NCBQ0410 by Catharine Snell

FALL 2010

The Next Generation ■ Capitol Concerns ■ GIPSA ■

30/30 vision. see horn ﬂy free

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FALL

NATIONAL CATTLEMEN • The Journal for America’s Cattle Producers

Volume 26 • Issue 4

9 12 Learn more about what NCBA is doing to foster the next generation of cattle producers and association leadership.

16 CHALLENGES AND OPPORTUNITIES In spite of a challenging political environment, NCBA’s Washington, D.C. staff has had some important wins in 2010. The policy staff works hard to ensure a better business environment for the nation’s cattle producers. See how their efforts have impacted your business.

18 PRE-HARVEST GUIDANCE FROM FSIS: IS THIS THEIR ROLE? The USDA Food Safety and Inspection Service recently released a “guidance” document that may have important implications for the beef industry. NCBA director of legislative affairs Kristina Butts takes a critical look at how this effort may affect your operation.

19 THE GIPSA RULE: DOES ONE SIZE FIT ALL? NCBA chief economist Gregg Doud provides perspective on the implications of the proposed livestock marketing rule from the Grain Inspection, Packers and Stockyards Administration.

6 LEADERSHIP & SOLUTIONS Robbie LeValley, president of Colorado Cattlemen’s Association oﬀers her thoughts on the unintended consequences of the proposed GIPSA rule and its potential negative eﬀect on marketing innovation in the beef industry.

9 AROUND NCBA It’s been a busy summer for the association. The 2010 Legislative Conference saw more than 200 cattle producers from across the country meet in Washington, D.C. to address key policy issues aﬀecting the beef industry. Read about highlights from the conference and learn more about other important policy issues that NCBA has been addressing on your behalf.

DEPARTMENTS

NEXT GENERATION

FEATURES

12 PAVING THE WAY FOR THE

14 CATTLEFAX Higher corn prices this fall have the potential to impact calf prices, but fewer available cattle for feedlot placement mean that calf prices should improve steadily into the ﬁ rst quarter of 2011. See what the experts at CattleFax have to say about these fundamentals in this issue’s market update.

22 ALLIED INDUSTRY AND PRODUCT COUNCIL DIRECTORY NCBA appreciates the generous support of its Allied Industry and Product Council members and encourages you to support these partners by purchasing their products and services. www.NationalCattlemen.com

ABOUT THE COVER Grant County Feeders, Ulysses, Kan.

Th is address takes you to National Cattlemen online.

National Cattlemen’s Beef Association reserves the right to refuse advertising in any of its publications. National Cattlemen’s Beef Association does not accept political advertising in any of its publications. National Cattlemen’s Beef Association does not accept advertising promoting third-party lawsuits that have not been endorsed by the board of directors.

Fall 2010 National Cattlemen

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LEADERSHIP & SOLUTIONS 6

Government Intrusion NATIONAL CATTLEMEN Not the Answer The Journal for America’s Cattle Producers

FALL 2010 VOLUME 26, ISSUE 4

entered into a value-based their price was not fair. marketing strategy, Who determines fairness? along with five other Will increased government families, as a way to reap intervention and litigation rewards for producing determine fairness? quality cattle. When Arbitrary judgment by a the U.S. Department of federal agency will only Agriculture’s (USDA) Grain increase paperwork and Robbie Baird Inspection, Packers and costs. Who pays for this LeValley Stockyards Administration’s increased intervention and (GIPSA) proposed rule litigation? The producer says packer-to-packer sales will. When costs increase are banned, my direct marketing for the processor, the trickle-down business, Homestead Meats, may effect is to decrease the price paid not be able to sell to other packers. to the producer that supplies the This rule harms small-to-medium raw commodity. size producers and processors. For When the costs of defending years, USDA has promoted exactly cattle prices or justifying prices paid what we are doing. We are selling to producers continue to increase, directly to the consumer; operating as what will be the consequence? What a small processor in a strategic area of happens to every other industry when the country; adding value to the end litigation increases? I can tell you product; and producing local food. personally based on my experiences Now under this rule, our marketing with federal lands. As the costs and options will be limited because we the threat of litigation have increased were innovative and took market risks. dramatically on federal lands, the Value based-marketing has given our actual use and management of federal family the opportunity to compete at the lands has also decreased significantly. highest level. The consumer has been the No one takes a risk for fear of reprisal. one to determine the fair and justified This ends creativity, partnerships and price paid for the value-added product, the desire to take a chance. Do we not the government. The primary way truly want that for the beef industry? that small and medium size producers At the very least, there needs to can benefit from value-added marketing be further study of the unintended is to enter into contractual agreements consequences and a cost-benefit that reward quality. analysis of the proposed rule changes. My concern with the proposed Agriculture is our long-term national GIPSA rule changes is that there is security. It is the only steady business neither clarity nor clear definition across this country. This major proposal in terminology. Elimination of the warrants additional economic study and competitive injury requirement will thoughtful discussion that is not based provide a disincentive for packer on emotion or rushed through with premiums and value-added contracts very little thought about the long-term because of the fear of litigation. The implications or real costs incurred by vague definitions, such as “unfair” or small and medium size producers. “reasonable person” will open the door to an increased number of lawsuits. Robbie Baird LeValley is a cattle producer, The proposed rule changes allow for feeder and beef processor from Hotchkiss, persons to sue without proof of injury Colo., and president of the Colorado or harm. They just have to say that Cattlemen’s Association.

