Are U.S. Cattle Prices Dropping to Level of Import Values?

The following slide is from my R-CALF presentation from 2015 as the market was dropping during the effort to repeal Country of Origin Labeling (COOL), putting consumers in the dark about where their beef is from. The eventual repeal of the COOL law and non-enforcement of anti-trust laws gave permission for the big meatpackers and their retailer partners to drastically lower the value of cattle, totally unrelated to supply and demand.

Today, the producer share of the beef dollar is 38.57%, down from 70% in 1970 when there were many meatpackers across the country buying in a competitive market.

The current live market at $1.00/cwt. equals $1,350 live value, divided by the current $3,441.69 retail value, equals a producer share of 38.57%. This low share of the retail dollar has left ranchers and independent cattle feeders bankrupt and meatpackers and retailers swimming in unfair profits.

A finished animal will yield 42% of the live weight into boneless retail cuts. A 1,350 pound live animal will yield 567 pounds of retail beef x $6.07 average retail for a total fresh retail beef value of $3,441.69

The retail value doesn’t include the packers drop credits (1,350 lb. animal x $9.05/cwt. = $122.17), the retailers 12% added solution, pink slime, value-added, or any of the higher quality hotel, restaurant, institutional (HRI) sales and the cream of the beef supply that is exported at premium prices.

The packer and retailer are sharing $2,272.17 from the sale of a finished animal that cost $1,350. The investment turn is around two weeks.

A competitive market would never allow such outrageous theft.

What could happen to cattle prices?

The U.S. is now a net food importer on a value basis. We haven’t produced enough beef to feed ourselves in nearly 70 years. Why would we want to lose even more ranchers, along with the good animal husbandry and land stewardship they provide?
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“There’s an economic term to describe this phenomenon: It’s called stealing.”

Twenty-one years ago, in responding to the question of why producers were receiving so little for their livestock, Dr. John Helmuth (economist, meat industry expert, and longtime critic of meat industry consolidation) said, “There’s an economic term to describe this phenomenon: It’s called stealing.”

A fire in a slaughterhouse on August 9, 2019, in South West Kansas, turned the cattle and beef industry upside down. Live cattle plummeted and boxed beef prices skyrocketed, while meatpackers raked in massive profits. The so-called market that the big packers and retailers had been managing to their advantage for at least the last thirty years revealed that there is really no market at all, just a price – a price, that sellers and buyers will tolerate.

Today, price is not determined by supply and demand, or any semblance of competition, but by a new mechanism called, “Non-Market Price Discovery”.

Under the shared control of the big retailer/meatpacker cartel, some of the factors that now determine price are:

  1. Market touts – Pushing the big lie, “It’s supply and demand!”, by Beef Checkoff-funded groups like NCBA, Cattle Fax, university professors, beef publications, etc.
  2. Manipulation of the Futures markets to mentally condition sellers to accept lower prices.
  3. Protests
  4. Shaming
  5. Hell-raising
  6. Intimidation
  7. Fear
  8. Threats
  9. Boycotts
  10. Appeals to shareholders
  11.  Social media campaigns
  12. Tomi Lahren and Corbitt Wall advocating for the cowboys

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Ten reasons why Tyson may not be sad about the Garden City packing plant fire

  1. The plant will be forty years old next year.
  2. Excuse to break the cattle market further – Cattle futures were down the limit two days in a row.
  3. The free water from the Ogallala Aquifer is disappearing.
  4. The U.S. cattle herd continues to decline.
  5. Many workers are illegal – Lack of immigration reform is making the hiring of low-cost refugee workers more difficult. Public support for foreign wars and abusive trade policy that displaces refugees to slaughterhouse jobs is becoming less popular.
  6. Foreign beef is cheaper.
  7. Memphis Meats – Tyson’s investment in fake meat competes with their existing and aging beef plant infrastructure.
  8. Tyson can force cattle feeders to redirect cattle to other Tyson plants, increasing utilization of remaining facilities. Additional freight will be at cattle owners’ expense. Additional stress will be at the animals’ expense. With USDA’s new non-inspection rules, chain speeds can be increased at existing facilities and cleanup shifts reduced to absorb additional numbers.
  9. If Elizabeth Warren’s vision for farming and food is implemented, a breakup of Big Food’s monopoly power is possible, and the cheap grain benefitting Big Food companies will become more expensive.
  10. It’s a clear warning and lesson to cattle producers supporting R-CALF’s lawsuit against Tyson and the other big packers claiming ongoing anti-competitive practices.

