MARKETING OUR PRODUCTS

The beef industry is like a middle aged man who smokes, drinks, doesn´t exercise and thinks he´ll be okay as long as he eats three bran muffins every morning and stays away from doctors. Like that candidate for bypass surgery, we too are living in denial about the deteriorating health of the American beef industry. If a human was in as bad a shape as the cow/calf and cattle feeding business they´d be put on life support.

Finally, someone has put the beef industry through a thorough exam and the results of all the tests are back. There´s no easy way to break the news . . . the prognosis is not good. R-CALF USA (United Stockgrowers of America) prepared a document called "The Current State of the U.S. Cattle Industry" that was presented to delegates attending the 2002 Business Forum of the Free Trade Area of the Americas that took place October 29-31 in Quito, Ecuador. R-CALF sent the report, along with two representatives, to Quito to make sure U.S. and South American negotiators had all the facts before they negotiated away your future. The bureaucrats are not the only ones who should read the report.

R-CALF´s detractors may scoff and say the numbers are skewed but the document is painstakingly documented. (We left out the footnotes.) Besides, if you are a cattleman suffering from lower prices you´ll know the diagnosis fits your symptoms.

Early Warning Signs

R-CALF came to the conclusion that the live cattle industry has been in a state of substantial economic crises over the past decade, and remains so today. Here´s a look at the chart hanging at the end of your bed in intensive care.

• "According to USDA data regarding U.S. cow/calf production cash costs and returns, the average gross value of production less cash expenses during the 10-year period of 1982-1991 was $25.51 per bred cow." In other words, from 1981 to 1991 we made a little money -- not much but a little.

"During the following 10-year period, 1992-2001 the average return to U.S. cow/calf producers fell to -$30.40 per bred cow. (Please note the negative sign!)

"During the period of 1992-2001, the average number of beef cows in the U.S. was approximately 34 million head. Applying the average loss per head to the average number of beef cows generates an industry-wide average cash operating loss of over $1 billion over the past 10 years for U.S. cow/calf producers. Actual losses to cow/calf producers were far greater when total production costs were factored, with significantly greater losses occurring during the period from 1996-2001. Based on USDA´s total per head loss for 2001, and again using the 34 million head beef cattle herd size, losses for 2001 alone are estimated at over $15 billion dollars."

• More bad news. The USDA says our financial health is going to get worse. "The USDA expects livestock and livestock product values to fall $9.6 billion in 2002. USDA projects cash receipts for cattle and calves to decline by $200 million in 2002, and is predicting a 23 percent decrease in average net cash income for producers of beef cattle below the average net cash income received during the period of 1997 through 2000. It also predicts that approximately 17 percent of U.S. cattle producers will experience debt repayment problems, representing an increase over 2001."
• "The U.S. cattle feeding sector is also suffering from a persistent economic cost-price squeeze. Using Kansas State data, Auburn University professor Robert Taylor determined that the average return for U.S. cattle feeders during the period 1980-1990 was $41.40 per head. The average returns during the following period, 1991-2001, fell to -$14.60 per head." (Again, note the negative sign.) "Based on the USDA data, United States cattle feeders have lost approximately $3 billion dollars just since March of 2001."
• "United States cattle inventories have been in a state of decline since 1996, with all cattle and calf inventories falling from 103.5 million head in 1996 to 97.3 million head in 2001. Beef cow inventories alone fell 1.9 million head during this period. By January 1, 2003, the USDA expects the U.S. cattle herd to fall to 95.6 million head, its lowest level since 1959. The calf crop in 2001 was likely the smallest since the 1950s and the USDA predicts the calf crop for 2002 will likely be even smaller."
• "From 1999 to 2000, USDA data shows that 13,290 U.S. cattle operations exited the industry. The USDA National Agriculture Statistics Service (NASS) reports that U.S. beef cow operations have declined by approximately 200,000 operations since 1987, with the steepest decline occurring from 1996 through 2001. The total number of U.S. beef cow operations in 2001 was 814,400. Approximately 27,000 additional U.S. cattle operations have exited the industry thus far in 2002, resulting in a further decrease of operations."

How are you feeling so far? A little faint? Wait, there´s more bad news.

The Cure Will Kill Us

We´ve always been told that the cure to hard times is more hard times. In other words, enough of our neighbors will leave the industry so that it will eventually become profitable again. Yeah, right. And chicken soup can cure cancer.

According to R-CALF, "the ongoing crisis in the U.S. live cattle industry cannot be explained by the historical cattle cycle."

"The U.S. live cattle industry has been historically characterized as a cyclical industry," says R-CALF. "The cattle cycle refers to the rising and falling of cattle inventories that result from changes in live cattle prices. It was the equivalent of an industry-wide self-management program, but the competitive market drove it, not an industry or government directive."

"The cattle cycle historically occurred every 10-12 years, a function of the long biological cycle for cattle. USDA reports it consists of about 6 to 7 years of expanding cattle numbers, followed by 1 to 2 years in which cattle numbers are consolidated, then 3 to 4 years of declining numbers before the next expansion begins again. USDA reported in 2001 that the cycle has been shortened over time. Many in the industry believe the historical cycle may have ended."