Fall 2010 National Cattlemen

2010 Officers President President Elect Vice President Federation Division Chairman Policy Division Chairman Chief Executive Officer Publishing Team

Steve Foglesong Bill Donald J.D. Alexander Scott George Bruce Hafenfeld Forrest Roberts Mike Deering Holly Foster Chad Spearman Don Waite

To Learn More About NCBA Call 1-866-BeefUSA (1-866-233-3872) or visit www.BeefUSA.org. To receive e-mail updates from NCBA, contact Sheryl Slagle at sslagle@beef.org.

How To Contact National Cattlemen’s Beef Association: P.O. Box 3469, Englewood, CO 80155 (303-694-0305); Washington, D.C.: 1301 Pennsylvania Ave. N.W., Suite 300, Washington, D.C. 20004 (202-347-0228). National Cattlemen is a publication of the National Cattlemen’s Beef Association.

Published by Naylor, LLC 5950 NW 1st Place Gainesville, FL 32607 Phone: 800.369.6220 | Fax: 352.331.3525 Web site: www.naylor.com Naylor Publisher Kathleen Gardner Naylor Editor Elsbeth Russell Project Manager Ray Goodwin Publication Director Robert Shaferl Advertising Sales Jacob Fisher, John O’Neil, Paul Woods, Pete Dicks, Robert Shafer Marketing Associate Erin Sevitz Layout Catharine Snell Advertising Art Aaron Harper ©2010 National Cattlemen’s Beef Association. All rights reserved. The contents of this magazine may not be reproduced by any means, in whole or in part, without the prior written consent of the National Cattlemen’s Beef Association.

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Fall 2010 National Cattlemen

AROUND NCBA

eef and pork producers attended a joint public meeting in Fort Collins, Colo. to discuss competition in the livestock industry and the U.S. Department of Agriculture’s (USDA) Grain Inspection, Packers and Stockyards Administration’s (GIPSA) proposed federal rule on the buying and selling of livestock. The meeting, which was held Aug. 27, was hosted by USDA and the Department of Justice (DOJ). As part of the 2008 Farm Bill, language was included directing GIPSA to issue regulations regarding poultry and swine contracts; arbitration use in livestock contracts; and to establish criteria for the Secretary of Agriculture to consider in determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and Stockyards Act. GIPSA released the proposed rule June 22, 2010, nearly a year after the deadline mandated by Congress.

During the hearing in Fort Collins, livestock producers voiced concerns to USDA Secretary of Agriculture Tom Vilsack about the unintended consequences of the proposed rule. Additionally, NCBA and the National Pork Producers Council (NPPC) held a media briefing on Aug. 26 where pork and beef producers representing more than 20 states met to voice their opposition to the GIPSA rule, expressing the negative effect it could have on their operations. “As written, the GIPSA rule would limit my ability to sell hogs,” said NPPC President Sam Carney, a producer from Adair, Iowa. “It’s a solution in search of a problem. The markets work, and we don’t need the government trying to ‘fi x’ it. The GIPSA rule is overly broad and very vague. It would inject uncertainty into the market, stifle innovation and lead to less, not more competition in the livestock industry.”

Bill Rishel of North Platte, Neb. is president of the Nebraska Cattlemen’s Association, owner of Rishel Angus and was one of the panelists for the listening session. Rishel said he is concerned that the GIPSA rule could jeopardize the alternative marketing programs that have benefited both producers and consumers if it pressures packers to validate every price difference they would give for cattle of varying degrees of quality. “Somewhere along the way they’re going to say “I’m not going to take all this risk, it’s just as easy for me to offer one price fits all” and it will become a commodity type business again and it will revert back 25 years to what we’ve worked so hard to get away from,” he said. To read the full rule or to obtain more information, visit www.gipsa. usda.gov/GIPSA or beefusa.org/ goveGIPSAProposal.aspx. NCBA worked on behalf of its membership to extend the comment period beyond the original date proposed by USDA and the Department of Justice to allow the industry more time to review the proposed rule. Comments pertaining to the rule should be submitted by Nov. 22.

YOUR NCBA

Livestock Producers Fear GIPSA Rule’s Vagueness and Unintended Consequences

NCBA, PLC, ASI Comment on Wild Horse and Burro Proposal

It was a packed house during the joint USDA/DOJ hearing on livestock marketing held in Fort Collins, Colo.

Three agricultural organizations, representing the interests of public lands ranchers submitted comments to Secretary of Interior Ken Salazar in September, in response to his department’s proposal, “Draft Goals, Objectives and Possible Management Actions,” for the Wild Horse and Burro Program. Comments were submitted by NCBA, the Public Lands Council (PLC) and the American Sheep Industry Association (ASI).

www.NationalCattlemen.com

According to the Bureau of Land Management (BLM), the appropriate management level of wild horses and burros is approximately 28,000 head. Currently there are over 38,000 animals grazing public lands and an additional 30,000 in short- and long-term holding facilities. With the current growth rate of 20 percent per year, in four years, the population will be twice its current size, which is already 25 percent above sustainable levels, according to BLM. While NCBA, PLC and ASI are in favor of measures to control fertility rates to a level that matches adoption demand and support the improvement of wild horse gathers, the three groups voiced concerns that several of the suggested measures did nothing to address the long-term issue of overpopulation of wild horses and the negative impact that it is having on the ecological health of public lands throughout the West. Secretary Salazar’s original recommendations were submitted in response to a Governmental Accountability Oﬃce (GAO) report that cited two major challenges with the current Wild Horse and Burro Program. First, if not controlled, oﬀ-the-range holding costs, which are currently estimated to be 74 percent

of the current budget, will continue to overwhelm the program. Secondly, BLM has limited options for dealing with unadoptable animals, and as a result, overpopulation will continue to be an issue, unless more sustainable solutions are identiﬁed. NCBA supports management alternatives to bring herd numbers to a sustainable level that will allow wild horses to coexist with wildlife, ranching and other multiple uses of the nation’s public lands and minimizes the costs for long-term care of unadoptable horses.