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New York Times: Warning of ‘Pig Zero’: One Drugmaker’s Push to Sell More Antibiotics

A brochure by Elanco, one of the largest manufacturers of drugs for animals, urged farmers to give antibiotics to every pig in their herds, even as it told the public and policymakers it was aware of the hazards that the overuse of antibiotics poses to human health

Overuse of antibiotics in livestock has given rise to drug-resistant germs. Drugmakers say they want to be part of the solution. But a recent campaign urged farmers to administer the drugs to healthy animals daily.

By Danny Hakim and Matt Richtel | June 7, 2019

Facing a surge in drug-resistant infections, the World Health Organization issued a plea to farmers two years ago: “Stop using antibiotics in healthy animals.”

But at last year’s big swine industry trade show, the World Pork Expo in Des Moines, one of the largest manufacturers of drugs for livestock was pushing the opposite message.

“Don’t wait for Pig Zero,” warned a poster featuring a giant picture of a pig peeking through an enormous blue zero, at a booth run by the drugmaker Elanco.

The company’s Pig Zero brochures encouraged farmers to give antibiotics to every pig in their herds rather than waiting to treat a disease outbreak caused by an unknown Patient Zero. It was an appealing pitch for industrial farms, where crowded, germ-prone conditions have led to increasing reliance on drug interventions. The pamphlets also detailed how feeding pigs a daily regimen of two antibiotics would make them fatter and, as any farmer understands, a heavier pig is a more profitable pig.

The rise of drug-resistant germs, caused by overuse of antibiotics, is one of the world’s most nettlesome health predicaments. Excessive use of the medicines has allowed germs to develop defenses against them, rendering a growing number of drugs ineffective for people and animals. The practices of livestock farmers, who for decades have used huge quantities of the drugs deemed important to humans, have long been viewed as one of the roots of the problem, but the role of the companies that make the drugs has received less scrutiny.

Antibiotics continue to be an important part of the business of companies like Elanco, which spun off from Eli Lilly in September, its share price soaring to $33 from $24. While Elanco is developing antibiotic alternatives for animals, like vaccines and enzymes, the antibiotics promoted by the Pig Zero campaign are exactly the kinds that global public health officials are trying to curb. And Elanco is no outlier — its rivals are also urging aggressive use of their own antibiotic cocktails.

“The reality is that antibiotics and large-scale industrial farming really grew up together,” said Dr. Gail Hansen, a former state epidemiologist and state public health veterinarian in Kansas, who sits on advisory boards addressing antibiotic resistance. She equated the problem with climate change. “By the time people understand and believe it,” Dr. Hansen said, “it may be too late.”

Elanco had already been put on notice about the drugs used in its Pig Zero push. In 2015, the Food and Drug Administration warned Novartis Animal Health, which had been acquired by Elanco, that the same antibiotic cocktail was “unsafe” and “misbranded,” because it was being illegally marketed to fatten pigs, rather than to simply treat disease. One of the drugs, tiamulin, has been a top seller for Elanco; the W.H.O. views it as medically important to humans, but American regulators do not. Pig Zero trumpets the benefits of coupling tiamulin with chlortetracycline, a drug made by Elanco’s competitors that both American and international regulators consider medically important to humans.

In an interview at Elanco’s headquarters outside Indianapolis, Jeffrey Simmons, the chief executive, said the company had decided to change the program’s marketing and to stop distributing the Pig Zero brochure after The New York Times began asking questions about it.

“We’re trying to be stewards and leaders at the same time,” said Mr. Simmons, adding that the brochure “wasn’t misrepresentation, necessarily, relative to the label or the science, or how a farmer would look at it.”

Dr. Shabbir Simjee, Elanco’s chief medical officer, said drugs like those in the campaign “would never be administered” in a herd “without some animals being physically sick,” adding that “there would need to be some animals showing clinical signs.”

He likened treating a herd to caring for children in a nursery: “If one child gets sniffles, you usually find that the whole class ends up with a cold, and this is exactly the same principle.”

But children almost certainly would not all be treated with preventive antibiotics in such a situation, and many scientists believe animals often should not be treated that way, either.

The connection of overuse of antibiotics in livestock to human health takes two paths: As bacteria develop defenses against drugs widely used in animals, those defense mechanisms can spread to other bacteria that infect humans; and, resistant germs are transmitted from livestock to humans — through undercooked meat, farm-animal feces seeping into waterways, waste lagoons that overflow after natural disasters like Hurricane Florence, or when farm workers and others come into contact with animals.

Bacteria are rebelling. They’re turning the tide against antibiotics by outsmarting our wonder drugs. This video explores the surprising reasons.

