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Cattle R a nching

A traditional industry in modern times

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MT producers, feeders are self-advocating internationally, domestically and on the internet Pam Burke community@havredailynews.com At a time when cattle prices are low, the global market is uncertain and meat producers are facing heavy public scrutiny on social media, ranchers are working to secure their business, imagine new market models and wage a measured battle to improve public image. Economically, the last five years have been turbulent for cattle producers — on domestic and foreign fronts and many are getting hit hard as calves go to market this fall. “Well, we’re certainly on the downside of a market, but there’s indications that things are going to get brighter,” said Jim Steinbeisser, 1st vice president of the Montana Stockgrowers Association. The futures market is prompting a better price for larger calves rather than the smaller ones, he said, because the larger calves will be ready to butcher at a time when the futures prices look favorable for feedlots. Prior to the Thanksgiving holiday,

Courtesy photo/Rene Brown Calves wait in an alley on Tom and Rene Brown's ranch on the south side of the Bear Paw Mountains Nov. 13 to be shipped to auction. Muddy conditions from rain and snow required the Browns, assisted by family and friends, to haul their calves off-site to corrals that the semitractor-trailer could access. Steinbeisser said finished cattle were getting $1.15-$1.17 per pound. The general hope is to add 700-900 pounds to calves that start at 450-750 pounds, with a cost of gain at not much more than $1 per pound, he said.

Ranchers, he said, were seeing $1.45 to $1.75 per pound on their calves.

Turbulence in the market place This price is marginally above near-re-

cord lows from 2016 when market prices paid to cattle producers plummeted from near-record high prices of around $2.50 per pound in late 2014 to $1.20 to $1.35 per pound on a 600 pound calf, and some prices lower than that, by fall 2016. On the heels of this price drop, and shortly after he took office, President Donald Trump withdrew U.S. participation in the Trans-Pacific Partnership, a trade agreement, which had not been ratified by Congress, that also included Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. While many producers in the U.S. were happy to leave the TPP, without it in place, new trade agreements needed to be forged with many of these nations, which were initially staying loyal to other member nations. On the heals of the TPP withdrawal, Trump also announced the U.S. wanted a renegotiation of the North American Free Trade Agreement between the U.S., Canada and Mexico. While this could benefit cattle producers in the long run, short term, this added to uncertainty in the market. The new free-trade agreement, called USMCA — the United States-Mexico-Canada Agreement — was signed in November 2018, but has not been ratified by any of the countries’ legislatures. As an upturn for Montana cattle producers, U.S. Sen. Steve Daines, R-Mont., helped arrange a meeting between Chinese representatives and the Montana Stockgrowers Association. From that meeting a deal was made in late 2017 between Chinese e-commerce giant JD.com to purchase $200 million dollars of Montana-sourced beef and build a meatpacking plant in the state, most likely between Billings and Miles City. Before that deal could be signed, a trade war had started between China and the U.S. Back-and-forth threats of tariff hikes, including on beef, stalled the deal, but Steinbeisser

www.havredailynews.com dropped, however, the cow-calf operators and feedlot owners have not seen the profits that the meat packers have. Country of origin labelling could help raise prices for producers, Darlington said, especially for Montana producers who have “some of the best cattle genetics in the United States, and the world, for that matter. We have the beef that these countries are interested in.” “Most of us feel that would probably help boost the cattle industry — if you knew where your meat was coming from, the same as you know where your shoes and socks come from,” he added. “You know, everything else has a label on it, but a lot of our ag products don’t.” Packing industry and foreign producers who ship cattle to the U.S. have largely come out against COOL legislation because, their critics say, these companies import some cattle for processing. Bullard said that R-CALF has been pursuing legislation to prohibit the largest meat packers from owning and controlling cattle for longer than seven days before slaughter; prohibit the use of formula contracts that don’t have a firm base price; and require packers to purchase a certain percentage of their daily needs in the cash live market because they are relying on that cash market for the price of their contract cattle. Both Steinbeisser and Bullard pointed out that one of the problems with the current marketing model is the formula to determine prices that meat packers pay on forward contracts. It is based on prices paid for cattle sold at live auction one or two weeks prior to the cattle’s sale or kill date, but they said, only about 20 to 25 percent of cattle are sold at live auction, and these cattle, at this small percentage, do not adequately represent the cattle sold on contract. Steinbesser said one solution would be to tie the base price on formula contracts clos-