"USDA recently acknowledged the last cycle was nine years in duration; the present cycle is in its thirteenth year, with two more liquidations likely. This certainly does not reflect a shortened cattle cycle, and even granting USDA its prediction of two more years before the US cattle industry begins rebuilding its production capacity, a 15-year cycle with 6-8 years of liquidation is well beyond the historical perimeters of a functioning cattle cycle."

The Patient Really Is Sick

We are not hypochondriacs. There is a real disease causing our current discomfort. According to R-CALF it is simply this: "Total cattle and beef imports are outpacing the decline of the U.S. cattle herd."

"Under present trade policies and practices, the U.S. is supplanting domestic production with imported beef and live cattle at an alarming pace. Imports of beef and live cattle have steadily outpaced the decline of our cattle herd since 1996. The U.S. trade deficit in cattle and beef is likewise outpacing the decline of our cattle herd."

"The adverse effects of this continuously growing volume-based trade deficit can no longer be masked by emphasizing trade values over trade volumes as the U.S. cattle industry now finds itself in an unfavorable value-based trade deficit as well."

"The U.S. live cattle industry is highly sensitive to changes in beef volumes. Cattle industry analysts have historically emphasized the value relationship of U.S. imports and exports, arguing that we have a trade surplus in beef when measured on a value basis. As a result of this emphasis, little attention was paid to the impacts of trade volumes on the U.S. cattle industry. However, the year 2000 marked the last year we had a trade surplus in beef when measured on a value basis, with the United States experiencing an $82 million dollar beef trade deficit in 2001. This value-measured deficit appears to be growing rapidly in 2002, with the United States experiencing a $252 million beef trade deficit at the end of August 2002." According to R-CALF, "The U.S. is now a net importer of cattle and beef regardless of whether trade flows are measured on a value or volume basis."

"Evaluating the cattle/beef trade in terms of value, however, ignores the impact that imported cattle and beef volumes have on the U.S. live cattle industry. Particularly their impact on domestic cattle prices when the domestic market is saturated, e.g., when the U.S. cattle industry is in a liquidation phase, or when importers strategically time import arrivals to leverage down domestic cattle prices or to prevent price increases."

According to R-CALF, "while U.S. cattle producers continue liquidating to achieve a more favorable supply-demand relationship that will support higher domestic live cattle prices, record imports are far outpacing their domestic supply reductions, effectively nullifying their efforts."

Taking Their Own Medicine

While the NCBA is pushing for more trade agreements, R-CALF used NCBA numbers to show such agreements can have a devastating impact on our prices.

"According to Chuck Lambert, Chief Economist at the National Cattlemen´s Beef Association, "The rule of thumb is that a 10 percent increase in beef supply results in a 15 percent to 20 percent decrease in price." Even small increases in supply - as little as 2 to 3 percent - can have significant downward effects on price. "Thus, increased beef imports can significantly affect the price received by U.S. cattle producers," says R-CALF.

"Beef and live cattle imports have increased significantly in recent years, with beef imports increasing from 2.1 billion pounds in 1996 to 3.2 billion pounds in 2001. Live cattle imports increased from 2 million head to 2.4 million head during the same period. Combined, these imports caused the U.S. trade deficit (total imports minus exports) for cattle and beef to grow from 1.5 billion pounds in 1996 to 2.4 billion pounds in 2001."

"The 2001 trade deficit for cattle and beef of 2.4 billion pounds represents an approximate 10 percent increase in supply over the United State´s 24 billion pounds of domestic production. Applying the aforementioned "rule of thumb" to the 2001 production year, prices received by U.S. cattle producers were negatively impacted between 15 to 20 percent. This means fed cattle prices in 2001 would have likely been between $83.03 to $86.64 per cwt., rather than the $72.20 per cwt. actually received, if not for the increased import supplies. If this rule of thumb is accurate, U.S. producers lost between $130 to $173 per head on their 2001 production due to the ongoing United States trade deficit in cattle and beef."

Quacks

R-CALF contends that the reason we get conflicting reports on our condition is that "the USDA and the International Trade Commission are using faulty economic models to evaluate the current state of the live cattle industry. The General Accounting Office (GAO) released a report in March 2002 titled Economic Models of Cattle Prices: How USDA Can Act to Improve Models to Explain Cattle Prices. The GAO´s report criticized both USDA´s and the International Trade Commission´s (ITC´s) economic models, models commonly used by these agencies to evaluate the United States´ cattle and beef sector, and suggested revisions to them. As a result of these faulty models, reports issued by both USDA and ITC likely understate the current economic difficulties being faced by U.S. cattle producers."

"Evidence that historical indicators can no longer explain or predict what is happening within the U.S. cattle industry abounds. As recently as October 1999, the USDA grossly miscalculated the cattle industry´s production trend by predicting that U.S. beef production would decline in 2000 by 4-7 percent below 1999 levels. U.S. production in 1999 was 26.4 billion. Thus, the USDA predicted 2000 production would fall by as much as 1.8 billion pounds. However, production in 2000 reached an all time record high of 26.8 billion pounds. The USDA under-forecasted this short-term prediction (less than 14 months) by 2.2 billion pounds, the carcass weight equivalent of nearly 3 million head of live cattle."

"The USDA is predicting even further industry losses, without factoring in the prospects of additional imports of beef and live cattle resulting from any new Free Trade Agreement."

