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AFF Sentinel-Vol 20#03-Perhaps An Ugly 2024

Washington Hand Lends Some Insight to Future Marketing Fight

Steve Dittmer | AFF Sentinel

Colorado Springs, CO

Originally sent to subscribers 01/22/23

We have been concerned about the third promised proposal from USDA, supposedly aimed at helping boost competition in the marketing of fed cattle. The department’s bent has been similar in thought to the Grassley-Fischer bill aimed at taking marketing freedom away from cattlemen and giving it to the government. Mandating a big percentage of fed cattle sales to negotiated cash would seriously damage beef quality and consistency and ultimately damage our great beef demand.

Chandler Keys, formerly CEO of the NCA, having worked or consulted for JBS for many years and now running Keys Group, put a little different spin on the timing of such a major, damaging proposal. He recently spoke to the Marketing Committee of the Colorado Cattlemen’s Mid-Winter Conference in Denver. The thinking in Washington is that such a marketing mandate and a resurrection of the attempt to make it easier to sue packers last seen under GIPSA administrator J. Dudley Butler would likely be part of the proposed rule. Keys doesn’t think USDA will advance a proposed rule yet in 2023. As a long-time Washington political observer, his reasoning holds merit.

Keys first did a little history review for the committee, reminding them that the big push for value-marketing of fed cattle came from feeders in the ’80s and ‘90s. Packers had bought cattle by the pound on the average for decades. There was skepticism from cattlemen. Keys noted the CAB program came within one vote of being stopped in the late ‘70s. But the concept worked, despite some rough patches for cattlemen in the beginning.

The packers didn’t really want to do it. They were accustomed to buying on the average, evaluating grade and yield better than feeders and getting the value out of the carcasses later. Keys recalled IBP’s ramrod Bob Peterson coming to D.C. and telling the NCA board that he was going to keep buying cattle on the average and getting the value out of them himself.

But NCA -- Keys particularly recalled the insistence from Chuck Lambert, NCA’s economist at the time -- held firm that value-based was the long-term way to go. Over time, the quality engendered by value-based marketing changed the way the public viewed our product.

So what would happen if Grassley-Fischer started mandating a big chunk of cattle to be bought negotiated cash? Packers would go back to slaughter the cattle and sort them for value they could harvest for themselves, Keys said. They wouldn’t mind going back to buying on the average by weight and the rest of the industry would be the ones punished. Two of the major packers already buy cash cattle every week.

The Grassley-Fischer approach, supposedly designed the help the cattle industry would really help the packers, Keys said, reminding the committee he had seen how the packers operate from the inside.

He also reminded cattlemen that the packers are every day, twice a day, required under MPR, to report sales and other data to the government. No other industry in America has constraints like that.

Grassley will introduce his bill yet again this year, Keys said. USDA Secretary Tom Vilsack is taking a different approach than he did last time when he proposed the whole GIPSA rule all at once. The industry howled and Vilsack lost the battle, Keys remembered.

This time, Vilsack is trying again but breaking it up into smaller pieces. He’s already gone after the tournament system poultry processors used to pay growers.

Vilsack’s theory for the cattle industry is that there are producers who are vulnerable to deception under the value-based marketing system.

Keys expects some kind of “injury to competition” proposed rule near the end of Biden’s term. Because there was so much opposition to such a gift to the trial lawyers last time and much is expected this time, Vilsack will not want to give the opposition time to generate steam. So, politically, it will made sense for him to wait until the last minute and try to sneak it in.

Years ago, some producers sued IBP/Tyson in court (Pickett v. Tyson)and won at the district level but the decision was overturned at the appellate level. Lawsuits regarding injury to competition have been disallowed eight different times in eight different suits, holding that the injury has to be for an entire industry, not just one party. Butler’s intention, and Vilsack apparently agrees, is that any trial lawyer with any aggrieved party should be allowed to sue any company, or in this case, packer.

That’s not even counting the $15 million dollar incentive Vilsack has funded for state attorneys general to hunt for injured parties, Keys reminded.

We note USDA has actually made it a contest for attorneys general, an “Agricultural Competitive Challenge,” to find victims of violations of competition laws, such as price-fixing.

Such actions are not legislation passed by elected representatives, Keys pointed out. This is regulation advanced by bureaucrats in an agency. He suggested the industry must put pressure on USDA not to issue such regulations. There is time, as Keys suggested June of 2024, the election year, as the most likely time for such regulations to be proposed.

The Farm Bill could enter into all this. While it is supposed to be passed in 2023, Keys said it is much more likely the hearings will be held in 2023 and passed close to the next election in 2024. Congressmen like to have bills spending money for various constituent groups to be fresh in voters’ minds at election time.

With a Republican majority in Congress, it may be possible to block damaging USDA proposed rules in the 2024 Farm Bill.

Keys explained that Vilsack was thwarted last time with the GIPSA proposed rule. But he learned from that defeat. He has brought in people to help him in re-jiggering the cattle industry, to shift power to the plaintiffs’ side of lawsuits.

And yes, Vilsack is a lawyer.

Next time: More with Chandler Keys’ views on USDA.

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