2010 NCBA Legislative Conference In mid September, approximately 200 cattle producers from across the country converged on Washington, D.C. for NCBA’s 2010 Legislative Conference. Attendees had an opportunity to visit with their respective state elected oﬃcials on issues impacting the cattle industry. U.S. Department of Agriculture (USDA) Secretary Tom Vilsack also spoke to the group. During his address, Vilsack underscored the importance of U.S. agriculture in eradicating global hunger and providing one out of every 12 jobs in the U.S., as well as the importance of

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trade in maintaining the proﬁtability of the U.S. agricultural sector. “We (USDA) are focused on developing new markets, especially where the middleclass population is expanding. We also need to break down unscientiﬁc trade barriers,” he said. The issue of unprecedented environmental regulations on dust proposed by the Environmental Protection Agency (EPA) was also an issue of concern for cattle producers in attendance. The Secretary said he accepts full responsibility for actions taken by USDA but can’t speak for EPA. The group also discussed concerns about the lack of science in the Food and Drug Administration’s draft guidance document, The Judicious Use of Medically Important Antimicrobial Drugs in FoodProducing Animals. Cattle producers were equally concerned over U.S. Representative Louise Slaughter’s (D-NY) Preservation of Antibiotics for Medical Treatment Act (PAMTA), which proposes to phase out the use of some antibiotics in the livestock industry. “I’ve communicated to Rep. Slaughter, my support of the judicious use of antibiotics. The vast majority of producers do not abuse the use of antibiotics in livestock production. I told her you cannot ban this. It doesn’t make sense,” Secretary Visack told NCBA members. “USDA’s public position is, and always has been, that antibiotics need to be used judiciously and we believe they already are.” Next year’s Legislative Conference will be held in conjunction with the 2011 Cattle Industry Summer Conference in Washington, D.C., July 26-30. The 2010 Legislative Conference was sponsored by Elanco.

NCBA Supports Market Transparency NCBA Vice President of Government Aﬀairs Colin Woodall said the approval of the Mandatory Price Reporting Act of 2010 (S. 3656) Sept. 15, by the U.S. House

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Fall 2010 National Cattlemen

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of Representatives will continue to encourage transparency in the marketplace. The move comes after the U.S. Senate’s vote last month to reauthorize mandatory price reporting, which was set to expire Sept. 30 of this year. “Along with transparency, mandatory price reporting encourages competition in the marketplace without violating producers’ privacy by substantially increasing the volume of industry sales transactions reported by the U.S. Department of Agriculture (USDA),” said Woodall. “This mandatory reporting provides U.S. producers with readily understandable and timely information regarding pricing, contracting for purchase, and supply and demand conditions for all segments of the beef industry.” The Mandatory Price Reporting Act of 2010 will reauthorize mandatory price reporting for ﬁve years. The act requires livestock sales information to be reported and published in a timely fashion, allowing buyers and sellers to make more informed decisions. Prior to 2001, information was collected by observing public auction markets and via voluntary submission by market participants. However, by 1999 fundamental changes in the market structure meant that approximately 35 percent of fed cattle sales in 1999 occurred via contract agreements that were not covered by USDA reports. Bruce Hafenfeld, California cattle producer and NCBA’s policy division chair, said these unreported transactions hampered producers’ ability to accurately assess livestock prices. He said requiring price reporting augments producers’ knowledge base when making marketing decisions by providing them with pricing and sales information from transactions around the country.

NCBA’s Cattlemen to Cattlemen is Celebrating its 200th Episode! On Dec. 7 2010, NCBA’s Cattlemen to Cattlemen is broadcasting LIVE from Washington, D.C. in honor of our 200th episode! During this special edition, we’ll give viewers a behind the scenes look at how a story evolves from an idea to a television segment. Plus, all bets are off when our good friend Baxter Black stops by our studios for a live interview. It’s one episode you won’t want to miss! Help us celebrate this milestone by leaving us a comment on Facebook. You can find our page by searching NCBA’s Cattlemen to Cattlemen. NCBA’s Cattlemen to Cattlemen debuts each Tuesday at 8:30 p.m. on RFD-TV. The show also airs Wednesday at 10:30 a.m. and on Saturday at 9 a.m. (all times are Eastern). This program would not be possible without the generous support of sponsors including: Purina Mills, John Deere, Igenity, Pfizer Animal Health, Intervet Schering-Plough Animal Health, and Boehringer Ingelheim Vetmedica, Inc.