FARM & RANCH er to the consumer to give the producers a clearer share of the amount charged to consumers. “Instead of having the base price based on live cattle, may be the base price should be based on boxed beef,” he said, adding that it might be a hard sell, though, because “right now the live market sales are very low and the box beef prices have remained high, so of course, the packers aren’t going to agree to that now because they’re making a killing right now.” “Nothing against the packers; I don’t blame them for what they’re doing personally,” he added. “They have the leverage now and they’re taking advantage of that. It’s just good business. We didn’t feel sorry for them when we had the advantage and we had the leverage and they were losing money, so it works both ways, but it’s not a healthy marketing system. We need to revisit that and it’s not going to be easy, but I think it’s a worthwhile endeavor.” The age of internet Statistically, only about 1 percent of the U.S. population is involved in agriculture, and yet, everybody eats. In the age of social media, that equates to a greater percentage of people who have little idea of how food is grown, raised, processed and packaged, or even what is in it, having a public opinion about food, than the number of people who do know. And social media often has been less than kind to agriculture, with videos, memes and tweets about how livestock are mistreated or are bad for the environment or are not healthy — whether it’s factual or not. “It all boils down to that people are so many generations removed from the ag community that we’ve lost that connection with the city folk, I guess, that they really don’t know. (Outside of rural states like Montana), a lot of them really don’t know where their

food comes from,” Darlington said, adding that ag-related “groups will have to take a leadership role into re-educating the public as to how important farms and ranches are.” A recent tweet by Miss Montana USA Merissa Underwood advocating people eat the newly developed artificial beef rather than actual beef because it’s healthier for people and the environment. Rather than taking up a gauntlet in a social media fight, Montana Stockgrowers responded with a statement of respect for alternative perspectives and an invitation for Underwood to meet with producers to learn more about ag production and the benefits of beef. The Stockgrowers’ Facebook page also had posts with information on the benefits of cattle production to the environment. “That was all Keni,” Steinbeisser said, c re d i t i n g S to c k g rowe rs ’ D i re c to r o f Communications Keni Reese with the responses. “We’re finding it increasingly important to get out there and tell our story,” he added. “For so many years we just assumed people would take our word for it, and just assume that we’re doing a good job and that we’re always striving to do a better job, but especially social media has had a huge effect on this,” he said, because misinformation is easily spread. Rather than focusing on the fight, like other ag organizations and individuals, they are focusing on education. About four years ago, Stockgrowers starte d l i n k i n g t h o s e e f fo r t s to t h e i r Environmental Stewardship Award Program that annually recognizes an outstanding

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rancher for range and water management, taking care of the land and water along with their cattle, Steinbeisser said. Stockgrowers started inviting select people to the award farm tours, he said, mainly targeting media representatives and chefs, the latter because they not only control buying for their restaurants, but they are expanding to a larger online audience. “We thought, y’know, we go through all that and what do we do with it? Not much. So we thought, y’know, let’s invite some folks that aren’t familiar with ranching to just tour the pasture award winner and explain to them what we do, why we do it and how we do it,” he said. “But we’re not explaining it, we’re not doing it as ranchers … we’re letting third parties explain it. During several tour stops throughout the day, experts, mainly from Montana State University, explain what elements make the ranch an award winner. At rangeland stops, range specialists will explain what people are seeing that makes this an exemplary pasture, and same for water ways with fisheries and water experts, especially if there has been reclamation or regeneration work, he said. “We’ve found that quite effective,” Steinbeisser added. “It’s not just saying, ‘Hey, look how good we are.’ It’s other people explaining in more detail what’s going on there, and why it’s important to them and to everybody. “I think as we get better at it, I think it will help us in the long run as far as marketing beef, too,” he said. “Consumers want to be confident in what they’re buying.”

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Ranching: Several groups have joined R-CALF’s class-action lawsuit ■ Continued from page 3 we’re getting for our product is quite a bit out of balance,” Darlington said, adding, “Our margins are getting down there; it’s getting pretty tight. It’s pretty much taking the fun out of this deal the way it is.” While president of North Central Montana Stockgrowers in September, Darlington encouraged members of the organization to j o i n a n a t i o n a l Tw i t t e r c a m p a i g n #FairCattleMarkets that was designed to draw attention to problems in the beef industry which favor the packers over the feeders and ranchers. “The packers, they only own them cattle a few days, if that, and their profit margins were anywhere from over $400 to $700 a head at times, depending on where the cattle market was,” he said. “The object was to draw attention to that so somebody could do some investigating into the packing plants for having such a monopoly over the cattle industry.” In the absence of any tangible explanation for prices paid to producers in 2016, Bill Bullard, CEO of Billings-based cattle producer and feeder advocacy group R-CALF USA, had called for an investigation of meat packers’ influence on the market then. He also said Secretary of Agriculture Sonny Perdue has announced the U.S. Department of Agriculture would conduct an investigation into whether any unlawful acts occurred after the Aug. 9 fire in a Tyson plant. In April lawyers representing R-CALF filed a national class-action lawsuit in Illinois, alleging that the four major meat packers in the U.S. — Tyson Foods, Cargill, Brazillian-owned JBS USA and National Beef Packing Co. — have violated U.S. antitrust laws, the Packers and Stockyards Act

