BFF

by Lee Pitts, Livestock Market Digest

I don’t get it. Admittedly, there are a lot of things in life I don’t understand, but one of the more puzzling phenomena is rancher’s support of the NCBA while the organization is doing everything possible to hurt American ranchers, including killing COOL. At the same time those ranchers seem to despise R CALF who has had the cattlemen’s back every step of the way.

People will flock to an NCBA convention in San Diego in droves while R CALF could hold theirs in a meeting room at the Ramkota Best Western in Rapid City. Is it the pursuit of a swag bag full of free stuff at the NCBA trade show that sucks cattlemen in? Or, is it just a social club whose members want to party like there’s no tomorrow in a good-time town? Sadly, for NCBA’s cattle-feeding members, there will be no tomorrow because they went from boom times to bankruptcy faster than you can explain the convoluted and complex relationship between the NCBA and the Beef Board. 

It can’t possibly be NCBA’s policies that keep people coming back for more.

Curious Coincidences

I’m not a big believer in coincidence. For example, I don’t think that the two most profitable periods in the cattle business during the last 40 years occurred, first, during the time that R CALF got our northern border shut to incoming Canadian cattle while Canada dealt with her mad cow issues. The second boom occurred during the time period after R CALF led the effort to get country of origin labeling made mandatory for beef so that the American consumer might know, for instance, that the hamburger they bought at Walmart came from a dozen different countries. 

When both of those R CALF supported measures ended we witnessed major market meltdowns and in the latter case, cattle futures at the end of last year when COOL was cooked, suffered their biggest drop in 34 years. Beef futures dropped 16% at end of 2015, a percentage decrease not seen since 1981. Oh, and after COOL was killed in cold blood and the NCBA was worshipping at the altar of globalization, our exports of beef went down 12% while at the same time our imports were increasing by another 20%.

Ask an NCBA supporter why cattle prices were high and they’ll point to exports as the reason. I don’t know if they’re just gullible or they really don’t know that the money we bring home through beef exports is dwarfed by the dollars we pay out to producers in 32 different countries we have graciously let tap into the richest beef market in the world. That would be us… as in the U.S.

If you don’t believe me about R CALF and their role in helping ranchers pad their wallets get a calendar and your checkbook and see for yourself. It’s fact, not coincidence.

Bolder Than Bandits

While the NCBA was busy selling trade-show booths and giving sustainability speeches, R CALF was asking a Senate Judiciary Committee to investigate the 2015 cattle price collapse. Specifically, R CALF asked the Committee, “to investigate 13 specific issues including the cause for the dramatic, unprecedented collapse of U.S. cattle prices in 2015; whether there are structural problems in the U.S. cattle market that contributed to the price collapse in 2015; and whether dominant meatpackers or other major market participants engaged in unlawful conduct that adversely influenced the cattle futures market and cash cattle market in 2015.”

If you haven’t read a market report from your local auction market recently, let us bring you up to date on just how bad the carnage was.

• R CALF provided documentation to the committee showing that independent cattle feeders lost more than $500 per head on cattle sold during the collapse and, consequently, “the very foundation of the U.S. cattle industry’s feeding sector – its independent cattle feeders – was irreparably damaged.” If you are sitting with a full feedlot of over-ripe cattle it doesn’t take much of that action before you’re broke and weeds are growing in your former feedlot.
• According to John Nalivka, President of Sterling Marketing, feedyards lost a cumulative unhedged $4.7 billion in 2015. Add the $1.1 billion they also lost in 2013 and that’s almost two billion more that they made in the glorious year that was 2014. A year when we had country of origin labeling, I might add. Even more galling, while feeders were losing two billion, consumers saw little, if any, reduction in the price at the grocery store because multi-national meatpackers were making unprecedented profits. 
• At the end of 2015 the average price for yearling cattle was $1.66 per pound. A year earlier the same weight cattle were worth $500 more per head.
• Even after the big up in the market that followed the HUGE DOWN, Sterling Marketing reported that cattle feeders were still suffering a $383 per head loss on a cash price of $1.32 per pound. I suppose that’s better than losing $500 per head but once you’re broke does it really matter to what degree your level of “brokeness” is? 
• Industry observer Stephen Anderson says, “Ranchers and private feedlots are poised for vertical integration, about like hog people were in 1998. When they eliminate the private independent cattle feeders, the “competitive markets” for feeder cattle will go too. Then the packing cartel will have the cowman by the throat and will dictate: genetics, delivery date, weight, vaccinations, I.D. policy, and price. The Walmartization of the cattle industry is just around the corner. NCBA calls it Sustainable Beef!”
• To illustrate just how crazy the cattle market was in the last quarter of 2015 live cattle were worth $132 per cwt. on the first day of December. Two weeks later they’d dropped to $117 and then another week later it had jumped back to $131. One trader said the market was akin to catching a falling knife and many got bloodied in the process.
• I have big stocker friends who paid four dollars per pound for 350-400 pound calves and fed them to fat who are now selling ranches and giving up leases in hopes of avoiding bankruptcy. At next summer’s big video sales don’t be surprised if many of those four dollar-per-pound-players are no longer participating. And just like that, another chunk of the U.S. cattle business is gone.
• According to R CALF, “As cash cattle prices plummeted and cattle futures prices fluctuated with extreme volatility, dominant meatpackers were benefiting from what one industry commentator referred to as gangbuster profits.”
• R-CALF’s Bill Bullard says, “Analysts are characterizing the 2015 price collapse with nondescript phrases such as ‘market meltdown’ and ‘psychological upheaval,’ indicating that they either do not know, or they will not say, what actually caused the catastrophic price collapse.”
• There was one little item that may have had something to do with the market collapse. Just prior to the calamity, the U.S. Congress, buckling to pressure from Canada, Mexico, the World Trade Organization, and the NCBA, killed COOL so that packers no longer had to keep the foreign cattle separate from domestic ones and they were then free to bring in cheaper beef from around the globe without the consumer knowing it.
• I had to laugh at one commentator who wrote, “Packer margins have improved dramatically along with the higher beef prices. As a result, packers have plenty of room to bid more aggressively for fed cattle.” Charitable packers? That’s the very definition of an oxymoron. If you believe that, you are a moron.
   