Mark Your Calendars! The 2011 Cattle Industry Annual Convention and NCBA Trade Show will be held Feb. 2-5, 2011 in Denver, Colo. Be sure to make plans to attend this important industry event! 496537_Moly.indd 1

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YOUR NCBA

Paving the Way for the Next Generation By Holly Foster

hen you look at the cattle industry there’s one fact that’s hard to ignore—few young people are returning to the nation’s farms and ranches to raise cattle. In fact, the 2007 U.S. Department of Agriculture Census of Agriculture reports that the average age of principal farm operators has increased roughly one year in each census cycle, from 50.3 in 1978 to 57.1 in 2007. The majority of farm operators are between 45 and 64, but the fastest growing group of farm operators is those 65 years and older. The majority of beef cattle operators are 65 and over, and NCBA’s membership has been following a similar trend. The national cattle herd seems to be on the same path. According to Kevin Good, a market analyst with CattleFax, there have only been two years in the last decade where cattle numbers have expanded. “We are continuing to see a lot of liquidation among smaller producers, and you have to wonder who is going to step up in the next generation and take on this lifestyle,” says Good. It’s a question that many are asking in the industry and one that NCBA wants to address. “The fact that fewer young people are returning to production means that we also have fewer people to serve as the next generation of leaders for our association,” says Steve Foglesong, NCBA President. “We need to oﬀer young people opportunities in NCBA and show them the potential that exists within the cattle business.” To help address this challenge, NCBA’s Young Producers’ Council (YPC) was established during the 2008 Cattle Industry Summer

Fall 2010 National Cattlemen

YPC Chairman Ben Spitzer and Vice Chairman Ben Neale preside over the group’s business meeting during the 2010 Summer Conference. Conference in Denver. Th is group was initiated to help NCBA members ages 18 to 35 develop their leadership skills and become more involved in NCBA policy development. The group also helps provide networking opportunities, continuing education and professional development activities to its members. YPC members elected their first slate of officers at the 2009 Cattle Industry Annual Convention in Phoenix, Ariz. Past NCBA President and Arizona cattle producer Andy Groseta said the creation of this group was one of his main priorities during his term in office. “Young people are the future of our industry,” he said. “We surveyed young producers, and although 90 percent said they had opinions about NCBA policies, a third of them didn’t feel they had an outlet for those opinions.” YPC members are getting a chance to learn about NCBA policy making from the ground up

by serving as members with the association’s eight standing policy committees. “Our members are gaining ﬁrsthand knowledge about how NCBA policy is developed and have a chance to take an active role by serving on these committees,” said Ben Spitzer, of San Antonio, Texas and current chairman of YPC. “Our age group needs to be proactive and essentially demand to be part of the discussion if we expect to make the cattle industry our future.” Most industry participants agree that a major barrier to young JJ Goicoechea, DVM and a rancher from Eureka, Nev. was elected as the chairman of the 2011 Young Cattlemen’s Conference by his fellow attendees during the 2010 trip. continued on page 21

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CATTLEFAX

YOUR MARKET UPDATE

High Corn Prices to Impact Calf Marketings By Chad Spearman

he U.S. corn situation has changed dramatically since mid-summer with corn prices rallying sharply higher this fall amid declining supplies while usage projections have remained generally steady for the new crop marketing year. The current corn marketing year, 2010/2011, began on Sept. 1 and runs through Aug. 31, 2011. Prices are expected to remain historically high on into the spring months in order to ration demand and ensure suďŹ&#x192;cient production levels for next year. New crop corn supplies, as estimated by the United States Department of Agriculture (USDA), have declined steadily from initial estimates last May. Corn production was initially expected to total a record large 13.4 billion bushels, raising total corn supplies to a record large 15.1 billion bushels. Total corn usage was also expected to be record large at 13.3 billion bushels, led by strong exports and rising demand from corn used for ethanol production. At the time, projected ending stocks for corn were near 1.8 billion bushels and the stocks-to-use ratio was a comfortable 13.7 percent. Since then, however, the monthly stocks-to-use ratio has declined sharply. In October, the USDA lowered estimated corn production to only 12.7 billion bushels amid disappointing corn yields and total supply was lowered to 14.4 billion bushels, both of which were a decline of 5 percent from the initial estimates in May. Projected usage, however, has actually increased nearly 200 million bushels (+1.4%) and is now estimated at 13.5 billion bushels. The bottom line is that projected ending stocks have fallen to 900 million bushels, lowering the projected stocks-to-use ratio to only 6.7 percent. The last time the ratio was this low was in July 2008 when spot corn prices averaged $6.42 per bushel for the month. For perspective, since May 1990 the monthly stocks to use ratio has only fallen below 7.0 percent 12 out of 246 months, or only 5 percent of the time. Prices are expected to rise to the level which rations usage enough to stem supply concerns. With high grain costs, the structure of the cattle market will move to add gain at a lower cost than can be derived in a feedyard. The sharp increase in corn prices has impacted fall calf prices, but the fact that the available supply of calves has continued to shrink on an annual basis amid declines in the size of the annual calf crop and the U.S. beef cow inventory is supportive. High feed costs are expected to limit calf placements into feedlots this fall and winter,

Fall 2010 National Cattlemen

Monthly Projected U.S. Corn Stocks to Use

Annual Calf Crop

driving a larger percentage of calves to winter grazing or backgrounding to be marketed as yearlings during the ďŹ rst half of 2011 or held through the winter to place on grass next spring. Calf prices remained above year-ago levels through the fall run this year and seasonally the market tends to stabilize and begin improving into December and January. Corn price levels will add to market volatility. Calf prices are expected to steadily improve in the ďŹ rst quarter of 2011 as the demand for grass cattle picks up. Stocker operators should focus on their potential breakevens to determine if summer grass cattle should be purchased prior to the ďŹ rst quarter 2011. Chad Spearman is a market analyst with CattleFax, a member-owned market information organization serving producers in all segments of the cattle business.

