Friday, November 18, 2016

Leaving Commodity Markets Behind

 A few weeks ago I wrote about the hypocrisy of current cattle markets and world hunger. Actually it is the hypocrisy of the commodities market and world hunger. Governments and organizations dealing with poverty, along with the media,  are constantly spreading the fear of not being able to produce enough food to feed the world. If all of these governments and organizations (which collectively collect and disperse hundreds of billions of dollars annually to fight the problem) are so dedicated then why were American dairy producers forced to dump forty three millions gallons of milk in the fist ten months of 2016 from "over production?"  Why is it that American produce farmers are forced to take "excess" produce to landfills while supermarkets have the identical produce on their shelves, from other countries? Last (but not least) why are American ranchers receiving less money for their calf crop than they did in 1979 (reportedly from "over production") while we are importing beef from other countries?

These are all fallacies caused by prices being set at the CME without any basis given to the cost of production, and the myth "we'" are in a global economy. If commodity prices would have kept track with inflation, $1.25 calves in 1979 should be $4.16 according to the CPI inflation calculator.  So is there a way to get out from under the CME so ranchers can start receiving a price which reflects the inflation over the last thirty seven years? Yes, in fact some ranchers already are.

Some use organizations like the Grass Fed Network or Homegrown Cow, while others do their own marketing locally, selling directly to the consumer. Others manage to sell their cattle locally at above market prices, with delivery to a local slaughterhouse. Some, such as White Oak Pastures, have gone the extra mile and actually built their own processing plant. However many cattle producers are too far removed from from dense enough populations to market directly to the consumer.

In order to enable all producers to circumvent the CME price fix, the NCBA needs to be abolished, or at the very least, restructured. For those thinking the NCBA is helping cattle producers, and that the beef checkoff program really adds $11 a head to the value of your cattle, why are you receiving less money now than in 1979? In fact, when you allow for inflation, the prices of two weeks ago producers were paid $2.95 a pound less than pre-checkoff prices.

The new organization would require both cattle and feed producers to file their cost of production. Farmers providing feed would be paid on the average cost of production plus a percentage of profits. The formula for cattle producers would need to be a bit more complex. There would be a base price of the average price of production, plus percentage for profit, with the option to retain part, or all of their calves all the way to wholesale, if not retail, and be paid on hide and offal as well.

The new association would need to lobby congress to assure that the packers cannot import beef unless there is an actual shortage of US produced beef.  Furthermore,  the tariff on imported beef would put the packers price on imported beef at a level to be even with beef produced in the USA.

This is just a bare bones proposal which beef producers need to discuss before we go the way of sheep producers...just think of when the last time you saw lamb in a store which wasn't a product of New Zealand.




3 comments:

  1. Bob Kinford I agree with you and once thought I had the solution but figuratively got 'hung, drawn and Quartered' by my peers. At the time I was president of my Provincial Cattlemens Association and rep on the Canadian body, the equivalent of your National Association. We were being subject to countervailing duties by US and Western Canadian consolidation was dumping cattle in the East because of this. This market distortion eventually caused closure of,by that time the only independent Slaughter plant in the East capable of Federal Slaughter. The only two major Slaughter plants left were in Alberta and One in Ontario. All were owned by US Companies Tyson and Cargill. Tyson later sold to Brazil's Batista Bros or JBS, I realised that these companies liked to hedge against risk by trying to forward contract or pre own up to 40% of their supply, referred to as captive supply. This was supposedly illegal under the Stockyards act which had become toothless because of money and politics. This in turn made farmers and ranchers, the same as their cattle, captive supplies to the public good. All other segments of society had schemes to ensure workers etc kept place with inflation until the system encouraged out sourcing of jobs offshore. I could not believe it was being allowed to happen due to erosion of food sovereignty and security. The real reason for the electoral upset???? Anyway I was being condemned and ostracised because I had commissioned a study in my last act as chair of local group re 'fair share of retail' When I fully committed to finishing beef in 1990 this fair share was 50% for beef. the highest of all commodities. Due to Countervail duties and stage of beef cycle it dropped to about40% and then since BSE Border closure in 2003 it rose steadily to about 55% but now since we have again been made captive by processing and retail, they have captured the producers margin. They of course have the ability through the power of capital, to protect their margins from field to consumer. The major players protect themselve by formula and have the clout to impose. A legislated fair shair of retail for the producer is the only hope for the future, otherwise the 'dog eat dog' continues. I have 'niched' my operation to conception to consumer grass fats but only on small scale. The demand is there but because of my previous outspoken attitude, leading to Huge BSE related, uncompensated loss, it is very difficult to recover from a 'blame the victim' and 'shoot the messenger' mindset, fed by the ' top of the heap' Good luck. !

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