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Shaping the Future of the Beef Industry

Livestock Update, August 2003

Dan Eversole, Dept. of Animal & Poultry Sciences, Virginia Tech

Virginia Angus Association Field Day
Virginia Tech, Blacksburg
Saturday, August 23, 2003

The beef industry is at a crossroads. Issues that will shape the future of the beef industry in the United States are currently being debated on Capital Hill and in ranch community coffee shops all across the country. The resolution of these issues will shape an industry markedly different in the year 2010. By 2010, our industry will either be more free-market driven, with more competition and transparency in price discovery, or our industry will be more vertically coordinated (like the pork industry) with alliances and packers playing an ever-larger role from conception to consumption.

The Virginia Angus Association and the Southwest Virginia Angus Association are proud to invite all interested cattlemen to our joint "Shaping the Future of the Beef Industry" Field Day on August 23 at the Virginia Tech Beef Cattle Center in Blacksburg. We have commitments from four leading industry lobbyists who have agreed to speak and answer questions on these hot-button issues. Specifically, we have asked our speakers to address "Country of Origin Labeling" (COOL), the "Packer Ban", and "International Trade". These are passionate subjects with huge long term financial implications. As such, we have all read precious little objective commentary about these subjects. This opportunity to listen to and question industry leaders‹who are on the record taking different sides to these issues‹will allow attendees the opportunity to mold their own informed opinions going forward.

COOL was passed into law with the 2001 Farm Bill, and becomes mandatory September 30, 2004. COOL applies to a large number of perishable agricultural products, including fresh muscle cuts of beef and ground beef. On the surface, COOL is a simple concept that would allow United States producers to identify and differentiate their product in the marketplace and provide consumers with the option to support US agriculture. Make no mistake, COOL is the first battleground for the future path of the beef industry. COOL is coming under attack from two fronts: from those who flatly want the law repealed, and from those who were initially in favor of COOL, but now oppose it because of the way USDA is proposing to regulate the law. Proponents of COOL believe the law will improve food safety and provide consumers with the right to know the origin of the beef products they buy, resulting in improved demand and more revenue for US beef. Opponents of COOL believe it will have no impact on food safety, that consumers don't care about the origin of the beef they buy, and that the costs of implementing the law will be substantial or prohibitive. Opponents of COOL therefore believe the program should be voluntary and not mandatory. Skeptics believe voluntary COOL will never happen because the status quo allows for cheaper Mexican and Canadian cattle to continue to receive the USDA quality grade stamp, which allows packers and retailers to sell foreign beef for the same money as beef that was born and raised in the United States.

Unlike COOL, the "Packer Ban" is not law, it is proposed legislation. Essentially, the "Packer Ban" would restrict captive supply of slaughter cattle‹the cattle pre-owned or forward contracted by packers. Proponents started favoring legislation for "Packer Ban" after industry analysts showed that since about 1990 (when captive supply became significant), prices for slaughter cattle have remained stagnant while prices for retail beef have skyrocketed. The retail price of beef is up over $500 per head since 1990, while producer income has remained flat. Proponents of the "Packer Ban" believe that limiting captive supply will add more transparency to market price by forcing packers to bid competitively for the cattle they buy. Opponents of "Packer Ban" believe the industry is working most efficiently now, and that practices that result in more inefficiency at the packing plant will result in lower prices for the producer.

International trade, on the surface, is another fairly simple issue. Those in favor believe that promoting more trade will open more markets for US beef, and thereby improve the value of the beef we raise. Those opposed to increasing trade believe that trade is a two way street, and that there are significant costs inherent to doing business in the United States which makes our costs of production higher than other countries. If more and more cheap feeder cattle are able to come to the United States from foreign countries (like Mexico, Canada, Australia, New Zealand, Brazil, Argentina, etc.), then the fear is that more and more of our ranchers and cattlemen will go out of business because of an inability to compete in the marketplace. How comfortable would we be seeing our nation¹s cowherd continue to shrink, which would make us rely more and more on foreign countries to feed the USA?

Our distinguished speakers for the field day are Chandler Keys, Vice President of the Center for Government Affairs for the National Cattlemen¹s Beef Association (NCBA); Bill Bullard, CEO of R-CALF United Stockgrowers of America (R-CALF USA); Mark Dopp, Senior Vice President of Regulatory Affairs and General Counsel for the American Meat Institute (AMI); and Michael Stumo, General Counsel for the Organization for Competitive Markets (OCM).

The NCBA is the trade association for America's beef industry‹producers, feeders, and processors‹making NCBA the marketing organization for the largest segment of the nation's food and fiber industry. Chandler Keys has been with the NCBA since 1984, and he now directs the legislative, regulatory, and political activities of the NCBA in Washington, DC. Mr. Keys is a graduate of the University of Maryland, and he was raised on his family's Angus cattle farm in Maryland.

Based in Billings, Montana, R-CALF USA is a relatively young organization that represents the United States cattle industry in trade and marketing issues to ensure the continued profitability and viability of independent U S cattle producers. Bill Bullard joined R-CALF USA as CEO in 2001, and he previously served as Executive Director of the South Dakota Public Utilities Commission from 1995 to 2001. Mr. Bullard is a graduate of Black Hills State University and he ranched for a number of years in South Dakota.

Based in Washington, DC, AMI represents the interests of packers, processors, and their suppliers throughout North America. Mark Dopp was outside general counsel for AMI from 1995 to 1999, and in 1999 he formally joined AMI. Mr. Dopp oversees policy development and research and provides legal counsel to AMI. Mr. Dopp received his BA from the University of Wisconsin, his MS from Michigan State University, and his law degree from the University of Missouri. Prior to joining AMI, Mr. Dopp worked in private practice and for the USDA.

OCM promotes competitive markets for farmers, ranchers, and rural communities by focusing on competition and antitrust issues in agriculture. As general counsel for OCM, Michael Stumo has authored and co-authored several articles regarding competition and fairness policy in agriculture. Mr. Stumo graduated from Iowa State University and received his law degree from the University of Iowa. He grew up on a small, diversified farm in Iowa and has also worked as a cattle and hog buyer.

Registration for the field day will start at 9 A.M., August 23, and the program will run from 10 A.M. through 3 P.M. Junior members will participate in a judging contest from 10 A.M. through noon, with a fitting demonstration after lunch. Adults will listen to our speakers from 10 A.M. through noon, and participate in a question and answer session after lunch. Everyone is invited to a free lunch at noon, sponsored by SW VA Angus Association, and prepared by the Virginia Tech Block and Bridle Club. Please contact the Virginia Angus Association at 540/337-3001 or Dr. Dan Eversole at 540/231-4738 if you have any questions. We hope to see you at Virginia Tech!

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