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YOUR CAPITOL CONCERNS

Challenges and Opportunities Abound for Cattlemen By Mike Deering

010 has been a challenging year for U.S. cattle producers, but it has also been a year of great opportunity. Prices have been good, exports continue to improve and demand has remained stable in spite of the economy. At the same time, however, the industry is facing some of the greatest challenges that it has ever faced, particularly from government overreach and attacks from extreme activist groups. The coming year is shaping up to be a time when cattlemen will have to stand up to big government and well-funded anti-animal agriculture interest groups like never before. “The good news for cattle producers is that NCBA was very effective at pushing back on several bad proposals in this Congress,” says Colin Woodall, vice president of government affairs for NCBA. “That includes cap and trade legislation, proposals limiting antibiotic use in livestock, and food safety regulation that had no tangible benefit for public health. What we found is that, regardless of who’s in charge in Washington D.C., NCBA has a lot of sway and the reason is the involvement of our producers.” Woodall says the biggest challenge still facing the industry in Congress this year is the expiration of the Bush tax cuts, specifically the estate and capital gains taxes. “Our concern is that Congress is just not going to get to it this year,” he says. “Tax reform is one of many different priorities that Congress wants to get done by the end of this year, and there just may not be enough time to get to everything.” If nothing is done about the estate tax, better known as the “death tax,” Woodall says that it will revert back to an exemption amount of just $1 million with assets exceeding that amount taxed at 55 percent. NCBA will be putting pressure on Congress to address this issue during the lame-duck session after the Midterm election.

Fall 2010 National Cattlemen

“The best way Congress can protect family farmers and ranchers is to make sure this death tax reform gets done,” he says. While Congress has been listening to cattle producers, regulatory agencies seem to be working overtime trying to come up with new ways to wreak havoc on the livestock industry. “The Environmental Protection Agency (EPA) appears to be waging an unprecedented war to end modern livestock production,” says Tamara Thies, NCBA chief environmental counsel. “EPA exhibits reckless indiﬀerence to scientiﬁc fact and, instead, imposes stringent regulations based on nothing more than what appears to be a biased anti-animal agriculture agenda that will leave many cattle operations with no recourse but to shut down and eliminate jobs.” Thies notes that EPA’s environmental agenda includes regulating dust, ammonia, greenhouse gases and more. “The EPA has laid the foundation to impose the most stringent regulation of dust in U.S. history,” she says. “It is preparing to issue a proposed regulation that is twice as stringent as the current dust standard and is more stringent than background levels of dust in many parts of the United States.” Much of the EPA overreach is coming under the Clean Air and Clean Water Acts. “There is no question that cattle producers want to do what is best for the environment. In fact, we have made great progress over the years in decreasing our environmental footprint,” says Thies. “By producing more beef with fewer resources, the total carbon footprint for beef production was reduced by 18 percent from 1977 to 2007.”

GIPSA Rule Another important regulatory concern for cattle producers is USDA’s proposed Grain Inspection, Packers and Stockyards Administration (GIPSA) rule that sent shock waves through the industry when it

was published in June. Steve Foglesong, NCBA president and a cattle and hog producer from Illinois, says the unintended consequences of the rule could have devastating eﬀects on the livestock industry. “We’ve got people who have spent their entire careers building a quality product and some of those marketing programs that they’re participating in today will be called into question by this proposed rule,” says Foglesong. “We need more clarity and the administration needs reevaluate this proposal before they do something that hurts producers more than it helps them.” An economic impact study conducted by John Dunham and Associates found that the proposed rule could cost 104,000 American jobs and create an economic loss of $14 billion in the national Gross Domestic Product. “Every time you cause harm to the livestock industry, you harm far more than just those farmers and ranchers,” Foglesong notes. “

Anti-Animal Agriculture Agenda Meanwhile, the livestock industry is facing repeated and sustained attacks from anti-meat and anti-animal agriculture groups like PETA and the Humane Society of the United States that seem to be gaining more ground in furthering their agendas. “These groups are very well funded and they are bent on putting animal agriculture out of business,” said Donald. The movement has reached the point where it’s even having an impact on the government’s latest proposed dietary guidelines, which advocate shifting to a more “plant-based” diet with “only moderate amounts of lean meats, poultry and eggs.”

