HUNTIN' DAYLIGHT -- EXTREMISTS AMONG US

by: Wes Ishmael

It's not new.

It is alarming, though, when folks claim to be part of the cattle industry and flap their gums about the industry's best interests, but join forces with the Humane Society of the United States (HSUS). HSUS, as you likely know, has publicly stated it is working to end animal agriculture in this country, period.

The one supping with HSUS is the Organization for Competitive Markets (OCM). That organization has a long history of arguing for competitive markets in the socialistic sense: bring above average producers down low enough through government regulation that below-average producers are on par with them; everyone equal, the standard lower, incentive for improvement non-existent.

OCM filed a lawsuit August 9 seeking an injunction against the U.S. Department of Agriculture's Agricultural Marketing Service, Cattlemen's Beef Board and the Beef Promotion Operating Committee. OCM President and Director Fred Stokes stated during a press briefing that HSUS is helping fund its efforts to file the lawsuit.

The injunction is aimed at barring the National Cattlemen's Beef Association (NCBA) from being a contractor for Beef Board projects. In simple terms, Beef Checkoff dollars flow to the Beef Board. The Beef Board—the members of it appointed by the Secretary of Agriculture—decide what dollars will be spent in which areas, such as promotion, research and product development. The Beef Board hires contractors to carry out the specific projects.

“HSUS is an organization going state by state vowing to end production agriculture by outlawing scientifically validated production practices in animal agriculture,” says J.D. Alexander, NCBA president. He's a Nebraska cattle feeder. “Their efforts put people out of business and often jeopardize the well-being of livestock.”

At the OCM press briefing, though, Stokes said, “OCM and every cowboy out there owes a deep gratitude to the Humane Society of the United States.”

According to the OCM website, Mike Callicrate is the plaintiff in the lawsuit. He also happens to be OCM vice president.

The OCM dialogue continues, “Specifically, the lawsuit alleges that the NCBA receives a large majority of Checkoff-funded projects. The lawsuit alleges that the CBB operating committee awards the contracts to NCBA and that 10 of the 20 seats on the committee are held by NCBA members. Fred Stokes, president of OCM, said he believes the NCBA is biased in favor of large cattle operations at the expense of smaller ranches.”

As for NCBA receiving Beef Board contracts, whether or not you happen to like the organization, understand that blaming it for getting contracts is a whole lot like blaming the judge at the steer show for picking a black steer as champion when the only steers at the show were black. In this case, the Act and Oder legislating the Checkoff includes a strict definition of eligibility for contracting organizations. You can read all of the details at the Beef Board website (www.beefboard.org).

Incidentally, Alexander points out that nearly 75 percent of U.S. cattle producers continue to support the current Checkoff and what it accomplishes.

Kicking a Reeling Target

It seems more than coincidental that this comes at a time when the cattle business is fighting for survival, mired in a historic drought that is rationing corn demand in a major way.

USDA forecast corn production at 10.8 billion bu. August 10 in the monthly Agriculture Supply and Demand Estimates. That's 13 percent less than in 2011 and the lowest production since 2006. The average yield for corn was forecast at 123 bu/acre; 24 bu/acre less than last year. And that may end up being bullish.

“There is an old saying in commodity markets that small crops tend to get smaller,” says Todd Davis an economist with the American Farm Bureau Federation. “If this holds true, then future reports will show declining projected production for corn and soybeans and further reductions in projected demand. This will also mean higher projected prices and great volatility in the commodity markets as demand is rationed and more supply is encouraged worldwide.”

Participants in corn rationing include ethanol producers who gobble up an inordinate amount of the nation's corn crop via the government's idiotic policy of joining food and energy policy at the hip via the mandated Renewable Fuels Standard (RFS). That standard fuels ethanol production through federal subsidies.

Even proponents of that policy and law makers supporting it can surely see that knocking the stuffing out of the current crop, in tandem with historically low carryover stocks, demands easing the pressure by suspending or at least reducing the mandated level of ethanol production.

Nope.

The first week of August 156 U.S. Representatives and 26 U.S. Senators sent a letter to Environmental Protection Agency (EPA) Administrator Lisa Jackson, encouraging the agency to implement a waiver to the RFS. EPA was granted the authority in the 2005 Energy Policy Act, which set the initial RFS, and in the 2007 Energy Independence and Security Act, which expanded the fuels standard.

