Why a Cattlemen's Organization is Campaigning Against the Cattle Industry
“Anger is a gift.”
By Jim Mundorf
For the past few years the pricing system used in the cattle industry has been broken, and has been bankrupting small independent cattle producers. The trouble is, the base price for all cattle sold comes from the sale of a small percentage of cattle sold to beef packers. Right now, the majority of fat cattle are sold on what is called a formula system. These formulas are confidential. On Wednesday both Republican and Democratic Senators introduced a bill that would force beef packers to bid on 50% of all of the cattle that they buy, which would then, make the price for all cattle, be based on half of all fat cattle sold. A fix to a broken system. The bill and its backers gave hope to thousands of small independent cattle producers who are currently drowning in this hopeless system.
On Thursday the National Cattlemen’s Beef Association, NCBA, came out against that bill.
The Feedyard’s Reason
Why would people in the cattle business be against a system that would increase competition for cattle? The reason the majority of cattle are sold on the formula system is because that is how beef packers want to buy cattle, and how large corporate feedyards want to sell cattle. This system allows packers to have contracts with feedyards and the prices are determined based on a number of, “factors.” These contracts are all different for different feedyards, the contracts, the factors and the formula are all confidential. What we do know is that cattle sold on the formula system make $40-$50($3-$4 cwt) more per head, than cattle sold using the negotiated system. Which may not sound like a lot, but if you are a corporate feedyard that sells hundreds of thousands of cattle, its millions.
The Beef Packers Reason
The reason beef packers need the formula system to stay in place is that it puts the large corporate feedyards in their pocket. The formula system allows packers to have exclusive contracts with feedyards. This allows packers to know exactly what is going on at these feedyards. They know how many cattle are there and when those cattle will be ready to ship. If a packer has knowledge and control of his own supply, they can control the price. Right now there are four beef packers that control around 85% of the beef produced. If those packers have exclusive contracts with 6 feedyards that, according to industry experts, control around 30% of all cattle on feed, then America’s beef supply chain becomes extremely narrow. If you haven’t noticed lately, that can be a problem. Beef in America is being controlled by fewer and fewer who have now partnered up, and to hell with the little guys.
Picking Winners and Losers
Another new benefit for feedyards to use the formula system is that, when packing plants shut down, packers can choose winners and losers, and guess who gets picked? When packing plants shut down during the week of April 6, 91% of all cattle sold to packers were sold on the formula system. Meaning packers are now taking care of corporate feedyards where they don’t have to negotiate on price. So while small producers are stuck losing thousands of dollars a day feeding cattle that have no place to go, the corporate yards have been shipping them out. Over the last few weeks packers have simply been able to choose who sinks and who swims. Obviously they would rather do business with a small group of massive feedyards than a larger group of small ones. Now the corporates are swimming while the little guy is taking one last gasp of air.
National C-word Beef Association
So, why would the NCBA be against increasing competition for cattle? The reason they gave was that they are against government mandates. That is complete BS. The truth is that they are against government mandates that may harm the beef packers and corporate feedyards that fund them. The NCBA is not a cattlemen’s organization, it is simply a mouthpiece for large corporations. That is why they are so well funded. They exist to do the bidding of those with the most money. To hell with the rest of them. If they were truly against government mandates they should come out against the current government mandate that steals one dollar per head of cattle from cattlemen’s checks. That is the Beef Checkoff and they are alright with that mandate because they are the benefactor. Of course, if beef packers ever had to pay into the checkoff, I’m sure NCBA would be against that mandate too.
To understand who NCBA is, and who they represent, you simply have to look at their soon to be President Jerry Bohn. Jerry is a part owner of Pratt Feeders, a corporate feedyard in Pratt Kansas. Since factors influencing formula pricing are confidential, I guess we will never know if being the next NCBA President is a factor that may influence the price his yard gets. Todd Wilkinson, NCBA Policy Chair, who wrote the statement against the bill, works as an Attorney and also is part owner of Redstone Feeders in De Smet South Dakota.
NCBA’s statement, notice the list of people they are working with does not include cattle producers.
Anger is a gift
The NCBA’s statement it was no surprise. Over the past couple of years I have looked into the serious issues and problems facing cattle producers. I have watched the NCBA take millions out of cattle producers checks, and do nothing for them. Many in the industry have shown their anger towards the NCBA about campaigning against the current bill, including some of their own members. Those people need to realize they have just been given a gift. By working to pass this bill you can put the NCBA in its place, and show them who they need to start working for. You can push back against the corporate feedyards, and beef packers’ take over of this industry. State associations can show the NCBA that they work for their members, and not for checkoff dollars. The 50/14 bill is no longer just about giving the small independent cattle producer a chance to survive, it is about handing the beef packers, corporate feedyards, and the NCBA a defeat. Its about the entire country showing that they do not want the entire beef supply controlled by just a few corporations. Call your Senators and your state associations, tell them to pass this damn bill.
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Jim Mundorf- Owner of Lonesome Lands and The Drover House. He also works on his families farm and cattle ranch in Iowa
