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HUNTIN' DAYLIGHT -- FREE MARKETS PREVAIL...SO FAR

by: Wes Ishmael

Cattle producers still have the right to market their cattle any way they choose and to whomever they choose.

On April 23, a federal judge reversed the February 17 jury verdict in the class action lawsuit against Tyson Fresh Meats.

In his ruling, judge Lyle Strom noted, in part, “…the Court finds that the plaintiffs failed to present evidence at trial to sustain their burden with respect to both liability and damages… the trial record is barren of any evidence which would permit the jury to conclude that the defendant lacked a legitimate business justification for its use of captive supply (marketing agreements and forward contracts). The evidence reveals that captive supply transactions permit defendant to achieve a reliable and consistent supply of fed cattle, allowing it to operate its plants in an efficient manner.”

Folks keeping track of the trial—Pickett vs. IBP—which began in January, following about eight years of legal maneuvering, know that an Alabama jury decided against Tyson, which bought IBP after the suit was brought, and awarded damages of $1.28 billion. The premise of the case was that IBP violated the Grain Inspection, Packers and Stockyards Act by using formulas and forward contract to create captive supplies with the intent of depressing cash market prices.

In turn, Tyson filed a motion asking the judge to grant the company a judgment as a matter of law. The company said it would be impossible, as a matter of economics and common sense, to conclude that IBP's purchase of cattle through marketing agreements and forward contracts depressed prices in the cash market. Further, Tyson explained the evidence proved they and cattle producers have legitimate business reasons for wanting to enter into marketing agreements.

Indeed. The same marketing arrangements that make for captive supply can also increase marketing efficiency and reduce marketing costs for the industry collectively, reduce price volatility, provide opportunity for “individual” pricing rather than average, increase opportunities for brand marketing; and connect the production side of the business closer to the consumer. Never mind the fact that whether or not producers choose to participate in such arrangements, they should have the freedom to make that choice.

Understand, the original suit was brought in 1996 when beef demand was still slipping south hooves over horns. Since reversing the decline in 1998, though, beef has recaptured 15.4% of lost demand. In round numbers it has regained, in a few years, 75% of the market share it lost during two decades.

This ruling will undoubtedly be challenged, just as Tyson challenged the initial jury decision. Moreover, similar suits are pending against other beef packers. And, they're just the tip of a growing number of legal and legislative challenges a vocal minority of the cattle business continues to burden the rest of the industry with.

Throwing Out the Baby With the Bath

For instance, also in the past week, R-CALF sued USDA over expanding the type of Canadian beef imports allowed into the United States. According to a news release from the organization they are seeking an injunction against USDA, claiming the Animal Plant and Health Inspection Service relaxed BSE safety standards in order to expand Canadian imports to include products from cattle older than 30 months of age.

Jan Lyons, president of the National Cattlemen's Beef Association (NCBA), responded, “The NCBA executive committee, comprised of cattlemen from across the country, opposes this type of lawsuit that restricts the opportunity to reopen international markets that benefit U.S. cattle producers.” She explains since most countries closed their border to U.S. beef in wake of finding bovine spongiform encephalopathy (BSE) in December, lost beef exports have cost U.S. beef producers $13-$15/cwt.

Efforts to build a global market for U.S. beef based on science would be harmed by frivolous litigation against USDA to close the U.S. border to Canadian beef and cattle, says NCBA.

Certainly, it seems the lawsuit should cause countries such as Japan to scratch their noggins. Ever since BSE hit, the U.S. has been trying to win back what was the largest importer of U.S. beef on a value basis, that being Japan. So, here USDA is telling them U.S. beef is safe and that the 100% BSE testing the Japanese are demanding as a contingency for resuming beef trade is not justified based on science. Then along comes a lawsuit from within the U.S. working to close U.S. borders.

Of course and unfortunately, domestic and international customers of U.S. beef are getting used to such dichotomous displays. Look no further than national animal identification and Country of Origin Labeling (COOL). Here's a part of the industry demanding products be labeled to verify country of origin, but supporting legislation that ultimately passes, which prohibits USDA implementing the national ID program that COOL requires.

Incidentally, it appears that COOL will continue to be a source of contention. In fact, a group of organizations is lobbying that the original compliance deadline of September 30, 2004 be replaced in COOL legislation (if you remember the date was moved forward). So, these groups, who claim to represent producers, want producers to be liable for complying with legislation within four months that the industry will be lucky to comply with in the next four years.

If you work through these issues over the first cup of coffee, you can always spend the next contemplating how it is that the beef industry's checkoff—which the mass majority of beef producers continue to support (measured through third-party surveys)—is no longer in the hands of the producers that enacted it. Instead, the fate of the check-off resides with the Supreme Court, just one more stop on its much-litigated journey.

Just Ask

If you notice some common and disconcerting threads between these issues—just examples of many—you should. Just as a covey of common groups are behind activism in the animal rights arena, you find similar organizational nepotism here. Undoubtedly, there are well meaning, sincere members of these organizations, but collectively they have an amazing penchant for demanding more laws and more litigation to protect themselves in a competitive world the rest of the industry is more than happy to participate in.

Maybe some of these folks have barked so long at everything that moves, friend and foe, that they can no longer tell the difference. Maybe they haven't taken the time to truly examine the ramifications of the actions they suggest or the programs they oppose.

Then again, collectively, maybe they just enjoy a good fight or earnestly believe all of the rest of the industry should bend to their will.

With each one of these issues, though, and the added wedge of discontent it drives within the industry, one thing does become more apparent. Whether it's in casual conversation or in support of a well-oiled campaign, before agreeing or disagreeing, every participant in the industry has the responsibility to find out and understand the facts, rather than take rhetoric at face value. This column is a great example. It represents fact, interpretation of fact, as well as opinion supported by fact. Then again, I could be as wrong as I believe some of the groups described above to be. The point being, you have no way of knowing for sure unless you question rather than simply accept or disregard out of hand.

That's the beauty of the cattle business. The freedom exists to do or decline whatever individuals feel right. But, this freedom is challenged every time an individual or group seeks to use the courts or the legislature to take it away, bit by bit and piece by piece.

(The opinions expressed in the above article are those of the author and do not necessarily reflect the views of Cattle Today.)

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