says.

For the long term, TCFA has initiated an industry-wide systems analysis of the beef industry, to be conducted by leading business schools across the nation.

"This systems analysis will give perhaps the clearest and most insightful picture we’ve ever had of industry structure from producers to consumers and where profit opportunities for producers might be found," McDonald says. "While this is not a short-term solution to our immediate market problems, this analysis will give us the knowledge we need to remain viable and competitive as our industry and our market continues to change. Most importantly, it will determine if the producer is getting a fair share of the consumer dollar."

McDonald says the live cattle market is hurting because of record supplies of beef and competing meats, reduced business travel, limited confidence in the futures markets and reduced exports.

In response to these problems, McDonald adds, beef checkoff money is being used in a $2.8 million summer grilling promotion involving 6000 grocery stores.

Such promotional programs are what makes the stay of the injunction shutting down the beef checkoff program so important, he insists.

Efforts to increase beef demand are important, McDonald says, because every dollar that winds up in a producer’s pocket from the sale of cattle starts when a consumer purchases beef at the grocery store or restaurant.

"We still have a hard fight ahead, because there is no

single solution that will solve our marketing problems," McDonald concludes.