In other words, we are much sicker than our quack USDA doctors are telling us. Using painstaking research R-CALF came to the conclusion that "any trade agreements that do not address all market distortions, and that do not provide minimal protections for producers of live cattle are a clear threat to the future profitability of independent cattle producers in the U.S. and to the future sustainability of the rural communities they support."

The only question remaining is will the patient heed the early warning signs before we are thrown on the bone pile with the other carcasses of previously destroyed American industries?

California officials recently subpoenaed a Houston-based firm to determine if the company assisted power plant owners in artificially boosting energy prices during that state´s now infamous power crises. What did the company, Industrial Information Resources, allegedly do? It provided data that power plant owners could have used to manipulate the energy market.

What has this got to do with livestock, you may wonder?

A much-too-regular basis another entity issues reports and disseminates data that some large firms then use to manipulate a market: the cattle market. Only this entity, the United States Department of Agriculture, is NOT called on the carpet or issued subpoenas, but instead is given the blessing of our politicians. Why is one entity guilty of helping to destroy a market and the other is thought of as providing a very important service? Talk about a double standard!

The information disseminated by Industrial Information Resources was obtained from plant personnel who worked for the very same companies that were then using that information to allegedly gouge their customers. Couldn´t the same thing be said of a feedlot manager affiliated with one of the Big Three packers providing on-feed numbers to the USDA? Especially when a futures trading subsidiary of the same firm then uses that information to jerk the cattle market around.

In the California energy case an administrative law judge said, "This dissemination of energy information among competitors may have facilitated market manipulation by sellers of energy." HELLO! isn´t that what is routinely being done in agriculture with the collection and dissemination of on-feed and crop reports? A spokesman for California´s Attorney General had this to say about the anticompetitive conduct and market manipulation: "When companies communicate with each other directly or through a conduit about current or future supply we are very interested." I only wish those agencies who are supposed to be charged with keeping our livestock markets free and lawful would share that sentiment.

A Better Blue Book

A cheerleader for the big packers who writes a weekly column recently stated that January price declines in the cattle market were caused by the two large video cattle auctions who offered a large number of cattle for sale within a three day period. The casual reader might read that opinion, consider it reasonable, and shake his head in agreement. Except that´s not even close to what transpired.

This reporter happened to be at ground zero when the previously described events took place. The week prior to the large video sales, the cattle market was rising. Thankfully, we had a much more optimistic blue book for our cattle and the price of fat cattle even reached 80 cents! Packers and cattle feeders strategically aligned with them, were well aware of the large number of cattle to be offered in the upcoming video auctions and knew that, in order to maintain inventories, they needed to buy them. They also knew they were reluctant to participate at the new price levels. Lo and behold, right before the video sales began, out of nowhere came news about missing vials of biologicals. On the screens of DTN machines across the country pundits opined about their devastating potential if they got in the hands of the wrong people. Those rumors drove futures prices and live cattle prices down sharply. After the feeders and packers had bought their cattle on the video sales at lower than hoped for prices, no more was heard about the rumors that had caused the market to drop in the first place.

A single occurrence, you say? Not really. The exact same thing happened with rumors of foot and mouth in Kansas feedlots that were not true. But the rumors served their purpose. They took a nickel off the price of cattle during a heavy marketing period. Once again, after the sales were over, no more was heard about the rumors.

What´s that old saying . . . "Fool me once, shame on you. Fool me twice, shame on me?"

It seems any rumor will do. Anytime the price of fats gets close to eighty here comes another rumor or another negative reaction to a government report. In today´s monopolized cattle market packers do have other options to lower the price they have to pay for fat cattle: They can either slow down chain speeds in their plants or even close down a packing plant for a day or two to back cattle up and drive down prices. But this costs them some money. It´s much easier, and certainly more profitable, to get the market moving lower based on rumors or USDA reports.

And the worst part is . . . we are willing co-conspirators.

Looking Through Green-Tinted Glasses

Doug Wildin of Kansas is a long time opponent of futures trading and of government reports. And with good reason. Doug has studied USDA reports and their effect on the cash wheat market for years. For example, Doug took notice last November when the cash price of wheat went down a whopping 78 cents per bushel in six trading days following a November 5 USDA report. What was in the report? Basically three words . . . "Wheat looks better." Did the USDA statisticians put on their boots and actually go look at the wheat? No, wheat farmers volunteered the information.

In the time period from October 16, 2002, to January 14, 2003, the price of wheat dropped $1.41 per bushel, despite wheat stocks being at their lowest level since 1983. Wildin says that $1.14 of that $1.41 price drop can be attributed to the issuance of four USDA reports and one from a Kansas crop reporting service. Sure enough when you look at actual elevator wheat prices and add up the drop in the price of wheat immediately following those reports it comes to $1.14.

On January 10 the USDA issued a report that sent the price of wheat down 36 cents per bushel in just three trading days. The price dropped 19 cents on the day of the report, 9 cents on the next trading day and another 8 cents on the third. All because the USDA said that" 62 percent of the nation´s crops are in excellent condition." Not 60 percent or 70 percent but 62 percent. Are we to believe that the folks at the USDA are that precise? And please note that they hardly ever actually quote anyone. It´s always, "an analyst said," or, "an expert projected." Here´s a typical direct quote from the USDA: "Though drought has reduced the crop in the United States, prices need to come down to revive U.S. export business," analysts said."

