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Big Beef Targets Virginia Ranchers With Bigger Checkoff Tax

Virginia State Senator A. Benton Chafin last week introduced a bill that would significantly hike “checkoff” taxes that cattle growers in the state must pay. The move follows efforts in other states—including recently in Oklahoma—to increase or introduce state-level checkoff taxes, which are charged in addition to the $1 per head tax collected at the federal level. Many local ranchers oppose both the tax and the idea that it will be imposed by the legislature, saying the process effectively shuts independent cattle producers out of having a say in this sector specific levy.

The bill quadruples the amount that Virginia beef growers must pay every time they sell a head of cattle, from $0.25 to $1. The bill also reduces the size of the state’s Beef Industry Council, the group that implements programs funded by the cattle checkoff, from fifteen representatives to seven, and alters the makeup of the council substantially. Previously, the council was a mix of cattle producers, dairy farmers, and packers. Now, the council will contain six cattle producers and one dairy farmer.

The federal checkoff program collects mandatory taxes from producers of 22 specific commodities, ranging from milk to soybeans. The national beef checkoff program currently collects $1 per head of cattle sold in the U.S. Checkoff funds are used to market specific farm products, such as through the “Got Milk” advertising campaign, ostensibly to benefit all producers of that commodity. But producers in many states have argued that federal and state checkoffs only benefit the largest, most conventional producers. Half of the money collected by the federal government is allocated to agricultural groups in the state where the cattle was sold, while the other half is allocated towards the federal checkoff pool.

In some states, a state checkoff is levied in addition to the federal checkoff. In many states, ranchers and farmers have strongly opposed the tax. Last October, Oklahoma’s Cattlemen Association introduced a ballot initiative that would have required the state’s cattle producers to pay an additional $1 as a state checkoff tax. Independent producers campaigned against the bill, and the state’s ranchers ultimately voted against the increase.

Joe Maxwell, a Missouri rancher and the president of the Organization for Competitive Markets, notes that unlike other state checkoff expansion attempts, Virginia’s will be considered in the legislature rather than through ballot referendum. Consequently, he says, “the cattle producers of Virginia will not be given an opportunity to vote” directly on the proposal, even though they face “a 300% tax increase.”

The Virginia bill is supported by the Virginia Cattlemen’s Association (VCA), a local affiliate of the National Cattlemen’s Beef Association. Both groups are trade associations that lobby on behalf of conventional beef producers. The VCA estimated in its 2017 report on expanding the state checkoff tax that there are 850,000 cattle in Virginia that are eligible for the tax. That means that if new legislation is passed, the VCA will be managing an additional $850,000 on top of the existing federal funds it handles.

The bill also gives the VCA even greater power to select who serves on the Beef Industry Council. Historically, the VCA along with other livestock organizations in the state would recommend appointees to the Governor. But the new composition means that the VCA will control nominations for all but the one Council seat allocated to dairy farmers. Maxwell says this will allow the VCA to “stack the deck” with their members.

Dr. John Boyd, a Virginia cattle rancher and president of the National Black Farmers Association, says cutting down the size of the board will especially disadvantage minority and small farmers. He says that to his knowledge no black farmer has ever served on the state’s cattle checkoff board, and the changes will make that even more difficult in the future. “These types of boards should be made up of area producers, that represent [Virginia’s] makeup,” he says.

Checkoff programs have been challenged in both state and federal court. Last June, after a lawsuit was brought by independent ranchers in the state, a District Court judge placed an injunction on the collection of Montana’s checkoff tax. There have also been lawsuits brought against the federal checkoff program. Last March, Senators Cory Booker (D-NJ) and Mike Lee (R-UT) introduced the Opportunities for Fairness in Farming Act, which would bring more transparency and accountability to the federal checkoff program.

What We’re Reading

· JBS USA will divest Five Rivers Cattle Feeding to an investment management firm for $200 million. The sale is part of a broader divestment plan that the company put into place last summer, as its executives paid out fines for their involvement in bribery schemes. If the deal is approved, none of the major meatpackers in the U.S. will own their own feedlots.

· Bacardi will buy the remaining 70% of Patrón Spirits International that it didn’t already own, in a deal that values the brand at $5.1 billion. Patrón’s namesake tequila has about a 14% market share in the U.S. tequila sector.

· Nestlé sold its U.S. candy business to the Italian confectioner Ferrero International for $2.8 billion. The deal includes brands like Butterfinger and Baby Ruth. Ferrero beat out Hershey for the buy. This marks Ferrero’s third U.S. candy acquisition in a year, and will position it as the country’s third-largest chocolate seller.

About the Open Markets Institute

The Open Markets Institute promotes political, industrial, economic, and environmental resilience. We do so by documenting and clarifying the dangers of extreme consolidation, and by fostering discussions of ways to reestablish America’s political economy on a more stable and fair foundation.

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