• R CALF further briefed the Congressional committee “that extremely tight cattle supplies and growing beef demand were among market fundamentals cited by analysts to support projections for strong cattle prices throughout 2015 and for up to three years beyond. During the first half of 2015, those projections were spot-on. But then something went awry. Cattle prices collapsed farther and faster than during any time in history and the unprecedented volatility in the cattle futures market rendered it useless for price discovery purposes.”
• What did your friends, the NCBA, have to say about R CALF’s request for a Congressional investigation into the market calamity? NCBA officials said there “was no merit in R CALF’s request for a Congressional investigation.” Although they did host a meeting in December and wrote a letter on January 13, to Terrence A. Duffy, President of the CME Group to express their member’s concerns. 

Gee, would that be the same Chicago Mercantile Exchange that’s listed as a major sponsor of NCBA’s convention, is an NCBA Allied Industry Partner and has had an “ongoing partnership with the National Cattlemen’s Foundation” to sponsor CME Beef scholarships since 1989?” Editor’s note: CME used to be called the Chicago Mercantile Exchange until they started using just the initials. No doubt to be more transparent.

I wonder if the NCBA-belonging big stocker operators who are busy going broke feel as comfy and cozy with the CME and NCBA now?

Needless to say, for ranchers, feeders and stocker operators taking turns going broke is no way to run a business, let alone an industry. Neither is giving your money in the form of a checkoff tax to an organization that seemingly doesn’t care what country the beef comes from because they get paid no matter what.

NAFTA On Steroids

While the NCBA was busy leading the cheers for the Trans-Pacific Partnership free trade agreement, R CALF was presenting testimony to the U.S. International Trade Commission to recommend its rejection. 

If you liked NAFTA you’re going to absolutely love the TPP.

R-CALF CEO Bill Bullard testified, “The TPP adopts the mantra of the National Cattlemen’s Beef Association, who told a federal court that “beef is beef, whether the cattle were born in Montana, Manitoba, or Mazatlán.” Read that sentence again and then tell me that the NCBA is your BFF. (That’s “best friends forever” for you non-texters and tweeters.) 

“Under the TPP’s product-specific rules of origin,” said Bullard, “the origin of beef is wherever the animal was slaughtered. This renders the origins of cattle irrelevant. It relegates U.S. cattle producers to nothing more than an undifferentiated global supply chain for meatpackers.

“The TPP allows U.S.-based meatpackers to float live cattle from Australia, slaughter them here, and export the duty-free beef to Japan with a ‘Product of the USA’ label. This extinguishes competition between U.S. cattle producers and cattle producers from around the world. So not only will the TPP destroy competition, it also allows multinational meatpackers to usurp the good name, image and reputation of the U.S. cattle producer,” Bullard testified.

Bullard also said that non-participating countries will benefit from the TPP at the expense of U.S. cattle producers under the flawed origin rules. He explained that meatpackers can do this now by slaughtering Mexican cattle in the U.S. and shipping the resulting beef with a ‘Product of USA’ label under the U.S.-South Korea Free Trade Agreement, even though Mexico is not a party to that agreement.”

Bullard testified that the U.S. has, “Already accumulated a $22 billion trade deficit with the 11 other TPP countries and that the TPP block represents the third-largest cattle herd in the world; it overproduces beef and its production is increasing while its consumption is decreasing. “We will become the dumping ground for cattle, beef and lamb,” he said.

According to Bullard, the combination of unlimited imports and no safeguards is what caused the severe shrinkage of the U.S. commercial sheep industry. “Since the U.S.-Australia Free Trade Agreement, more than half of our domestic lamb consumption is supplied by imported lamb. The failure to provide safeguards for sheep producers has resulted in the offshoring of our nation’s once vibrant commercial sheep industry.”
 
“The cattle industry is following in the sheep industry’s footsteps,” said Bullard, “with more than half a million U.S. cattle operations exiting the industry since 1980, the liquidation of the U.S. cattle herd was reduced to the smallest size in 70 years! The reduced production output that is now the lowest in more than two decades, since just before NAFTA.”
 
“Treating the trade deficit as lost sales,” said Bullard, “it is estimated the U.S. economy experienced an output loss of about $8.7 billion and a loss of more than 97,000 jobs as a result of the $2.2 billion trade deficit increase the U.S. experienced with the TPP countries from 2013 to 2014.”

The TPP would also weaken U.S. health and safety import standards and subject U.S. laws to review by an unaccountable foreign tribunal inaccessible to most U.S. citizens. That’s not a theory, it’s exactly how the NCBA and their meatpacker buddies got rid of COOL through the World Trade Organization. Bullard said the TPP requires the U.S. to “unacceptably cede a wide swath of its national sovereignty.”

As R CALF supporter Mike Schultz says, “The NCBA does not represent independent cattlemen and there is a BIG difference between the NCBA and R CALF. NCBA wants and supports more consolidation and a flood of global meat imports, less producers, feeders and packers while only R CALF supports more producers, feeders and we damn sure wish there were a lot more packers for the simple reason of stopping collusion and increasing competition. Pretty simple and the facts have been on the table for years! Some people just can’t read,” concluded Schultz.

As a writer, I certainly hope that’s not the case, but sadly, I can’t think of any other logical explanation.