What analyst? Who does he work for? Who said prices need to go down?

The answers given to USDA survey takers depends on one´s perspective. Ask a grain trader or buyer how the wheat looks and more often than not it will be, "Oh, it looks great, belly deep to a bull." Of course, he might be looking through green tinted glasses: green as in cash. The farmer growing it might have a different story.

Even foreign countries know how to play the game. One minute a country issues a press release stating that they won´t be needing any grain from the U.S. after all, and the next minute they are buying our grain AFTER their first press release drove down the price they´d have to pay. When Tunisia bought grain from France and Russia instead of the U.S. our price tumbled. Is Tunisia really that big a factor?

Here´s another quote that sent wheat prices downward: "Prices tumbled in response to a USDA report saying that supplies are much higher than previously thought." What happened, did the USDA find some extra wheat in their basement? What happened to their 62 percent-like accuracy? Were the previous USDA reports wrong or could the latest one be in error? With USDA´s track record both reports are probably wrong. But they still did damage to the price of wheat and the people who grew it.

How Do They Know?

If it could happen in wheat couldn´t the same thing happen with beef? This reporter looked in the futures prices section in the Wall Street Journal for the past six months and every time the cash market for beef tanked I looked in their futures reporting section and made note of their comments. I found recurring themes on every down day. Here´s just a small example of the verbiage responsible for sending down futures prices for beef on a regular basis:

"The perception is there is plenty of beef out there."

"Unexpected bearish reports by the Department of Agriculture."

"The market moved lower on nervous short covering from speculators."

"Heavy selling by speculators caused prices to fall sharply."

"The market moved lower on technical based selling."

. . . "the result of end of the week profit taking by speculative funds."

"The threat of a winter storm . . ."

"Rumors of poor export sales."

"Heavy selling by commodity funds."

"End of the month positioning."

"Traders said speculative commodity funds could smell the blood of the bulls."

"Government report showing U.S. supplies at much higher levels . . . "

And on and on. A meteorologist can send the beef market down with a comment about increased chances for rain. But the market NEVER reverts back to previous prices after no raindrops fall. Please tell me . . . did any of this have anything whatsoever to do with the available supply of beef that day, that week or even that month?

The USDA issues world reports about commodities around the globe and these effect the price you receive for your cattle. But our government can´t even find a certain terrorist, how can we possibly know how much grain is produced in Ghana or beef in Brazil? We all know how many times the government has had to issue corrections. But that hasn´t stopped them from aiding and abetting gambling in the futures pits.

Doug Wildin asks: "With constant regular reports of the manipulations going on in the stock market, can there be any doubt the same thing is going on in our commodity markets?" Good question. In the news on the morning this story was written there was a report of one firm being fined $70 million for manipulating trades on NASDAQ. And this is an all too often occurrence lately. Why should the more loosely regulated commodities markets be any different?

The Commodity Futures Trading Commission has a 500- person staff to police 797 MILLION futures trade per year. Their chairman says everything is hunky dory and that they are on top of the situation. Yeah, just like the SEC was when they let Enron, World Com and others decimate the pension plans of poor working stiffs.

We have seen scandal after scandal involving insider stock trading, derivatives and phony financial reports. Doesn´t it stand to reason that a market that can be moved with "potential yield reports" and non-news items would also be a fertile field for corruption?

Bad Poker

Why we are expected to give our adversaries the bullets to shoot us with is beyond me. We are so generous in sharing our information that it´s like playing poker with card sharks and showing them our hand. When the USDA tells the world how many bushels or pounds of beef we plan on producing, even before we´ve done it, all of us are put at a great disadvantage.

Would Wal Mart be expected to give up the same type information? Of course not. Then why should we? When a company insider or ex-employee gives up company information that is far less damaging, lawsuits and jail sentences are the result. Most U.S. companies erect firewalls and safeguards for the specific purpose of not letting any such sensitive information out. In many factories tight security systems only allow specific employees to enter certain areas of their facilities so that no one person has too much information.

Is it really anyone´s business how much beef you produce? If someone asked you how much money you made last year you´d consider them rude or perhaps punch them in the nose. But a USDA staffer calls and a cattle feeder spills his guts and hands over the combination to his future. And here´s another very important point to ponder: Have you considered the implications if just one mega-feeder gave out misleading information for the purpose of making a killing in the futures markets?

Are the businesses of farming and ranching that much different than any other business? Should groups collecting information to be used by commodity buyers have free access to what any other business would consider confidential information? Any industry that voluntarily divulges as much information to their competition as we do is bound to eventually be a ward of the government.

Perhaps we should follow our government´s lead. Between January and November of last year more than 600,000 manufacturing jobs were lost. In the same period U.S. employers announced over 2,000 mass layoffs. Now this information was an embarrassment to the Bush Administration, so, what did they do? Last Christmas Eve the U.S. Department of Labor announced that it will no longer collect or publish data on mass layoffs. The reason given was to save money.

Hey, we want to help ease the budget crunch too. They shouldn´t be the only ones to suffer. We sure could save the USDA a lot of money by stopping them from prying into our businesses and sticking their nose where it does not belong.

Fruit and vegetable farmers who see grocery stores selling the product of their toil for multiples of what they receive through traditional markets have the option of selling their produce at a local farmer´s market or a roadside stand. Until now cattlemen did not have the same option. There´s one simple reason why ranchers have difficulty selling direct to consumers: USDA inspection.