Unity Needed To face these kinds of challenges, NCBA leaders believe it is vital for livestock producers, and even the agricultural continued on page 22

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YOUR BUSINESS

Pre-harvest Guidance from FSIS:Is this their role? By Kristina Butts

n May of this year, the encourages slaughter U.S. Department of establishments to purchase Agriculture (USDA) cattle from producers who Food Safety and Inspection use one or more pre-harvest Service (FSIS) released management practices. a “guidance” document Among the technologies entitled: “Pre-harvest FSIS recommends in the Management Controls and “guidance” document, it is Kristina Butts noted, that some have no Intervention Options for Reducing Escherichia coli O157:H7 effect on pathogens or the research is Shedding in Cattle.” Numerous inconclusive as to their effectiveness research scientists, industry food in reducing pathogen shedding safety experts, as well as beef producer in cattle. leaders have expressed their concern More importantly, the document with it. provides little information on FSIS’s intent when writing this scientifically conclusive strategies document was for it to be a literature currently available for use and a review of the research surrounding complete review of research on pre-harvest technologies. FSIS all pre-harvest products currently considers “guidance” documents to awaiting approval by either USDA or be an informational resource for the the Food and Drug Administration industry to use and not a regulation, (FDA). The vast majority of the but oftentimes “guidance” documents recommended intervention strategies are either interpreted or enforced as a are relevant only on the farm, ranch regulation by field personnel. or feedlot, sectors of production The beef industry is extremely over which FSIS does not have concerned with the potential jurisdiction—FSIS’ jurisdiction interpretation and enforcement of the begins once cattle arrive at the pre-harvest “guidance document” as it slaughter facility. encourages slaughter establishments The lack of consistency in the to begin following the guidance. The writing suggests that the authors are document specifically recommends not experts in the area of pre-harvest that slaughter establishments begin interventions. In addition, many of following the guidance to receive the topics included in the document cattle from beef producers that are inadequately reviewed and implement one or more documented several of the citations refer to data pre-harvest management practices not relevant to the topic areas. In to reduce fecal shedding of E. coli. other cases, the document omits key However, the document is incomplete potential pre-harvest interventions in its assessment of options or management considerations easily for producers. found in peer-reviewed literature. It Numerous inaccuracies throughout is unfortunate that the document fails the pre-harvest “guidance” document to recognize the basic principles of can be noted. The document includes immunology and does not recognize several technologies that have not the commercialization process for been approved for commercial vaccines and biological interventions. use by the respective oversight If the true goal of FSIS was to agency, even though the document provide an informative literature

Fall 2010 National Cattlemen

review on pre-harvest technologies, this document falls short. The Agricultural Research Service (ARS) would have been the more appropriate agency to provide information on the state of pre-harvest research. ARS is the arm of USDA charged with conducting agricultural research including beef safety research in the pre-harvest sector. Unfortunately, the FSIS “guidance” document is incomplete, includes inaccurate information and confl icting data. Cattle producers remain committed to beef safety and take pride in the amount of time and resources dedicated to making beef an even safer product. Producers have been committed to implementing strategies proven to reduce shedding of pathogens. Since 2007, the industry has demonstrated producer commitment on this specific topic as NCBA leads the E. coli Coalition, a collaboration between government and industry. One of the coalition’s goals includes identifying and working on intervention strategies that provide the greatest opportunities for rapid improvement in beef safety and subsequent public health benefits. In particular, this coalition has been focusing on identifying and prioritizing the most pressing problems in developing new interventions and tools to address E. coli O157:H7 in cattle and finding solutions to these hurdles. In order for progress to be made in the battle against pathogens, accurate information, sound scientific interpretation, and collaboration among industry partners to assure adoption of recommendations is essential. To view the FSIS pre-harvest “guidance” document or comments, go to www.fsis.usda.gov and search pre-harvest. Kristina Butts is director of legislative affairs for NCBA.

YOUR BUSINESS

The GIPSA Rule: Does one size ﬁt all? By Gregg Doud

ithin the beef advantage of alternative industry, it marketing arrangements sometimes seems (AMAs), or non-spot as though no one likes the market transactions, is that packer—which is strange they reduce costs and allow when you think about it, the marketplace to operate because “the packer” is an more efficiently. These absolutely necessary entity savings are then passed on Gregg Doud during “the process” of to both consumers and beef converting beef with the hide on it producers. The economic term they to beef without the hide on it. Who use in the study is “surplus.” likes to eat hide? Whether you call If packers walk away from these them a “packer,” “processor,” or AMAs due to this rule because “middle man” really doesn’t matter. they’re deemed “risky” by their They are always one of several lawyers, then both this additional buyers in the beef production and risk and the inefficiencies are added marketing chain. back into “the process.” As a result, Some industry participants consumers will potentially be paying are touting the proposed U.S. more for what will likely be a lower Department of Agriculture (USDA) quality product and cattlemen will Grain Inspection, Packers and receive less for the beef they produce. Stockyards Administration (GIPSA) Another possible outcome: cattlemen rule on livestock marketing as a way will be picking up the majority of for cattlemen to settle a perceived the tab in the short run, as higher longstanding score with the packer. marginal costs are added to “the It’s concerning, because this rule process.” Larger operations can could end up pitting cattlemen potentially spread these costs across against other cattlemen. more head of cattle than smaller The GIPSA rule infers that all producers. The packer’s goal in all cattle are the same and should be of this is simply to extract a margin valued on an average or standard without exposure to any risk between price, regardless of quality. However, the arrival at the front door and there are considerable quality the departure out the back of the differences in cattle, even within a processing plant. single herd. In fact, the actual value The GIPSA rule introduces the of a typical pen of cattle at a feedlot potential for a third party to decide can easily vary by $400 per head whether an agreement between a on a carcass basis. Deviations from packer and a seller isn’t fair, which “standard price” must be justified to would provide the ability for that the government, which could lead to third party to sue based upon an litigation that buyers seek to avoid. allegation of a lack of fairness. For By oversimplifying the beef packers, and their lawyers, this procurement of beef, with the hide threat of liability, litigation and on it, and mitigating this exposure to risk has a cost. To avoid this cost, risk and liability, additional per head packers may offer the same, standard marginal costs of doing business will contract to everyone. In order to meet be injected into the process. GIPSA’s consumer demand currently being own economic study clearly says the met by the use of AMAs, packers

