120810 presentation to ocm
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1 The State of U.S. Cattle Industry After 26 Years of Beef Checkoff Program Operations Presentation to The 14 th Annual Food and Agriculture Conference by Bill Bullard, CEO, R-CALF USA August 10, 2012
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Transcript of 120810 presentation to ocm
1
The State of U.S. Cattle Industry After 26 Years of Beef Checkoff Program Operations
Presentation to
The 14th Annual Food and Agriculture Conference
by Bill Bullard, CEO, R-CALF USA
August 10, 2012
2
Purpose of Beef Checkoff Program Enacted in 1985
• To enable cattle producers to establish, finance, and carry out a coordinated program of research, producer and consumer information, and promotion to improve, maintain, and develop markets for cattle, beef, and beef products.
3
Beef Checkoff Program Abuses Discovered in 2010
• $216,944 in Checkoff Abuse Identified in 2010 Independent Accountants Report– Charging Checkoff for policy activities
• 50/50 travel expense split for NCBA officers• Pay for non-Checkoff meetings, travel and speaker
costs• Pay NCBA employees’ time for non-checkoff
activities• Pay NCBA employees’ spouse’s travel expenses• Pay legal fees to maintain NCBA
4
2012 OIG Audit of 18 Producer Checkoff Programs
• Found evidence of misappropriated producer checkoff dollars. For example, the U.S. Soybean Export Council, a subcontractor of the United Soybean Board, used soybean checkoff dollars to pay employees unauthorized bonuses totaling approximately $302,000.
. • The OIG found that USDA’s oversight over the expenditure of approximately $528 million that is
contributed by commodity producers each year was inadequate to prevent or detect the misuse of checkoff dollars.
• The OIG found that USDA’s oversight of the various checkoff boards “increases the risk that funds could be misused by boards.”
– USDA staff did not adequately enforce the agency’s own guidelines; – USDA’s oversight of checkoff board activities was inadequate, particularly when it came to
enforcing regulatory requirements;– USDA did not even conduct a management review of the Beef Checkoff Program Board and
other checkoff boards overseen by the USDA’s Livestock and Seed program in at least five years;
– USDA did not ensure that independent auditor reports of the various checkoff programs included required statements of assurance that checkoff dollars were not being used for unauthorized lobbying.
• Alarmingly, the OIG stated that USDA officials viewed the checkoff programs as low risk
because, among other things, they did not involve Federal funding.
5
Beef Demand Fell for 18 of 26 Years and Is Now 28 Index Points Less than in 1985
Annual, Choice Beef Demand Index 1980=100
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
De
ma
nd
Ind
ex
(1
98
0=
10
0)
13-Year Decline
6-Year Decline6-Year Increase
Source: KSU AgManager.Info
6
Per Capita Beef Consumption Fell by More than 20 Pounds Since 1985
Annual, Per Capita Beef Disappearance (Consumption)With 2-Year Moving Average Trendline
Prepared by R-CALF USA
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012 E
st.
Pe
r P
ers
on
Co
ns
um
pti
on
(P
ou
nd
s)
8-Year Decline
10-Year Decline9-Year Stabelization
Source: USDA-ERS Beef Supply and Disappearance
7
Consumers’ Beef Prices Increased More than $2.50 per Pound
Annual, Choice Retail Beef PricesWith 2-Year Moving Average Trendline
Prepared by R-CALF USA
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Re
tail
Be
ef
Pri
ce
(D
olla
rs P
er
Po
un
d)
Source: USDA ERS Beef Price Spreads
Canadian Imports Curtailed
8
While Retail Beef Prices Increased Steadily,
Feeder Cattle Prices Were Highly Volatile
Feeder Cattle Prices (500-600 lbs, Kansas)With 2-Year Moving Average Trendline
Prepared by R-CALF USA
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fe
ed
er
Ca
ttle
Do
llars
Pe
r C
WT
Source: KSU AgManager.Info
Canadian Imports Curtailed
9
Like Feeder Cattle Prices, Fed Cattle Prices Were Much More Volatile than Beef Prices
Fed Cattle Prices (1100-1300 lb Steers, Kansas/Nebraska)With 2-Year Moving Average Trendline
Prepared by R-CALF USA
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fe
d C
att
le P
ric
e D
olla
rs P
er
CW
T
Source: KSU AgManager.Info; USDA-ERS
Canadian Imports Curtailed
10