A rancher could kill his own beef and eat it but he could not sell it to consumers or restaurants without USDA inspection, and that takes place primarily at plants which are owned by a dwindling number of large firms. What was needed was an establishment that could harvest a smaller number of animals and still be federally inspected. What would be even better is if that slaughter facility would have wheels under it so it could go to the animals instead of having the animals brought to it. Thanks to some enterprising people on Lopez Island, Washington, that is now a reality.

Following The Bison

We can trace the seed of the idea for a mobile slaughtering unit to Kerrville, Texas, over a decade ago. In the Texas Hill Country exotic species of animals were harvested by a mobile unit under the supervision of Texas state inspectors. Because these game species were not mandated by federal law to be federally inspected the meat produced by such a unit could be sold anywhere in the country.

The next manifestation of the concept turns up on an Indian reservation in Eagle Butte, South Dakota. In 1997 the Cheyenne River Sioux tribe received a grant to purchase a state of the art mobile slaughter plant. The ambitious project was designed to let tribal members slaughter their bison in a more traditional Indian manner. Prior to the mobile facility the only alternative was to work the bison like cattle, which put the animals through a higher degree of stress due to their untamed nature. To the Cheyenne River Sioux this was unacceptable. They wanted to treat their bison more respectfully . . . in life and in death. What was needed was a mobile processing plant that would come to the animals home ground. Such a system would satisfy the Indians and also improve the quality of the bison meat.

A million and a half dollars later the Cheyenne had a complete processing plant on wheels. Bison went in one end and came out the other end as packaged steaks and roasts. Why couldn´t the same thing be done with beef? Because beef, unlike bison, has to be slaughtered at a federally inspected plant.

A Man With A Plan

Bruce Dunlop of Lopez Island, Washington, traveled to Kerrville and also studied the ways of the South Dakota Indians with the idea of designing the first mobile processing unit that would accommodate beef, sheep, pigs and goats and be eligible for USDA inspection. That the first ever such unit was created on Lopez Island is no accident. Prior to this time all the island´s meat animals had to be hauled to a ferry for a trip to the mainland. It was very expensive, time consuming and hard on the animals. Bruce Dunlop remembers driving past field after field of sheep on his way to a local restaurant only to dine on lamb from New Zealand. As a sheep producer he wondered why the islanders couldn´t be dining on locally produced Lopez Island lamb instead.

Trained as an engineer, Bruce helped design the 26 foot mobile slaughter unit after feasibility studies were begun in 1996. The final result looks like a cross between a mobile home and a big horse trailer with no windows. To pay for the project, grant money was applied for by a nonprofit community organization called The Lopez Community Land Trust which owns the unit and leases it to a producer´s coop known as The Island Grown Farmers´ Cooperative. The mobile unit, built by well-known gooseneck manufacturer, Featherlite, became the first mobile meat processing unit to receive a USDA Grant of inspection to process beef, sheep, pigs and goats.

At first glance the ownership of a slaughter plant by a land trust may seem odd . . . but not upon further reflection. One of the goals of the group is to help the landowner maintain a sustainable and profitable enterprise. What better way to achieve this goal than to help the producer receive more money for his livestock?

Right now Bruce Dunlop says the rig is in the final stages of a year-long test. "Basically this was a prototype and we have made some changes and altered it. In addition we have learned how to better prepare the animals for slaughter. For example, shearing the sheep in certain spots so that the process is cleaner." The unit was built for $150,000, of which two-thirds was grant money. Bruce anticipates running about 1,500 animals per year through the facility.

USDA Inspector On Board

The Island Grown Farmer´s Cooperative has now hired a full time employee to man the rig and on October 1 they will begin operating a meat processing facility to work in conjunction with the mobile unit. The food processing center will facilitate cutting and wrapping and provide cold storage. They also hope to use the facility for educational programs thereby qualifying for research funds to advance sustainable agriculture.

When the USDA gave their approval to the mobile slaughter unit that meant they were obligated to provide an inspector. The coop gives the USDA their slaughter schedule in advance, "so it´s not like a USDA inspector is just waiting around with nothing to do on off days," says Bruce. He anticipates that once the processing plant is open that either the slaughter unit or the plant will be in operation every day. Although the USDA pays for inspection, grading of carcasses requires a fee.

A very encouraging sign was the assistance of the USDA employees all through the process. Bruce says that all of his dealings with USDA personnel at every level have been very positive. "They have been open, willing and understanding," says Bruce.

"That doesn´t mean the inspectors are going to let us get away with anything that would not be permitted in a regular fixed facility. They might even expect more of us," says Bruce, "since this project is apt to draw a lot of attention."

The Island Coop also received help from Washington State University Cooperative Extension. They applied for and received grant money for an outreach program to take the unit on "show and tell" missions throughout the Northwest. Everywhere the rig went the concept received an enthusiastic response. Such has been the level of excitement that the coop membership has grown to include 25 members. Bruce anticipates that the mobile unit will service five Washington counties all within 100 miles in Northwest Washington. "The idea is that the group who owns the rig will not make a profit. Any extra premium will be made by coop members based on their ability to market their own meat."