may also choose to own their own livestock in larger numbers rather than risk litigation. Today, packers directly own less than 5 percent of the market. Hundreds of thousands of U.S. beef producers have worked for decades to meet consumer demand by improving the quality of the beef that they produce. Where would the incentive be for cattlemen to make investments in improving the quality of their cattle if this rule penalizes any deviation from an average price? The scope of the proposed rule goes well beyond the intent of Congress and even contradicts previous court decisions. Proponents of the rule say it restores fairness and helps the “little guy.” Those opposing it note small to medium sized operations producing a premium product and getting rewarded by the marketplace for doing so will be hardest-hit. By prohibiting packer-to-packer sales and limiting the use of order buyers, this rule could also encourage consolidation, rather than provide more opportunities for cattlemen. Cattlemen have expended signiﬁcant capital and resources to produce premium and value-added products to meet consumer demands in the marketplace. However, the value of that bull with better carcass characteristics; the additional costs of traceability; a solid business relationship built over time; a brand name; or marketing that lead up to a superior eating experience by the consumer, are all at risk. There are no shortcuts to putting more money in producers’ pockets. You do it by building demand. Gregg Doud is chief economist for NCBA.

www.NationalCattlemen.com

PROTECT YOUR RIGHTS Government Intrusion into Private Business • Innovation Stymied by Limiting Ability to Contract Bonanza for Trial Lawyers • Limiting Opportunities for Future Generations As part of the 2008 Farm Bill, language was included directing USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) to issue regulations regarding poultry and swine contracts; arbitration use in contracts; and to establish criteria for the Secretary to consider in determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and y y after the Congressionally g y mandated Stockyards Act. Nearlyy a year

deadline for release, GIPSA ﬁnally released their proposed rule on June 22, 2010. Concerning to cattle producers is that many of the provisions in this rule are based on proposals and amendments that were defeated by Congress during debate on the 2008 Farm Bill. The components of this proposed rule hurt producers and could drastically change the way cattle are marketed in the United States.

rket lieved in the free ma Fellow Producers, owner, I’ve always be ess y to sin ilit bu ab e allTh sm t. d cer an ry other marke As a livestock produ cattle market and eve of U.S. et the in ten – sic n tio ba a eti is mp cts co as the best driver of you add to your produ tting paid for the value ma ximize profits by ge it with it, agriculture ) has anything to do business. DA (US ure rule by ult ric Ag ts of it. A recent proposed If the U.S. Departmen e market as we know w the fre allo the uld of d wo en A) the PS Administration (GI ds producers could see yar ck rket Sto d ma an n ca rs y on Packe and how the USDA’s Grain Inspecti to tell producers when ing the ls, fl na sti sig by t rs rke yea ma n 30 tha government, rather the beef industry back e tak ety of to l saf d tia an ten y po has the hance the qualit their cattle. This rule rs to add value and en ce du pro ttle ca . U.S innovative efforts of and abroad. nsumers in the U.S. estments in genetic their products for co that can ectly linked to our inv dir is ility tab fi pro r ce high-quality cattle ou In cattle markets, that allow us to produ ments have enabled es ge ctic an pra arr nt g tin me ge rke rd-mana For years, these ma nt. me ge improvements and he case. In essence, we an ail arr g ret tin er demand at the through a marke sum um mi con c pre a cifi for spe d et sol me be cts to .” produce quality produ her than “price takers ultry, producers like me to as “price-makers,” rat estock, Dairy, and Po ess Liv sin bu on r e ou tte of mi l om tro bc con Su e undaries tak ure bo to ult ir le ric ab the Ag g e are us sly oversteppin l weeks ago in the Ho DA officials for seriou g 2008 rin US d du ize te In a hearing a severa tic na cri Se d gly an on e ” in both the Hous sides of the aisle str ted th ec bo rej d moved m an dly fro s un ers res “so ng mb s Co me vision the intent of t includes several pro making tion, USDA has defied na ile em wh nd all co in proposing a rule tha n rs isa yea art 0 t in nearly 10 evidenced by the bip rs and Stock yards Ac farm bill debate. As g changes to the Packe s. pin ee trie us sw st ind ry mo ult the po for ward on livestock and hurt. The only ones k feedback from the who will ultimately be see r to ce du ort pro eff on will be ial the init it’s le rs, litt confidential informati A rule” targets packe of this rule, producers’ etitors or ult mp res co a Even though the “GIPS ir As the s. m yer fro law a flood of litigation this rule are trial to m m fro t the fi under no ne ng e; be cti ac to bje tpl ly su rke like view, erest of the ma b site for everyone to s is not in the best int yer law l tria posted on USDA’s We to ts y. rke ilit cer profitab ing the cattle ma ans of securing produ rketing the government. Open be supported as a me tial elimination of ma on ten ati po litig the ld d ou an sh es ce sal r cke ies for cattlemen, nit -pa circumstan rtu r-to po cke op pa prohibition on than provide more r he rat -on ati use of marketing The proposed rule’s olid the ntly being met by ly to encourage cons rre cu like lly nd tua ma ac less de is er nts um arrangeme to satisf y cons packers directly own you believe. In order ger numbers (today, lar ve in ha ck uld sto wo live DA n US ow as n their rs may choose to ow than arrangements, packe profitabilit y for more n risk litigation. tha r he rat t) rke ncing and producer ma na ; fi the r ttle of ce ca nt du ir rce pro the pe to for 5 d n on ad tha been the foundati for the value they ve id ha pa t nts ge me to rs ree ric ce ag ne g du ge Marketin nts allow pro resulting in a rketed. These agreeme regardless of qualit y, da ued on the average, 60 percent of beef ma val loss in customers an a be uld see ’ll co we ttle ct, ca du all , pro nts ed me nd ree ma ag de se erwithout the limiting consum . product. By losing or cers and consumers market and generic rs. ce ultimately hurt produ du d pro an n ttle tio ca ova for inn ts fi e loss in pro kill jobs, stifl : the GIPSA rule will Here’s the bottom line again. r ove rt sta d an e this rul Tell USDA to roll back