Courtesy photo/Rene Brown Cattle gathered for sorting on shipping day wait Nov. 13 in corrals on Tom and Rene Brown's ranch in the Bear Paw Mountains. Rain, snow and muddy conditions caused delays in shipping this fall. and the Commodities Exchange Act, Bullard said. Bullard said his lawsuit alleges that these companies artificially lowered prices paid to cattle producers, while inflating their own profit margins; they periodically reduced slaughter volumes to balance the demand for cattle; when they reduced the slaughter

volumes, they decreased the number of cash cattle market purchases on which they base their contract prices; they worked to minimize competition among packers when buying in the cash market; they imported cattle uneconomically to avoid inflating the average cattle price that the prices of their formula contract cattle are tied to; and they shuttered slaughter plants to help balance supply and demand. He said that an econometric study by R-CALF shows that actions by the major meatpacking plants caused a reduction in the price of cattle by about 7.9 percent annually from January 2015 to present. The intent of the lawsuit, he added, is to recover damages to the producers who incurred them — get reimbursement for all of those individuals who sold cattle while the alleged conspiracy was going on. Three days after the lawsuit was filed, he said, a similar suit was filed in Minnesota on

behalf of consumers so R-CALF’s lawyers made the decision to transfer their suit to Minnesota. Since then, he added, a handful of other suits have been filed and two of t h o s e s u i t s h ave c o n s o l i d a t e d w i t h R-CALF’s. They won’t know until maybe mid-January whether the lawsuit will be going forward, he said. Neither a 2016 investigation by the Senate Judiciary Committee or a 2018 investigation by the U.S. Government Accountability Office found evidence of wrongdoing. But the system is loaded in favor of the meat packers, Steinbeisser said. “We need to take a serious look at how we market beef. Basically we’re letting the packers market our beef and I don’t think that’s a healthy way to do it,” he said, adding, “I’m thinking it’s time for a change.” He said it has been frustrating because beef demand didn’t drop like market prices

www.havredailynews.com isn’t convinced it’s scrapped yet. “ C h i n a i s a c o m m u n i s t c o u n t r y, ” Steinbeisser said, “and those businesses are heavily influenced by their government, so I think even if they wanted to (go forward with the deal) probably they couldn’t, simply because of the control the government has on the country. “They have 300 million middle class people, which is nearly equal to our total population in the United States, so their middle class has increased substantially. And with that, their desire for higher quality foods — and beef being one of them — continues to grow, so there’s a lot of pressure on their government to have access to more highquality foods,” he added. A second large meatpacking plant — designed to process 1,800 cattle per day, 9,200 hogs per day, and 135,000 chickens per day at full capacity — was proposed in 2018 on behalf of its Canadian investors, for a location near Belt. Company representatives said the ideal would be to process all Montana-sourced meat, but by early 2019 the proposal was no longer being pushed toward implementation. “Two years ago at this time,” Big Sandy rancher Dana Darlington said, “everybody in the cattle industry was pretty upbeat and about walking two feet off the ground thinking, ‘You know, here we are we’re sitting on go we got talk of two packing plants moving into Montana, one in Great Falls and one somewhere between Billings and Miles City for the China deal and everybody’s thinking this is all going to be great .. and here we are two years later and no packing plants in sight and the prices are not where we’d like to see them.” Darlington, who completed his tenure as a North Central Montana Stockgrowers Association president, with Chinook-area producer Merle Young taking over the position mid-November, said that the market has been soft this summer and fall prices “are not where we’d like to see them.” “Most people are not turning a profit with these prices,” he said. Part of what gives hope to Steinbeisser, who co-owns and operates VS Inc., a family farm that raises cash crops and feed for their feedlot and wintering their cows, is that he’s seeing more heifers sold as feeder cattle, and with fewer cattle being bred the prices should, he said, increase over the next few years. Additionally, Trump recently signed a trade agreement with Japan, allowing the

FARM & RANCH U.S. to trade on equal footing with the countries who are part of what the TPP has evolved into, the Comprehensive and Progressive Agreement for Trans-Pacific Pa r t n e rs h i p . M o n ta n a S to c k g rowe rs President Fred Wacker, who helped to broker the China deal that is on hold, attended on invitation the signing of the U.S.-Japan trade deal in Washington, D.C. “It’s just a big deal because Japan is our largest market currently,” Steinbeisser said, “and we were starting to feel the stress of that competition because their tariffs on (CPATPP-member nations) were substantially lower than ours.” This doesn’t guarantee sales, he added, but he’s confident those will increase. “The one thing we do have is higher-quality beef,” he said, “So, if we’re on a level playing field with them, our higher quality beef will certainly help with our market share.” He said he’s already seeing an improvement from the trade agreement because the news has increased prices in the futures market. “Already, psychologically, it has affected our markets and I think it just will continue,” he added. Steinbeisser, who has served on national cattleman committees, thinks that other foreign markets will open up. “The good news for the beef industry is that there continues to be more and more demand for our product, and the reason we have more demand for our product,” he said, “... specifically in the United States, the northern states have higher quality beef and that puts Montana right in the center of things. And our exports to South Korea are just incredible — all the Costcos in Korea market U.S. beef.” Despite trade issues with some countries, he said, “our exports continued to increase during this downturn, otherwise this would’ve been a disaster. I mean it was painful the way it is, our markets are painful, but it would’ve been disastrous if we didn’t have strong exports — so that’s excellent news.” Rising tide for changes in the industry The disgruntlement of ranchers and feedlot operators, on the beef production end, with meat packers at the other end continues to grow. “In the scheme of things, the parody comparing our input costs compared to what

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Havre Daily News/Jack Lambert A cow and her late-born calf make their way across a snowy field outside of Havre Tuesday afternoon.

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