A Function of Cattle Price Volatility, the Producers’ Share of the Consumers’ Beef Dollar Fell to All Time Lows in the
2000s and Was 10% Less in 2011 than in 1990
Producers' Share of Consumer Beef Dollar With 2-Year Moving Average Trendline
Prepared by R-CALF USA
35%
40%
45%
50%
55%
60%
65%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sh
are
of
Be
ef
Do
llar
Re
turn
ed
to
Pro
du
ce
rs (
Pe
rce
nt)
Source: USDA ERS Beef Price Spreads
Canadian Imports Curtailed
11
Increased Retail Prices and Cattle Price Volatility Allowed Packers to Charge Consumers More and Pay Producers Less
Ranch-to-Retail Choice Beef Price Spread(Cost of Converting Live Cattle to Beef)
Prepared by R-CALF USA
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Be
ef
Pri
ce
Sp
rea
d (
Do
llars
Pe
r P
ou
nd
)
Source: USDA-ERS Beef Price Spreads
Canadian Imports Curtailed
12
A Long-Run Lack of Profitability for Cattle Producers Resulted in an Unprecedented Herd Liquidation
Declining U.S. Cattle Herd
Prepared by R-CALF USA
25
35
45
55
65
75
85
95
105
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ca
ttle
He
rd S
ize
(M
illio
ns
)
Source: USDA-NASS
Total Cattle Inventory: Beef Cows and Bulls, Dairy Cows and Bulls, Steers, Heifers and Calves
Beef Cow Mother Herd
Canadian Imports Curtailed
13
Running a Close Second Only to the Horrendous Exodus of U.S. Hog Producers, 488,000 Cattle Producers Ceased Their
Operations Since 1985
Declining Number of Beef Cattle Operations
Prepared by R-CALF USA
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nu
mb
er
of
Be
ef
Ca
ttle
Op
era
tio
ns
Source: USDA-NASS
14
Margin Operating Feedlots Continually Face Fatal Cost/Price Squeezes
that Already Forced the Exodus of 35,000 Feedlots Just Since 1996
Declining Number of Feedlot Operations
Prepared by R-CALF USA
60,000
70,000
80,000
90,000
100,000
110,000
120,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nu
mb
er
of
Fe
ed
lots
Source: USDA-NASSData Unavailable for Period 1985-1995
15
Independent Farmer-Feeders and Mid-Sized Feedlots Decline While the Largest Feedlots Continually Expand,
thus Shrinking the Number of Feeder Cattle Buyers
Changed Structure of Feeding IndustrySmall- and Mid-Size Feedlots Marketing Fewer Cattle
Prepared by R-CALF USA
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Nu
mb
er
of
Ca
ttle
Ma
rke
ted
Capacity Less than 1,000 Capacity 50,000 and More Capacity 1,000 to 49,999
Data Unavailable for Period 1985-1995
Source: USDA-NASS Various Cattle on Feed Reports
16
As Feedlots Consolidate Unabated, and as Packers Own or Control More and More Cattle, the Price
Discovery Market Is Vanishing
Vanishing Price Discovery Market
Prepared by R-CALF USA
20%
25%
30%
35%
40%
45%
50%
55%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ca
ttle
So
ld in
Ca
sh
Ma
rke
t (P
erc
en
t)
Source: USDA Market News
Data Unavailable for Period 1985-2004
17
Falling Production Post Beef Checkoff Program Reversed when the U.S. Cattle Industry Began It’s Unprecedented Herd Liquidation in the Mid-90s
Domestic Beef Production From U.S.-Origin CattleWith 2-Year Moving Average Trendline
Prepared by R-CALF USA
18
20
22
24
26
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Do
me
sti
c P
rod
uc
tio
n (
Bill
ion
s o
f P
ou
nd
s)
Source: USDA-ERS (Note: Does not Include Beef Equivalent of Imported Cattle
18
After 26 Years of the Beef Checkoff Program, the U.S.
Cattle Industry Is in a “CODE RED” State of Emergency
The Beef Checkoff Program Is the Principal Funding Source for the NCBA – an Industry Trade Association Not Only Oblivious to the Vanishing Opportunities for Independent Cattle Producers, but also, the Principal
Catalyst for Eliminating those Opportunities
19
Disconnect Between Retail Beef Prices and Live Cattle Prices
C. Robert Taylor, Auburn University
20
How Consumers Are Impacted
CONSUMERS' RETAIL BEEF PRICES COMPARED TO CATTLE PRICESJAN. 1980 - APRIL 2012
0
100
200
300
400
500
600
Jan/
80
Jan/
81
Jan/
82
Jan/
83
Jan/
84
Jan/
85
Jan/
86
Jan/
87
Jan/
88
Jan/
89
Jan/
90
Jan/
91
Jan/
92
Jan/
93
Jan/
94
Jan/
95
Jan/
96
Jan/
97
Jan/
98
Jan/
99
Jan/
00
Jan/
01
Jan/
02
Jan/
03
Jan/
04
Jan/
05
Jan/
06
Jan/
07
Jan/
08
Jan/
09
Jan/
10
Jan/
11
Jan/
12
Cen
ts P
er P
ou
nd
Net Farm Value (Cattle Price) Retail Beef Prices R-CALF USASource: USDA-ERS
In just the past 10 years - 2002 to 2012, spread has increased $2.46 per pound (from $1.85 to $2.48 Jan. to Jan.)
21
The End
