NOBULL: The Auditors, By Lee Pitts — And we thought IBP and the loss of our markets was bad…
Livestock Market Digest November 15, 2012
By Lee Pitts
Let’s play the old word association game, shall we? If I were to say the word “grass” you’d probably say “green”, unless you were a pothead. If I said “black” you’d say “white” and if I said the word “audit” you’d probably… wet your pants.
Usually the word “audit” is associated with those good folks at the IRS whose goal in life is to not let you keep any of your own money. Just the idea of an IRS audit is enough to strike fear in the hearts of the most pure and innocent among us. But if the big meat behemoth Tyson gets its way, the word audit will become a permanent addition to the vocabulary of anyone who raises cattle for a living.
The Packer’s New Rules
With all the news about drought, the high price of corn, meat recalls and failed statewide initiatives to raise the beef checkoff to two dollars, one little tidbit of news flew under the radar of most ranchers. And yet, in the long run Tyson’s announcement that the nation’s largest corporate meatpacker would begin imposing its new FarmCheck™ audit program on its suppliers, could have far more serious and long-lasting implications than this year’s drouth and the cost of corn combined.
Tyson is the nation’s leading producer of meat and poultry, the second-largest food production company in the Fortune 500, and a company whose tentacles reach into more than 130 countries around the world. Tyson is estimated to control more than one-fourth of the nearly 85% of the nation’s steer and heifer slaughter controlled by only four mega-corporations. So their announcement on October 12, 2012 that it is launching a program to audit the treatment of animals at the livestock and poultry farms that supply the company was a very big deal that promises to send shockwaves throughout the industry.
Tyson calls its new program FarmCheck™ and the company has already begun by auditing some of the 3,000 independent hog farms that supply the company. Auditors are visiting the farms to check on such things as animal access to food and water, as well as proper “human-animal interaction” and worker training.
Says Tyson’s CEO, Donnie Smith, “We believe the farmers who supply us are the best in the world, and I think the audits will verify this. But, if we find problems, we want them fixed right away. These audits will give us a chance to correct any minor problems that are discovered and, if necessary, to stop doing business with any farms where animal treatment or conditions do not meet our standards.”
Here’s the part that should concern anyone who raises cattle for a living: The FarmCheck™ program, which has been under development since early spring 2012, will be expanded to include cattle ranches by January 2014. That’s one year until auditors start descending on your ranches to see if you are playing by the packer’s new rules, that are yet to be established.
Stop and think for a minute… since the cattle business currently operates under a different industry structure than the pork and poultry industries (we still have competitive bidding) Tyson really has only two ways of accomplishing their goals for FarmCheck™. One option is that by the time they plan to roll out the program for beef they will have changed the complexion of the beef industry so that they will have enough contract producers under their thumb to audit and supply their needs.
Here’s the rub: as a rancher, how do you or anyone else know when you put the bull in with the cows who will buy your calves? The only way you’ll know for sure is if you become a contract supplier to feeders who supply cattle to a specific packer. In such a scenario the beef industry would look like the poultry and swine industries where producers sign 24 page contracts and field men check on their contractors to make sure they are playing by the packer’s rule book.
If you want to sell your cattle to Tyson, FarmCheck™ means that you will either become a contract producer or, since you don’t know who will buy your calves or stockers, you will probably sign up with a third party auditor because in such a concentrated market you cannot alienate even a single buyer, especially the biggest meat processor in the country. "In many regional cattle markets where U.S. cattle feeders have only Tyson and one other buyer for their cattle,” says Bill Bullard of R CALF, “those cattle feeders will be forced to capitulate to Tyson’s command-and-control FarmCheck™ audit program or face the consequences of having only one remaining buyer and no competition for their cattle.”
If Tyson doesn’t have us all turned into serfs on our own land in 12 months Tyson’s other option in forcing FarmCheck™ down our throats is to rely on third party auditors to check on all potential suppliers, just as several independent companies and breed associations are now documenting the source and age of cattle. The big difference is that currently ranchers receive premiums for such cattle and we’ve heard no talk of such premiums paid for “humanely raised” animals. Then there is this: we currently are unaware of any third party auditors checking on the welfare of cattle on ranches. Nor do we know if a very large group of ranchers would be open to such checks. There’s a big difference in asking ranchers to put up with audits that they won’t be compensated for, versus a contractual obligation where you do it, or else.
Tyson is so used to dealing with captive hog and chicken producers that they must think they can inflict their will on beef producers as well. And perhaps they can.
All For Free
Tyson indicated in their big press release that they would tend to prefer third parties performing these audits. Of course they would, that way they won’t have to pay for them. The only part the packers didn’t like about age and source verification initially was that occasionally they had to pay a premium for it, and they are used to getting everything for free. For example, a lot of their research is being paid for by the buck-a-head checkoff that is paid every time an animal changes hands, except when the packer buys them. They don’t pay, of course. Now they want this proprietary animal handling information for free as well.
“Where else but in a monopoly controlled market can a corporation infringe on the private property rights of independent farmers and ranchers to extract valuable marketing information without having to pay a dime?" asks R-CALF USA CEO Bill Bullard. "FarmCheck™" audit program will enable the mega-corporation to add valuable marketing information to its meat products sold to consumers – Tyson will use its unilateral power to audit operations on private farms and ranches and oversee everything from breeding to harvest.”