Rationale for the requested RFS suspension was both severe economic and environmental harm.

The Senate letter was a bipartisan effort led by Senators Saxby Chambliss (R-GA) and Kay Hagan (D-NC).

“In light of the widespread droughts that are causing severe economic harm to our nation's farmers and ranchers, I am proud that a bipartisan group of senators signed on to the Hagan/Chambliss letter that asks EPA to use its authority to waive the corn-ethanol mandate of the Renewable Fuels Standard,” said Senator Hagan. “A waiver from the corn-ethanol mandate will provide much needed relief for livestock and poultry producers suffering from record high corn prices brought on by the worst drought in 50 years.”

The RFS requires 13.2 billion gallons of corn-based ethanol to be produced in 2012 and 13.8 billion gallons in 2013, amounts that will use about 4.7 billion and 4.9 billion bushels of corn, respectively. Some agricultural forecasters now estimate that just 11.8 billion bushels of corn will be harvested this year – about 13 billion were harvested in 2011 – meaning corn-ethanol production will use about four of every 10 bushels.

The House letter was a bipartisan effort led by Congressmen Bob Goodlatte (R-VA.); Jim Matheson (D-UT); Steve Womack (R-AR); and Mike McIntyre (D-NC).

“The RFS mandate has created a domino effect. Tightening supplies have already driven up the price of corn, and the extreme weather being experienced by much of the nation will only further increase prices. I am pleased that my colleagues in the Senate have joined me and 155 other Members of the House of Representatives in urging EPA Administrator Jackson to act now to make a critical reduction in the RFS for 2012,” said Representative Goodlatte. “We should not be in a position where we are choosing between fuel and feed for our livestock.”

As of August 13, there was no action from EPA. Remember there is a loud voice clamoring to maintain the mandate.

This from the Renewable Fuels Association August 10: “…The 25x'25 Alliance joins other renewable energy advocates in calling on policy makers to exercise good judgment and recognize that while today's USDA report on crop production suggests real stress on U.S. farms, it still gives no good reason to back away from our federal Renewable Fuel Standard…”

In all of the rhetoric surrounding the ethanol debate, I've yet to see anyone offer an econometric guess at how much significantly reduced livestock and poultry industries will cost the nation in jobs and raw capital.

That's what's happening, though. A growing number of feedlot pens are standing vacant because fewer folks are willing or economically able to risk equity on feeding cattle that are assured of losing money the day they're placed on feed.

At the recent Tri-State Beef Conference in Abingdon, VA, Derrell Peel, extension livestock marketing specialist at Oklahoma State University, pointed out that net cattle feeding returns estimated by the Livestock Marketing Information Center were nearly -$315 per head. Feedlot cost of gain for cattle placed today is commonly for than $135/cwt.

Throw in drought-hammered forage supplies—in the Southern Plains last year, across a broader swath of country this year; the Southern Plains is sinking back into drought, too—and this year began with three percent fewer beef cows. Peel says the herd could begin 2013 another three percent lower.

Infrastructure that exits the business as livestock numbers ratchet downward will be difficult to ever recover.

Reflecting on the current survival mode of many in the industry today, Glynn Tonsor, an agricultural economist at Kansas State university explained in a recent issue of In the Cattle Markets, “…what is not often talked about but is certainly important to appreciate is that cutting the right costs is critical in the grand scheme of things…”

Likewise, Tonsor adds, “Even in dire times such as those facing many livestock producers, a careful assessment of providing the market what it wants to the greatest extent feasible is imperative to profitability and perhaps even survival of one's business.”

Tonsor grew up on a farrow-to-finish swine farm that became a feeder-to-finish operation in the 1990's following the massive increase in corn prices then.

“This year's drought is placing similar pressure on many livestock operations,” Tonsor says. “I encourage all impacted producers to seriously evaluate their business not solely in the necessary ‘how do I survive the drought' context but also in a broader framework of ‘should I adjust my business model?' While this may seem out of touch to recommend at a time of such stress, the reality for many producers is that this is exactly the period for such assessments. Doing so may in time result in your operation being better positioned for the future…”







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