Bruce raises sheep that are non-implanted, given no antibiotics and are grass fed. He sells the meat at one of three farmer´s markets held on the three major San Juan Islands. So far Bruce says the reception to his product has been very enthusiastic. "My customers are excited and supportive." The day this reporter called, Bruce had received a telephone call from out of the blue: another potential customer wanting to know how they could get their hands on his locally produced lamb.

For anyone contemplating such a project Bruce warns there is definitely more money to be made, but it´s not as easy as it sounds. Right now individual members are doing their own marketing but Bruce says the Coop will soon address the issue of establishing a marketing arm, perhaps selling some product all under one label.

One study we have seen shows the cost to the producer per head to be about $25. "Needless to say, says Bruce, "we can´t be as cost effective as IBP but they can´t do what we can either: Produce a locally grown, grass fed, all natural product."

Granted

George Work is a fourth-generation California cattleman. But not just any ordinary cattleman. Not content to do things the same old way, George has been a leader in implementing modern methods in grazing and diversification on his southern Monterey County operation. One of the ideas he implemented is a "farm stay" program where paying guests come and stay right on his ranch. George was disappointed to learn that he could not legally serve his own meat to his paying guests because it was not federally inspected. So when he heard about plans for a mobile slaughter unit on Lopez Island he called Bruce Dunlop and started asking lots of questions.

In one conversation George told Bruce that if he needed any help with changing laws to accomplish their goals that he should give George a call because he´d had more than a little experience in this area. George also mentioned the mobile processing unit to his local Congressman, Sam Farr, who has always shown a keen interest in helping ranchers and farmers. Sam kept track of the Lopez Island project and when it was approved the Congressman called George to ask if he´d like some grant money to do the same thing. Sam figured they had a fifty-fifty chance of wrangling some money out of Congress for the project. Then the budget crunch hit and the purse strings tightened up. But out of the blue another group in the area turned back some grant money and Sam Farr was able to get $138,750 for the project.

There was only one problem. The money would come from the Economic Development Department but all the paperwork had to be done by September 30. This included getting approval from the local Board of Supervisors who had to actually apply for the grant. Rather than set up a new non-profit to accept the money it was decided that the Monterey County Ag Land and Historic Land Conservancy would own the unit and lease it to an entity formed by cattlemen, hog farmers, sheep and goat raisers, much like the coop had done on Lopez Island.

Feeling that there might be some opposition at the Supervisors meeting, George carried with him 16 letters of endorsement including letters from the Small Farms Center of the Cooperative Extension Service and the Community Alliance with Family Farmers. Fourteen ranchers went with George to the Supervisors meeting to lend their support. George explained how the mobile slaughter unit met many of the objectives of the ag element of the county´s general plan. Specifically it would promote, preserve and support agriculture and the industries that serve it. The project would also preserve the long term sustainability of agriculture in the county.

There was no opposition and the Board approved a motion to apply for the grant. George had two days to write out a proposed budget for the mobile processing unit and the grant money is now on the way.

Now the real work begins; first the designing of the rig and then its construction. The group has not decided if they should form a coop or corporation but there is widespread support from hog, sheep, cattle and goat producers in the area. There are many unique niche markets that will be served by the unit, due to be online a year from now. Due to the large Hispanic population in California the demand for goat meat is high and the market for grass fed, natural beef and lamb is growing all the time. George is optimistic about the impact the unit can have on the ag community.

A Win-Win Deal

The mobile unit could silence many of our critics. For the proponents of humane treatment of farm animals the unit is ideal because the animals would be kept on the farm until the end. They will be born, raised and slaughtered all on the same property without the stress of trucking or unfamiliar surroundings.

The mobile processing unit allows county farmers to supply their community with healthy, nutritional and wholesome meats. And the product will probably taste better due to less stress on the animals. The pH level of live muscle tissue is usually around 7 due to a process where glycogen is converted to lactic acid. If animals are processed when they are more calm the ph level of the meat falls into the 5.0 to 5.3 range, which means the meat will be more tender.

In the wake of 9/11 bioterrorism and food security is an important consideration and the mobile unit can ease some of these fears. Now days many people are worried about the dangers of mad cow, foot and mouth disease and E coli, and they want to buy the cleanest products as close to home as possible. They also want meat that has been raised without the use of extra hormones or antibiotics. Many consumers say they would prefer a lower fat, grass fed product and their buying habits would suggest that they are willing to pay a premium for such a product.

The unit will open new markets for ranchers and create more options for consumers interested in buying locally. It will also allow producers to sell USDA inspected meat to restaurateurs and retailers which could translate into more money in rancher´s pockets. We´re not suggesting that IBP should be quaking in their cowboy boots right now but this concept does provide a small ray of hope for many meat producers who don´t see much future the way we´re currently headed.

The ranchers featured in this story have found that, more often than not, the best place to find a helping hand is at the end of their own arms.

The future of the cattle industry is tied up in court right now. Decisions that will shape tomorrow’s cattle industry are either waiting on appeal or on a slow judge. Here is a sampler of pending important judicial decisions that will affect your future.

Jury Tampering

Sometimes it seems like even when we win we lose.

Ranchers were handed perhaps their largest victory in recent history when an Alabama jury reached a guilty verdict against Tyson/IBP in February after a month-long trial. The $1.28 billion jury verdict in the Pickett vs. Tyson trial was the second largest jury award in the country this year! More importantly, the jury found that Tyson had broken the law in using captive supplies to depress the price of cash cattle.

