No Competition Can Be Terrifying

August 1, 2002
 
No Competition Can Be Terrifying
By Mike Callicrate
August 1, 2002
 
The National Cattlemen’s Beef Association (NCBA) asked the question in their last “Directions” publication, “What is the biggest challenge facing seedstock companies?”
 
“Surviving the terrorist among us who wants to eliminate the beef checkoff, outlaw grid marketing, bankrupt the packers and in general raise all kinds of chaos is the beef industry’s biggest challenge. If they want to commit suicide, that is their own business. I strongly resent their efforts to wreck the economy of the entire beef industry,” said Mark Gardiner, Gardiner Angus Ranch, Ashland, KS, one of the organizers of U.S. Premium Beef (USPB), partner of Farmland/National Beef, the nation’s fourth largest packer.
  
I remember attending a USPB membership drive meeting where the question was raised about whether USPB would become a major captive supply source for the fourth largest meatpacker Farmland/National and, if so, wouldn’t that have a negative impact on the cash market, considering that Farmland/National was the only remaining big packer not using captive supplies and bidding almost exclusively in the competitive cash market. “What will happen to the cash market if USPB, wanting to supply half of Farmland/National’s needs, gives their cattle to Farmland/National without negotiating price?” USPB CEO Steve Hunt responded that USPB captive supplies would likely have a negative effect on the cash market, but as a member of USPB, you would become a packer and more than make up the difference in price on the meat side of the business. Feeling vulnerable, desperate, shut out of the cash market and left with no other choice but to “Join-em”, reluctant cattle feeders began signing up.
 
We now know that for the investment of approximately $54 per head in USPB stock, giving the owner the right and obligation to deliver cattle to Farmland/National, much has been lost, including the cash market for finished cattle and many of our cattlemen neighbors. Since 1978, when the big four packers controlled 36 percent of the steer and heifer slaughter compared with 82 percent today, concentration and the resulting market power has cost cattle producers approximately $400 per head of their share of the record high price the consumer pays today for fresh steaks, roasts and ground beef.
 
Of course, USPB cattle feeders can be consoled in their desperation and bankrupting losses with last year’s $25.87 per head premiums they received over the manipulated and arbitrary cash market price their non captive supply competitors received. A small consolation today with the cash market at $62/cwt and losses as much as $225 per head. And still left unexplained, last week some of the top premium grid cattle, grading 85% choice, netted back a deeply discounted $59/cwt at the same time consumers buy beef priced off an $85 cattle market. While packers and retailers swim in record profits, it looks like wounded USPB members have been swindled into buying their own hanging rope.
 
Mark Gardiner may not realize it yet, but his bull customers, who are part of the cattle industry, distinct and separate from the “beef industry,” will be needing fewer of his bulls as they go broke selling cattle on the discount weighted big packer grids. Instead of profiting from a USPB sponsored market for his bulls, he might be caught in the same deadly alliance trap he has helped set for others.
 
Ranchers and rural communities have far more to lose in land, cattle, and income by participating in the abusive Tyson/IBP, Cargill, ConAgra, Farmland/National type alliances and supply chain snares than chicken farmers lost when they fell for the same scam some thirty years ago.
 
Perhaps the terrorist label might be better applied to the Tyson/IBP – WalMart dominated big meat packer/retailer monopoly that is stealing from farmers and ranchers, destroying our safe and dependable food supply, and threatening the well-being of our precious rural communities instead of being used to defame, libel and slander those of us that are sacrificing all we have to preserve the economic freedom and social well-being that only a fair, open and competitive market system can provide.
 
Mike Callicrate