Take Action Today

If you would like to send a hard copy via mail, hand delivery, or courier, then it needs to go to Tess Butler, GIPSA, USDA, 1400 Independence Avenue, SW, Room 1643-S, Washington, DC 20250-3604; fax to (202) 690-2173. Comments can also be submitted via the Federal eRulemaking Portal at www.regulations.gov.

For a sample letter and to submit your comments in less than ﬁve minutes, visit NCBA’s Web site at www.BeefUSA. All comments must be received by November 22.

Steve Foglesong Illinois cattle producer Association nal Cattlemen’s Beef President of the Natio

Call National Cattlemen’s Beef Association at

202-347-0228 or visit www.BeefUSA.org / www.BeltwayBeef.com 20

Fall 2010 National Cattlemen

for more information

Paving the Way for the Next Generation continued from page 12 producers returning to family group then traveled to JBS Five operations is the ongoing threat of Rivers’ Kuner Feedyard and the the estate tax, but there also seem JBS Greeley packing facility, one to be fewer opportunities for young of the nation’s largest beef packing producers to get their own operations and processing plants. After started. “We need to educate young touring a major retail outlet in the people about the major structural Denver area, the group departed changes in the beef industry,” for Chicago where they made stops continues Spitzer. “It seems next to at the Chicago Board of Trade and impossible to enter the business in a Chicago Mercantile Exchange traditional sense, so our generation and also visited OSI Industries, needs to be creative and adapt and one of the largest, privately-held be networked with other industry food companies in the world. participants through programs The participants then traveled to like YPC.” the nation’s Capitol where they A special block of educational had an opportunity to meet with programs will be held during their respective congressmen Cattlemen’s College at the 2011 and senators, as well as several Cattle Industry Annual Convention regulatory agencies that make and NCBA Trade Show to focus on decisions affecting agriculture. production and business issues that “Before going on this trip, I impact young producers’ ability to thought I was pretty well-informed enter the business. about the beef industry, but this Several initiatives have also been added to NCBA’s convention activities to involve youth under 18. Public speaking, team marketing and cattle judging contests have been recent additions and complement the quiz bowl competition that has been taking place for several years. The pinnacle of leadership development for young producers in NCBA is the Young Cattlemen’s Conference (YCC). Since 1980, more than 1,000 young cattlemen and cattlewomen have made the YCC tour, most calling it “the best educational experience of my life.” The tour helps young industry421332_Gapzapper.indd 1 leaders understand all areas of the beef industry ranging from industry structure to issues management, from Please support production research to marketing. the advertisers Tour members are selected by who have their state and breed affi liates and are helped to make potential industry leaders between this publication the ages of 25 and 50. Th is year’s possible. 10-day tour kicked off at the NCBA Denver office with a comprehensive overview of the beef industry, as well as leadership training. The 477168_Fence.indd 1

experience was eye opening and also uplifting in the sense that it gives you hope that the next generation of producers will succeed,” said JJ Goicoechea, DVM, a cow-calf producer from Eureka, Nev. who was nominated by this year’s group to be the chair of the 2011 Young Cattlemen’s Conference. “Th is trip changes your perspective of the industry and you realize just how diverse cattle and beef production is in this country. It’s a ‘must do’ experience for anyone who is serious about being part of the future of this industry.” For more information about opportunities for young producers in NCBA, visit www.beefusa.org. Holly Foster is a fourth-generation cattle producer and freelance writer based in California.

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Challenges continued from page 16 industry as a whole, to speak with a unified voice. NCBA President-elect Bill Donald of Montana says the various groups in the beef cattle industry should sit down together to find areas of agreement and ways to work together. “How we come to terms with our partners within our own industry is going to be very important,” he said. Foglesong is excited about the potential of the recently created U.S. Farmers and Ranchers Alliance (USFRA) in bringing all segments of the agricultural industry together. The new alliance was officially incorporated in October with more than 60 representatives from more than 20 national food and agricultural organizations. “It was the first time that I saw all of agriculture, across commodity groups, sit down and agree that we could work together,” he said. Donald agrees that the time is right for this kind of positive, proactive alliance and he looks forward to working with the participating groups. “There are so many issues that we all face together and if we’re not aligned in agriculture, where we represent less than 2 percent of the population, we will compromise the future of our industry,” said Donald. “When we bicker internally, our enemies declare victory. As Benjamin Franklin once said, “If we don’t hang together, we’ll certainly hang separately.” Mike Deering is director of communications for NCBA and based in the Washington, D.C. office.

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