R-Calf: Looking Back at Highlights of 2007

US – The U.S. cattle industry certainly has its share of challenges and opportunities, and one can never say that being a participant in this dynamic industry is boring, says R-Calf.
calendar icon 21 December 2007
clock icon 7 minute read

Here, R-CALF USA President/Region VI Director Max Thornsberry not only takes a look back at industry highlights in 2007, but also explains what he expects to occur in 2008.

2007 Highlights:

  • While the average price of fed cattle is expected to reach a new record in 2007 (previous record was over $88 per cwt in 2005), the inflation-adjusted price (in 2007 dollars) for fed cattle will remain lower than the inflation-adjusted prices received from 1970 through the early 1990s.

  • Though industry analysts predicted a measurable turn-around in the liquidation phase of the U.S. cattle cycle that began in 1996, the U.S. herd size has not appreciably increased after falling to the lowest level since the ‘50s in 2004. The number of beef cows in the United States on July 1, 2007 – 33.4 million – was down from July 1, 2006, and July 1, 2005.

  • The third largest U.S. beef packer, Swift & Co., was sold to Brazil’s JBS-Friboi, a company that was reportedly charged by the Brazilian justice department for the anti-competitive practice of coordinating price agreements in order to keep cattle prices low when purchasing livestock for slaughter. According to U.S. news reports, the company agreed to pay $8.5 million in fines to a Brazilian antitrust fund.

  • The U.S. Congress did not renew the President’s Trade Promotion Authority, also called Fast Track, which expired in 2007. As a result, Congress reacquired its authority to amend provisions in trade agreements that may be harmful to specific industry sectors such as the U.S. cattle industry.

  • As a result of tainted imports from China, Congress and U.S. consumers learned firsthand the importance of knowing the country of origin of imported products, and particularly the importance of knowing where imported food products are actually grown or raised. This firsthand information contributed to renewed support for the 2002 mandatory country-of-origin labeling (COOL) law, which is scheduled to go into effect Sept. 30, 2008. This firsthand information also highlighted the need to strengthen U.S. import controls.

  • The Senate version of the 2007 Farm Bill includes reforms to improve the competitiveness of the U.S. livestock industry and strengthen producer protections against anti-competitive practices of the highly concentrated meatpacking sector. The reforms include a ban on packer ownership of livestock, establishment of an Office of Special Counsel for Agricultural Competition, improvements to the COOL law, authorization for interstate shipment of state inspected beef, and authorization for voluntary arbitration for livestock contract growers.

  • U.S. cattle producers and five national U.S. consumer groups joined together as Plaintiffs in a federal court action to block the U.S. Department of Agriculture’s (USDA’s) plan to further relax U.S. import protections against bovine spongiform encephalopathy (BSE), or mad cow disease. The lawsuit challenges USDA’s OTM (over 30 month) Rule that allows the importation into the United States of older Canadian cattle, as well as beef from older Canadian cattle – products that harbor an inherently higher risk for BSE.

2008 Expectations:

  • The U.S. cattle industry remains the last frontier for the U.S. meatpacking industry. It is the only major livestock sector that has not fully been vertically integrated, from birth to plate, by the meatpacking sector. Meatpackers are fighting to change this and have a long-term strategy for gaining control over independent U.S. cattle producers that includes developing strong alliances with conventional industry groups and the government to help them achieve their goal. 2008 will be a critical year in determining whether the cattle industry will go the way of the poultry and hog industries, or whether it will chart an entirely new course and develop an entirely new model where producers and packers maintain a harmonious partnership without either party exerting economic control over the other.

  • By preserving in the final 2007 Farm Bill the competition reforms currently in the Senate version, U.S. cattle producers will effectively block one component of the meatpackers’ plan to gain economic control over producers. Even within an industry where robust competition occurs (for lighter-weight feeder cattle, for example), the effects of anti-competitive practices at the final stage of the cattle life cycle – the point of sale for slaughter-ready cattle – are transferred back through the entire cattle industry. Meatpackers use packer-owned cattle to limit independent producers’ access to the fed cattle market. By slaughtering their own cattle when prices are high and purchasing producers’ cattle when prices are low, meatpackers effectively limit producers’ access to the market and manage the price of all cattle.

  • The ban on packer ownership will help restore market integrity by reducing the meatpackers ability to limit producers’ access to the market and to manage cattle prices. Preserving this measure in the 2007 Farm Bill will help to redirect the U.S. cattle industry on a course other than toward vertical integration. In addition, preserving the establishment of an Office of Special Counsel for Agricultural Competition will help fill the recently revealed void created by USDA’s failure for the past decade to properly enforce – or even investigate – complaints under the Packers and Stockyards Act.

  • Also in 2008, R-CALF USA hopes to reestablish the U.S. cattle industry’s right to protect the U.S. cattle herd from the introduction of foreign animal diseases. The lawsuit filed by R-CALF USA against USDA’s OTM Rule addresses the fundamental issue of whether the U.S. cattle industry has a right to prevent the introduction of deadly diseases like BSE, or whether we must resign ourselves to the management of such avoidable diseases after they are allowed to enter the United States.

  • While R-CALF USA’s lawsuit addresses health and safety ramifications of import policies and trade agreements, there are several trade agreements that may be decided in 2008 including the Panama, Colombia, and South Korea trade agreements. Currently, these agreements ignore the unique characteristics of the U.S. cattle industry. They contain no safeguards to protect against import surges and they contain an inappropriate rule of origin that allows cattle to be imported from a non-participating country, processed in the participating country, and then exported to the U.S. as if it were a product of the participating country. Trade agreements without protections for the U.S. cattle industry are yet another tool that meatpackers use to limit market access for U.S. producers. Unrestricted cattle and beef imports are effectively used to satisfy consumer demand for beef, thus reducing demand for domestic cattle.

  • The Sept. 30, 2008, implementation of mandatory COOL will finally enable the U.S. cattle industry to distinguish their product from among the growing tide of imports and will help producers to maintain the separate identity of their U.S. cattle herd. After COOL implementation, U.S. producers will be able to engage in competition by advertising and marketing their exclusively U.S.A. beef products.

  • Another form of control over the cattle-production sector supported by the meatpackers and the government is mandatory animal identification. Producers will need to effectively organize in 2008 to demonstrate the fallacy behind the meatpackers’ and government’s claim that animal diseases can only be controlled with a mandatory animal identification system. For more than a century, our industry already has demonstrated effective disease control and eradication – without mandatory animal identification. Our challenge in 2008 will be to show how improvements to existing disease-control strategies would be more successful at controlling diseases and more cost-effective than throwing out our previously successful programs in favor of an unproven and costly experiment.

“Importantly, the decisions regarding the 2008 direction of the U.S. cattle industry will be heavily influenced by cattle-producer organizations like R-CALF USA and beef organizations like the National Cattlemen’s Beef Association (NCBA),” Thornsberry pointed out. “There are approximately 800,000 beef-cattle operations in the United States; however, the total number of members among both groups is less than 50,000. This means only about 6 percent of the industry is supporting one of the two organizations deciding their industry’s future.

“Should producers decide for themselves in 2008 which organization shares their vision for the future and begin supporting that organization, the balance of influence over the direction of the U.S. cattle industry could be tipped very quickly,” he emphasized. “R-CALF USA urges producers to make that decision and begin supporting the national organization that shares their industry goals.”

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