New F.D.A. regulations put in effect in the waning days of the Obama administration prohibited farms from fattening livestock by lacing their feed with medically important antibiotics. The new rules, along with rising consumer demand for antibiotic-free meat, cut antibiotic use significantly in 2017. But such drugs are still routinely given to pigs and cattle, accounting for almost 80 percent of medically important livestock antibiotics in the United States and nearly 5,000 tons of active ingredient. Worldwide use is projected to keep rising sharply as growing middle classes in places like China and Brazil demand more meat.

Ellen Silbergeld, a professor at Johns Hopkins University, who has worked with the W.H.O. on drug resistance, called the continuing promotion of the drugs by pharmaceutical companies “very dangerous.”

“The reason they’re doing it, though, is money, honey,” she added. “That’s what it’s all about. That’s what it’s always been about.”

Now, the industry has an important ally in Washington: President Trump, who appointed one of Elanco’s former executives, Ted McKinney, as under secretary of agriculture for trade and foreign agricultural affairs. Mr. McKinney told international food safety regulators at a meeting last summer in Rome that they were too singularly focused on consumers, at the expense of pharmaceutical companies and research scientists working to meet growing global demand for food. “We have got to rededicate a focus on them as our customers,” he said.

“We’re trying to be stewards and leaders at the same time,” Jeffrey Simmons, Elanco’s chief executive, said. Credit Whitten Sabbatini for The New York Times

In 2015, Mr. Simmons, Elanco’s chief executive, joined a White House summit meeting to pledge the company’s commitment to curbing antibiotic use.

Sylvia M. Burwell, then the health and human services secretary, hailed the gathering as a “hopefully historic step to protect the health of our nation.” Dr. Thomas R. Frieden, the director of the Centers for Disease Control and Prevention at the time, warned that antibiotic resistance “could result in the medicine chest being empty when we need it most.”

Mr. Simmons outlined Elanco’s lofty aims. “We’re going to create antibiotic alternatives,” he said, adding, “We believe strongly that there are solutions, there are pipelines, there are options.”

A farm boy from upstate New York, he was a nearly 30-year veteran of Eli Lilly when Elanco spun off last year with its 5,800 employees. His wife helps run a church food bank. Mr. Simmons sits in an unassuming cubicle on Elanco’s campus.

He refers to himself as a “purpose-driven leader” on a mission to fight hunger — echoing the megachurch founder Rick Warren’s best-selling book “The Purpose-Driven Life,” which Mr. Simmons has read and taken to heart. He uses social media to spread a sort of protein-affordability gospel: “#Protein is a nutritious part of a balanced diet, but many don’t have access to it,” he once wrote on Twitter. “We can/must change this!”

While microbiologists emphasize the urgency of fighting antibiotic resistance, agrochemical industry veterans like Mr. Simmons say it must be balanced against hunger and the world’s growing demand for food. He often recounts his time as an executive in Brazil, when an anguished guard in his gated community sought help feeding his two children.

“I’m not doing it for a paycheck or profits,” Mr. Simmons said in an interview. “Purpose has to override that.”

(He does get a paycheck, though. His total compensation was $5.4 million last year.)

Elanco’s booth at the World Pork Expo in Des Moines last year.

Financial disclosures for Elanco and its rival Zoetis, which spun off from Pfizer in 2013, show the two companies sell roughly $2 billion annually in livestock antibiotics. In Elanco’s case, antibiotic sales represent more than one-third of its overall business. Some antibiotics, like monensin, a top seller for Elanco, belong to a class not used in people, and thus are not considered a resistance threat. But so-called shared-class antibiotics, like chlortetracycline, are used in humans and animals, creating risk for resistant infections.

Mr. Simmons said that while Elanco “started as an antibiotic company,” antibiotics that are medically important for people and used in livestock feed now make up only 5 percent of its sales. “We’re not building our company on that 5 percent,” he said. But the company has also said that 12 percent of Elanco’s sales overall, including antibiotics used in feed and administered in other ways, come from medically important antibiotics.

While consumer demand has made developing alternatives an industry imperative, few companies are eager to cede ground on existing business.

Del Holzer, who was the director of meat and poultry for Elanco’s global industry food team from 2012 to 2017, said the company and its competitors want to take positive steps and look good, to a point.

“They want to do the right thing,” said Mr. Holzer, who now works for a division of the agriculture giant Cargill, an Elanco competitor that develops antibiotic alternatives. “But they say, ‘My bottom line is my shareholders will be really pissed at me.’”