Bullard says Tyson’s new program “is nothing but a means by which the mega-corporation can exert its muscle to violate the privacy of hardworking, independent family farm and ranch cattle producers; extract from those independent family cattle producers valuable marketing information at no cost; and then charge consumers a premium price for the information it has extracted for free.
"If Tyson wants this valuable marketing information, it should offer a premium to family farmers and ranchers who wish to participate. But, Tyson knows it possesses monopolistic power in the U.S. cattle market and it is brazenly exercising its monopolistic power to exploit independent U.S. family farmers and ranchers.”
The New Guy At Your Roundup
One theory as to how FarmCheck™ might work is that the same companies who are performing age and source, or other new companies that might spring up, might send a representative to your shipping or branding with a clipboard and a scorecard that reads like this: No hot iron branding: check. Calves were not roped and thrown to the ground: check. When male calves were castrated they were anesthetized first: check. No prods, paddles and especially hot shots: check. Facilities designed by Temple Grandin: check. Cowboys have had annual sensitivity training on how to treat livestock in a more caring and compassionate manner: check. Any horses used in gathering the cattle were given adequate rest breaks: check. No spurs, quirts or ropes: check. And so forth. These audits will be limited only by the imagination of the animal rightists.
And who will be paying for all this?
Silly you. What a stupid question. You will be paying, of course, including the cost of the audit.
As a result the beef will taste no better, but it will cost a lot more because the packer will charge a premium for meat from “humanely raised animals” that are no different than they are now. This increase in price will reduce beef consumption even more. The animal’s lives will hardly be enhanced over what they are presently, you’ll have to completely remodel you’re way of doing business, you’ll be buried in paperwork and the bank accounts of the auditors and the packers will be greatly enhanced.
Much to their chagrin, thus far Tyson has been unable to transform the beef industry into one that resembles the pig and poultry industries, although they have tried. Despite all the public relations talk about the welfare of animals, make no mistake, this program is more about locking up contract producers than it is the animals getting clean water and cowboys who are kind and courteous. They couldn’t turn you into a contract producer the way they did it with hogs and chickens because auction markets and video markets allowed you to sell your calves in a competitive fashion. So now they’ll attempt to use all the current excitement over the consumers’ interest in how her food was produced to turn you into one of their own. And if this works you can expect Cargill and JBS to unleash their own pack of auditors.
Tyson also announced that they will develop a Farm Animal Well-Being Research Program that will “lead to improvement in animal raising methods”. Tyson indicated that Dr. Temple Grandin is heavily involved in the development and implementation of this program and stated that, “This program makes it very clear that mistreatment of farm animals will not be tolerated.”
Walmart has already climbed on the bandwagon and has said that Tyson’s FarmCheck™ program is in line with their commitment to ethical food sourcing.
The FarmCheck™ program will be overseen by a new, external, Animal Well-Being Advisory Committee that Tyson Foods is establishing that is expected to begin its work in March 2013. “Those selected to serve will include people with expertise in farm animal behavior, health, production and ethics,” according to Tyson.
We wouldn’t be surprised one bit to see the Humane Society land a seat on this advisory committee. After all, what’s the best way to keep them from videotaping your operations and hounding you? Why, of course, put them on your board, or advisory group, and pay them off. The Humane Society of the United States has already said that Tyson’s new program does not go far enough, even though we don’t know how they know that because the standards haven’t even been announced yet. In our view, the HSUS is just angling their way in for a piece of the prize. We wouldn’t even be surprised to see the Humane Society get into the potentially rewarding auditing game. A far fetched idea? Just watch. We also wouldn’t be surprised to see Tyson adopt a HSUS approved stamp of approval with Temple Grandin’s name or likeness on it, and they’ll charge plenty for it. After all, we already know that HSUS is more about making money than it is animal welfare, otherwise they’d be spending more of their millions on animal shelters than they do on lawyers.
“Audits are valuable if farm inspectors ask the right set of questions,” says Wayne Pacelle, CEO of the HSUS. And who better to come up with those questions than the Humane Society? For a fee, of course.
Tyson said its announcement was not a response to any release or announcement from any animal welfare groups and if you believe that you might be just the type of gullible person to sign up as a Tyson contract producer. But here’s the point no one is bringing up: Of all the videos shot recently exposing inhumane practices towards animals, to the best of our knowledge these have mostly happened in packing plants, and at dairies and auction markets that sell dairy cattle. Perhaps I am ill-informed but I cannot think of a single instance where videographers, working for the Humane Society or anyone else, have documented on film inhumane practices on cow ranches. And yet the packers will use this excuse as a reason to turn you into a contract producer and audit your operation with unannounced visits.
The fairness of FarmCheck™ will become painfully obvious as time goes by. For example, will Tyson demand the same audit of the cattle producers around the world who are raising cattle to supply the beef that the packers ship into this country? Don’t be silly. Of course not. Will they be checking on South American gauchos and Australian graziers to see if they are kindhearted to animals? If so, how. If not, why not? This is nothing more than a solution in search of a problem that has “ulterior motive” written all over it.
No wonder the word “audit” strikes fear in the hearts of anyone who hears it.