Ag Policy Blog

Beef Promotion Leads to Beef Politics

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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On Friday afternoon a group of reporters heard another complaint the Obama administration's Big Government agenda is going after the cattle industry by trainwrecking the beef checkoff.

Agriculture Secretary Tom Vilsack has floated the idea of creating a separate beef checkoff program that would run parallel to the current program. The agriculture secretary is seeking to create a different funding flow for that potential extra $1 per-head fee, which would generate as much as $80 million or so based on the current checkoff assessment.

Bob McCan, a Texas cattle producer and NCBA president, said there would be additional administrative costs and risks to the entire beef checkoff program. NCBA leaders and state affiliates see the proposal as "somewhat threatening," McCan said.

“Another dollar is attractive to everybody, but that dollar could come with a whole lot of costs," he said.

Reporters were reminded multiple times that the beef checkoff has a nearly 80% approval rating, based on a recent survey. http://www.beefboard.org/…

The program works, so why go another direction? Why use this 1996 generic checkoff promotion act when the 1985 beef act works so well? Why spend another $1 through another program that seems to create redundancy?

Like so many intra-industry fights in the cattle industry, there's another side to the argument.

Vilsack's proposal comes after industry groups have failed to reach a consensus over the past three years in trying to make some governance changes to the beef checkoff. The goal was to come up with some reforms that would allow everyone to agree to raise the $1 per-head assessment.

A lot of people would like to see the checkoff raised. The $1 per-head fee is losing its effectiveness on a lot of fronts. For one, $1 has the same buying power as .48 cents in 1987. A steadily declining national cattle herd has reduced revenue as well.

Eleven groups have had these ad-hoc discussions that led a memorandum of understanding that was offered to make some changes to the checkoff. The MOU didn't have enough changes in governance for members of National Farmers Union, who caused a stir by withdrawing from the working group last month.

In a late statement Friday, Donn Teske, NFU's vice president and president of the Kansas Farmer Union, said NFU applauds Vilsack's decision to get involved in the discussions over the checkoff.

"It is a step in the right direction for family farmers and consumers alike that Secretary Vilsack is actively addressing the situation after three and a half years of inaction from the Beef Checkoff Working Group.

Teske added, "In order to fundamentally change the checkoff, we must address the assessment, the beef operating committee and the fact that a single organization receives 93 percent of the checkoff dollars. NFU intends to do just that in its recommendation to the U.S Department of Agriculture and Agriculture Secretary Vilsack.”

A lot of other groups oppose the working group's MOU, including those who wrote Vilsack last month asking him not to approve it. http://www.worc.org/…

Chuck Kiker, vice president of the U.S. Cattlemen's Association and also a Texan, said Friday that his group supports the secretary's action. In the conversation Tuesday that Vilsack had with members of the beef working group, the secretary said he was looking at what can be done to further promote beef. Vilsack also was disappointed the industry groups didn't come together despite consensus that more funding was needed for beef promotion. Vilsack said he believed he could increase the checkoff through the 1996 act.

"That's what he said we're going to do. He was going to write a new order giving you-all some more money," Kiker said. "It's just another dollar to promote beef in the U.S. and they (NCBA) is going to spit at that? They don't take another dollar to promote beef in one of the best times in the beef industry because it's not on their terms. They might not get to control it."

Kiker said Vilsack had told the cattle industry since 2009 that the checkoff wasn't his battle and the industry groups should come to an agreement on their own. Last year, Vilsack gave the group a mild scolding over the lack of progress. The groups agreed to meet three more times and try again. While NFU quit the ad-hoc group, U.S. Cattlemen's Association plans to stay engaged to demand more governance changes.

Leaders in the beef industry have talked about what it would take to increase the beef checkoff to $2 since at least 2006. That discussion began after the Supreme Court ruled 6-3 in 2005 that the beef checkoff is constitutional. In that case, checkoff opponents wanted to stop paying government-mandated fees. The high court sided with checkoff supporters by concluding the beef checkoff constituted "government speech."

As NCBA officials noted Friday, the current checkoff has been changed already to allow a broader set of organizations. Yet, those groups that now have a chance to submit proposals aren't seeing a lot of bang for the buck.

National checkoff funds controlled by the Cattlemen's Beef Board are distributed through contracts approved by a 20-member Beef Promotion Operating Committee made up of ten members from the Cattlemen's Beef Board and ten members from the Federation of State Beef Councils. This structure effectively divvies up roughly $40 million, or half the total checkoff assessment. The other half of the checkoff funds goes directly to the 45 state beef councils nationally.

The federation is a division of NCBA and shares offices and other expenses. The idea of dividing the federation from NCBA is the crux of the fight for some groups demanding changes to the way checkoff contractors are chosen.

NCBA is the dominate contractor for Cattlemen's Beef Board funds for promotion, research and information about the industry inside the U.S. According to the checkoff board's fiscal 2013 annual report, NCBA contracted for $33.66 million out of $34.49 million in contracts, a ratio of 97%. For FY 2015, NCBA will contract $27.8 million. The next highest contractor was the U.S. Meat Export Federation, which received about $7.7 million. http://beefboardmeeting.com/…

There's a lot of pressure on the operating committee to keep the status quo. They know those people at NCBA who do the work. At a time in which the checkoff is facing dwindling resources, if the operating committee opted to move a chunk of funds to a new contractor then that could cost NCBA revenue and potentially jobs. This is some of the hallway jockeying that goes on outside the operating committee meetings that helps assure NCBA continues to garner the lion's share of checkoff dollars.

If other members of the working group --- Farmers Union and U.S. Cattlemen for instance --- got their way then the operating committee structure would collapse. A new, parallel checkoff could translate into that other $80 million or so flowing in a way that doesn't favor the current contractors.

But a new checkoff could serve a dual purpose. A survey done after the 2005 Supreme Court ruling showed as many as 96% of cattle producers surveyed would support increasing the checkoff if it went to promote U.S.-raised beef. If the World Trade Organization is getting ready to announce the U.S. lost another court case over Country-of-Origin Labeling then a checkoff promoting U.S. beef would seem to alleviate the need for a mandated COOL label. Canada, after all, uses maple-leaf stickers to promote its 100% Canadian beef. Thus, a $1 checkoff could go to promote U.S.-raised beef.

Feeder cattle remain at record highs. You could argue beef doesn't need the extra promotion right now. Yet, if a downturn occurs, then producers would be far more likely to get upset about losing that extra $1 per-head in their pocket if cattle prices take a major dive.

The talks have stretched out more than three years. Some observers argue that those who like the way things run now think they could run out the clock on this administration. They then could get an agriculture secretary that might just raise the checkoff on more amiable terms to the status quo.

Vilsack does have one other card to play in this battle to force consensus. USDA could choose not to approve the funding requests for checkoff projects until another structure is created to divvy up those dollars.

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melvin meister
10/9/2014 | 3:04 PM CDT
This is the same NCBA that joined Big Oil in attacking Ethanol. my way or the highway.