Mr. Simmons, left, ringing the bell at the New York Stock Exchange last year. Credit Brendan McDermid/Reuters

When antibiotics were first discovered more than a century ago, no one intended them for animals. But then an American company, Lederle Laboratories, announced in 1950 that chickens grew faster when they were fed chlortetracycline, one of the drugs included in the Pig Zero campaign.

By the early 1960s, almost half of livestock antibiotics were aimed at making animals fatter. Drugs were marketed by the barrel; a 50-pound chlortetracycline bag advertised in 1972 in The Herald, in Jasper, Ind., cost $9.25.

A Purina Pig Chow ad that appeared in an Iowa newspaper in the early 1960s promised that it was “power packed with the potent vitamins, minerals and anti-biotics pigs need for fast growth and good health.” Another ad, in a Missouri paper, promoted “full-o-pep Pig Grower,” a feed laced with antibiotics.

Yet scientists already had misgivings. In 1969, the Swann Committee report, commissioned by the British Parliament, concluded the problem of antibiotic resistance was significant. In 1976, a landmark study published in Nature found that resistant E. coli strains could be passed from chickens fed with antibiotics to other chickens, and then to farm workers.

“It was pretty obvious to me that the prudent thing to do would be to take low levels of antibiotics out of animal feed,” said Dr. Hansen, the former state epidemiologist in Kansas. As an F.D.A. employee in 1978, she gathered evidence for Congress linking antibiotic use in livestock to resistant infections in humans, but no action was taken.

“The science was there, the evidence was pretty easy,” she said. “It was a slam dunk.”

The pharmaceutical industry has pushed back. In 1997, researchers from Elanco were among those who authored a lengthy review in the Journal of Applied Microbiology dismissing concerns about antibiotic use in animals, writing, “We are confronted by a lack of information, a wall of ignorance.”

Pharma companies kept a stranglehold on basic information. Various estimates by academics and public policy groups claim as much as 80 percent of American antibiotic sales go to livestock. But the industry has assailed such projections, calling some “agenda-driven junk science,” while simultaneously lobbying to block legislation requiring more disclosure of antibiotic use.

Mr. Simmons of Elanco has long played down livestock’s role in spreading resistant microbes to humans.

“The most serious pathogens are not related to antibiotics used in food animals,” he said. “Of the 18 major antibiotic-resistant threats that the C.D.C. tracks, only two, campylobacter and nontyphoidal salmonella, are associated with animals.”

But such oft-repeated statements, made even in Elanco’s securities filings, refer only to food-borne strains like antibiotic-resistant salmonella that can be found in raw chicken, for example, while ignoring the myriad ways pathogens can be transferred.

There is a growing body of research establishing links between Clostridium difficile, or C. diff, in livestock and humans, viewed by the C.D.C. as an urgent threat. Broad-spectrum antibiotics in livestock provide “a survival advantage to antibiotic-resistant C. difficile strains,”according to a 2018 study by Australian researchers. Similar studies exist for E. coli and methicillin-resistant Staphylococcus aureus, known as MRSA — the C.D.C. even lists different animals like cows, goats, sheep and deer that can pass E. coli to humans.

“We’ve seen antibiotic-resistant bacteria that can leak into the environment through water and dust, jump to the skin of farmers and swap genes with other bacteria,” said Sarah Sorscher, deputy director of Regulatory Affairs at the Center for Science in the Public Interest, an advocacy group. “And that’s still just scratching the surface on the science. By the time we understand the full magnitude of this threat, it may be too late.”

There has been progress. In 2017, when the F.D.A. effectively banned the use of medically important antibiotics to fatten livestock, their consumption fell by a third that year.

But health experts say the regulations did not go far enough and see a sleight of hand at work, with industry marketing now presenting routine antibiotic use as a “proactive” necessity and weight gain an ancillary benefit, as Elanco did in the Pig Zero marketing campaign.

Before her death last year, Representative Louise M. Slaughter, a New York Democrat who was the only microbiologist serving in Congress, lamented the F.D.A.’s new rules as being riddled with loopholes.

“It’s useless,” she said of the regulations. “That’s why the industry’s supporting it.”

Aaron Schacht, head of research and development at Elanco. “Could we eliminate the need for broad-spectrum antibiotics?” he asked. “I think it’s possible.” Credit Whitten Sabbatini for The New York Times

A recent tour of Elanco’s labs at its Indiana headquarters swept past a virology lab and a large machine analyzing the DNA of thousands of hamster cells. Amid beakers and hardware, scientists in coats and protective glasses discussed their efforts to find alternatives to antibiotics.

Aaron Schacht, Elanco’s head of research and development, said those alternatives could include enhancing the animals’ own immune function, immunizing them against particular pathogens or reshaping their gut bacteria to favor the good ones.