On April 23, Federal District Court Judge Lyle Strom overruled that jury verdict and said there was not sufficient evidence to prove Tyson’s actions manipulated the cattle market. Which leads one to ask the obvious question: If a judge can so easily throw out a jury verdict why bother with a jury trial in the first place?

In hindsight, clearly there were signs this might happen. Even before the trial began in earnest Judge Strom said he would NOT approve a jury award for all sellers in the cash cattle market. Observers at the trial say that during the trial almost daily Strom would threaten to throw the case out. He also dropped a real bombshell when he gave final jury instructions that almost begged them to find Tyson innocent.

Tyson’s lawyers argued, and Strom evidently agreed, that Tyson had to have the ability to make sweetheart deals and acquire captive cattle “to be able to compete effectively with Excel, Swift and other packers.” In other words, Tyson needed to break the law to compete with competitors who were also breaking the law.

Some people suggest we should go easy on Strom because two other cases almost identical to Pickett will be held in his court, including one involving ConAgra. But even if a jury finds ConAgra guilty won’t Strom overturn that verdict, too, because ConAgra needs to be able to compete with Tyson, who is also breaking the law?

The big packers must have been dancing in Amarillo streets after the ruling but please keep in mind what the Judge’s decision DID NOT dispute. He did not deny that Tyson manipulated the market causing $1.28 billion damage to cash sellers. He did not dispute that Tyson captively bought low-quality cattle and priced their purchased cattle off the lower quality ones. Basically, even though the president of Tyson Fresh Meats admitted there were enough cash cattle in the market for Tyson to supply their plants, Judge Strom felt that without captive supplies Tyson could not compete.

David Domina, the attorney representing the 30,000 cattlemen plaintiffs, said that Strom´s ruling will be appealed and will be reviewed by the U.S. Court of Appeals for the 11th Circuit in Atlanta. Domina said the plaintiffs remain confident that they will prevail. But it could take another two years for the appeal process and in the meantime the packers have been given court approval to continue picking our pockets.

Getting Their Day In Court

Now that a jury has concluded that cattlemen who sell cattle to the Big Three in sweetheart deals are responsible for depressing cattle prices, perhaps current captive contract cattlemen ought to pay attention to activities in an Arkansas Court.

In August 2002 Tyson shut down its swine contract growing operations in Arkansas and Oklahoma. The contract growers put out of business then sued Tyson claiming the firm led them to invest heavily in their farms and then cut them off without warning. Tyson wanted to deal with the former contract growers in arbitration but the pork producers wanted their day in court.

A judge gave it to them but Tyson appealed all the way to the state Supreme Court. The contract pork producers won a 4-3 decision in the Arkansas Supreme Court ruling that their cases must be tried in a court of law. In the meantime all the delays and legal bills have left many of the contract growers destitute. So you ranchers and feeders out there who are part of the Big Three’s captive supply be warned: You may want to have a lawyer standing by on retainer and save all those “premiums” because you might need the money!

Hush Money

In yet another court case, Cargill agreed to settle a price-fixing suit for $24 million. Although the largest private U.S. company, major cattle feeder and owner of Excel said it had done nothing wrong, the firm agreed to settle a class-action suit that accused the company of conspiring with two other firms to fix prices of a common food sweetener. “We agreed to settle only after assessing the costs of further litigation,” Cargill said in a statement. “We did not engage in any illegal activity.”

Full Court Press

How many times does something have to be declared illegal before it is stopped? The $255 million mandatory dairy checkoff was the latest in a long line to be declared unconstitutional by a U.S. Circuit Court of Appeals after a Pennsylvania dairy family filed a lawsuit. The decision on the dairy checkoff follows last year’s federal court rulings that similar beef and pork checkoff programs are also unconstitutional.

Ann Veneman, the USDA Ag Secretary who took it upon herself to throw out a vote to do away with the pork checkoff (probably illegally), announced to a giddy NCBA convention that the Bush administration would petition the U.S. Supreme Court to overturn lower court checkoff rulings. In the meantime, the courts allowed the checkoff programs to continue pending further appeals, thus allowing the NCBA and NPPC to stockpile more checkoff funds to hold them over until they and the USDA can find another way to unconstitutionally take more money from producers. This they will probably try to do with a government mandated animal identification program.

Meanwhile, oral hearings were heard in the Charter checkoff case on March 31 in Seattle. There a three-judge panel of the U.S. 9th Circuit Court of Appeals listened to USDA and NCBA lawyers argue that the checkoff is “government speech” and thus exempt from First Amendment. USDA and NCBA attorneys argued that the checkoff is really a government-run program funded by a “targeted tax on beef.” They maintained that government officials are the ones who are calling all the shots and that members of the Cattlemen’s Beef Board “exercise no independent judgment” and can be fired if USDA so desires.

Charter’s attorney responded, “This Court should be appalled by the depth of the big lie the government is willing to tell in trying to save this program. The notion that they could remove someone from the checkoff board because they didn’t agree with his opinion is a complete fabrication. In fact, the Beef Board describes itself as a business run by a board of directors and accountable to the producers. If what the government is saying now is true, what the Beef Board has been saying to the public and to its members and to Congress since this program was adopted has been the most stunning lie imaginable. If that kind of government speech is protected under the First Amendment, we have lost our way.”