“Could we eliminate the need for broad-spectrum antibiotics? I think it’s possible,” he said. “Now let’s let the science play out.”

But change comes in fits and starts. Mr. Holzer, the former Elanco official, said the drugmaker had created “country-specific websites” where “there were certain things you couldn’t talk about in the U.S., but then talk about in Poland.”

“It’s a bit of a hypocritical thing,” he added. “Elanco wants to lead the charge on antibiotic use but then sells into these countries that could become the biggest part of the problem. The idea is that as long as we don’t lose antibiotics in country XYZ, we can take our hit in the U.S., and get the P.R. for it.”

Elanco called Mr. Holzer’s comments “completely inaccurate.” Colleen Dekker, a spokeswoman, said the company no longer included “growth promotion” — fattening up animals — as an approved use for medically important antibiotics worldwide, “regardless of what local regulations allow.” The company was also intentionally decreasing its sales of such drugs, she said, showing that “this is far more than a ‘P.R. effort.’”

But for Pig Zero, the company sees a problem only in the marketing. Going forward, Ms. Dekker said, such drugs would be sold “more from a health perspective” than from “a weight-gain perspective.” Mr. Simmons said of The Times’s inquiries, “We had a lot of dialogue about Pig Zero that probably we wouldn’t have had,” adding, “That’s good.”

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Non-logic and the NCBA

The National Cattlemen’s Beef Association wants to keep consumers in the dark?

The NCBA is currently making a media and lobbying push to have the United States Mexico Canada Agreement (USMCA) – better known as NAFTA-II – ratified by Congress.  In their press info NCBA states: “USMCA maintains science-based trade standards while rejecting failed policies of the past, like mandatory country-of-origin labeling.” This statement reveals two of NCBA’s fixations because along with COOL, the NCBA is obsessed with exports while denying any negative effects of beef and cattle imports.

In the NCBA world view only through more exports can cattle producers prosper. They manipulate trade statistics to make it look as though we export more beef than we import by conveniently not accounting for the nearly two million head of live cattle imported from Canada and Mexico. The NCBA then claims that exports increase beef’s value by $313.39 per head. I don’t know how they made up that number, because I am certainly not making $313.39 per head on cattle sales. It is clear that imported cattle are strategically used by the beef packing cartel to manipulate the market, yet NCBA totally ignores the fact that the market for cattle is neither transparent nor competitive.

Many of us had high hopes that re-negotiating NAFTA would result in a better trade agreement, but that does not seem to be the case. Corporations still have every incentive to outsource their manufacturing. They can still hide their profits in off-shore tax havens. Food safety standards are still not equivalent. The workers still have no rights. Environmental pollution is still happening. The World Trade Organization (WTO) can still overrule domestic laws, and COOL is still not allowed. The upshot from the point of view of cattle producers, is that beef and cattle imports still undermine our domestic market.

As for our Canadian neighbors, why do they remain dead set against US consumers knowing that they are eating Canadian beef? I understand that they think that they are protecting their interests, but COOL is the least of their problems. Their real issue, which unfortunately affects us too, is that Canadian cattle funnel into a captive supply system that results in lower prices for both them and us.  If our Canadian colleagues would wake up, they would realize to what degree that they are being used. What they should do is petition their government to insist that the US enforces the Packers and Stockyards Act. Real market competition would cure a lot of problems on both sides of the border.  

I recently had a conversation with Congressman Greg Gianforte and asked him if he would support a bill to restore COOL.  He said no, because the cattle industry is not in agreement over this issue.  I guess in his estimation, ninety percent of consumers and a majority of cattle producers can be ignored because a handful of NCBA lobbyists say so.  Mr. Gianforte is running to be our next governor.  If he comes to your town, a good question would be to ask him if he supports COOL. If enough people ask, maybe he will have a change of heart.

Senator Tester is totally in favor of COOL. In fact, his support for COOL was key both when it was first passed in the Montana legislature in 2005 and later in Congress in 2008. If you see him tell him thanks. As for Senator Daines, I don’t know his position.  He is running to defend his seat, so it would be a good time to get him on record.

This is a good question to ask all of the men and women running for various national or state offices. The same advice for those of you who might be reading this in another state.  Ask your candidates if it makes sense that all imported manufactured items and foods carry a mandatory country of origin label except for pork and beef.   And if that doesn’t make sense to them, remind them that NAFTA-II is not an improvement and COOL must be restored.

Gilles Stockton
Stockton Ranch
Grass Range, Montana
406 428-2183

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