Overruled

Thank goodness someone is keeping an eye on the sneaks at the USDA. After seeing reports in the Canadian press regarding a policy change by USDA that would allow in more Canadian beef, a R-CALF researcher located a memorandum embedded deep within a USDA web site. That memo, addressed to U.S. beef importers and brokers, allowed them to bring in more Canadian meat, including T-bones and rib roasts, regardless of age at slaughter, providing the meat was processed in USDA certified establishments. The expanded importation was scheduled to become effective on April 19. Please keep in mind, the USDA bureaucrats did not issue a formal news release on the change. In other words, Veneman was trying to covertly sneak more Canadian meat into this country without any of us becoming aware of it.

There’s only one problem with Queen Ann’s actions . . . they were illegal! “The USDA cannot circumvent procedural requirements by issuing this decision without public notice and opportunity for comment, especially when there are such broad public health and economic concerns at stake,” said Bill Bullard, R-CALF’s CEO.

R-CALF committed up to $500,000 to file a lawsuit requesting injunctive relief against the USDA, arguing the agency acted in an “arbitrary and capricious manner” by relaxing safety standards, which are intended to prevent BSE from entering the U.S. In a Billings courtroom R-CALF asked Judge Richard Cebull to put an immediate halt to the importation of Canadian ground beef, bone-in meat, processed products, and other tissues the USDA was trying to bring in through the back door.

Judge Cebull ruled that R-CALF USA was right and was likely to prevail on its claim that USDA’s decision was arbitrary and capricious and there was a significant threat of irreparable injury if a restraining order was not granted. So, the Judge issued one and gave R-CALF a May court date to further substantiate their case.

In the Judge’s 13-page order he agreed with R-CALF that such a mistake on the part of the USDA could be deadly. He said, “USDA’s recent action may result in a fatal, noncurable disease in humans who consume those products. Since there are no requirements that imports of Canadian beef products be labeled to indicate the country of origin once those products cross the border, they become virtually impossible to recover or segregate if additional cases of BSE are discovered in the Canadian herd.”

Wouldn’t country of origin labeling come in handy about now?

Not surprisingly, the NCBA did not agree with the Judge or R-CALF. The NCBA said R-CALF’s action was “frivolous litigation that will harm efforts to build a global market for U.S. beef based on science.” An NCBA spokesman said the NCBA favors free trade and believes Canadian meat is just as safe as American beef, this despite the fact that Canada has now produced two mad cows and the United States none.

Contempt Of Canada

A couple months ago the Canadian Parliament subpoenaed Cargill Foods, Lakeside Packers and XL Foods for financial records. (Lakeside Packers is owned by Tyson Foods and together these three firms process 75 percent of Canada’s beef.) Parliament wanted the information because Canadian packers have been accused of taking much of the $1.6 billion in government assistance that was supposed to go to Canadian cattlemen. Canadian consumers also complained that while the packers have paid significantly less for cattle as a result of mad cow, retail beef prices remain high.

Despite the fact they can be found in contempt of court, the companies did not give Parliament the information they demanded. Although Tyson did NOT have the time to gather the information for Parliament they did find time to issue a profit statement. According to Tyson, profit surged 65 percent and net income rose to $119 million compared with $72 million in the same period a year earlier.

Creekstone

When Ann Veneman spoke to the NCBA convention in February she said the USDA was working diligently to restart beef exports. We have been told that our government is in the business of tearing down barriers and building foreign trade. So why is the USDA stopping an American firm from selling U.S. beef to a willing foreign buyer?

Recently Japan announced that trade talks had broken down because they want any U.S. beef they buy tested for BSE. Creekstone Farms, the firm that took over the ultramodern Future Beef plant, had a good trade with Japan before the mad cow madness and is more than willing to test all the beef they sell. They spent $500,000 gearing up to test their beef and figure they can do it for $15 per head.

There’s only one problem: The USDA rejected Creekstone’s plan to sell cattle to Japan on the basis that its testing plan was “scientifically unsound.” The USDA is echoing the feelings of the American Meat Institute, lobbyists for the large meatpackers, when they say such testing is not warranted and would unnecessarily scare or confuse American consumers. In rejecting Creekstone’s plan, Bill Hawks, a USDA undersecretary said, “There is no scientific justification for 100 percent testing because the disease does not appear in younger animals under the age of 30 months.”

Perhaps the USDA never heard about the 23-month-old mad cow in Japan? And even if it were true that animals under 30 months of age don’t get BSE why did the USDA test 2,051 animals over the past two years that were under 30 months of age?

It is estimated that Creekstone is losing about $40,000 per day because they can’t sell their beef to Japan and the firm had to lay off 50 employees. Creekstone is pursuing a lawsuit against the USDA for restricting its ability to operate and they have hired a Washington, DC law firm. In the meantime, Australia is grabbing market share in Japan that previously belonged to us, and Canada is considering BSE testing beef for export to Japan.

Those are just a few of the important cases at various stages in our courts. Perhaps it is a good time to remind ourselves what a friend of mine from Montana recently reminded me: Our system of justice is slow, doesn’t always work, sometimes punishes the innocent but it is still the best system in the world . . . that money can buy.