Tri-State Livestock News: Markets gone mad
Amanda Radke
for Tri-State Livestock News
November 16, 2016 |
Bill Bullard speaks to a full house at Platte Livestock Auction Market while Herman Schumacher and Kim Ulmer look on. Photo by Amanda Radke
Concerned ranchers had the opportunity to gather at six livestock auction yards on Nov. 10-15 to discuss the current cattle price collapse and listen to R-CALF USA’s proposed steps that need to be taken in order to turn the markets around.
“I don’t think there’s an industry anywhere in the world that has taken such a beating,” said Herman Schumacher, local cattle feeder and R-CALF USA co-founder at the Platte, South Dakota meeting in Platte Livesock Auction.
Schumacher, along with the South Dakota Stockgrowers Association (SDSGA) and the Independent Beef Association of North Dakota (I-BAND) organized and hosted the meetings, which took place in Aberdeen, Platte, Huron, Fort Pierre, Herried and Mandan.
Schumacher, along with R-CALF CEO Bill Bullard, SDSGA President Bill Kluck, and Kim Ulmer, representing Livestock-R-Us and Huron Continental Marketing, addressed the market issues head on and offered a plan of action to take to Washington, D.C.
“Regardless of how this election turned out, the issue within the cattle industry transcends politics,” said Bullard. With this new administration, we literally start with a clean state. We have to ask ourselves, who is it you want representing your interest in Washington, D.C.?”
Bullard presented a plan to “make the U.S. cattle industry great again,” and in order to achieve that goal, he says R-CALF is working on a few different avenues.
“Four out of every ten beef producers who were here 30 years ago are gone today,” said Bullard. “Something has gone terribly wrong, and you saw your cattle prices fall farther and faster than any other industry today. That’s not an industry in a progressive state. That’s an industry in decline, and that’s your industry. It’s on a trajectory to decline unless you do something different than what we have done in the last 20 years.”
First, Bullard called to restore and preserve competition through the implementation of the Grain Inspection, Packers and Stockyards Administration (GIPSA) rule, which he says will stop the four largest meat packers, who purchase 85 percent of the cattle in this country, from exhibiting anti-competitive behavior and granting “undue preferences and advantages” in the marketplace.
“You [producers] are the red bullseye on the multinational meat packer target,” warned Bullard. “You’re the last one to be controlled from egg-to-plate or birth-to-plate. They want to vertically integrate your industry. They want to control prices on the supply chain. They aren’t trying to take your cow-calf or backgrounding operations away; they want to control the feeding segments of your industry — the holy grail upon which the entire industry is linked. We are sitting silent as we witness the decline of the number of feedlots in this country. If we let them go, we won’t bring them back.”
Bullard argued that packers have exhibited anti-competitive behaviors for years and because the major packers don’t just process beef, but pork and poultry, too, they are motivated to keep beef prices high at the retail level to help them move the oversupply of other proteins they have on hand.
“They say ‘cooperating,’ but we say ‘colluding,’” said Bullard, in explaining how packers switch between cooperating and competing depending on whether short-term cattle supplies are tight or plentiful.
In addition to supporting the GIPSA rule and addressing a lack of antitrust enforcement, Bullard encouraged producers to push their elected officials on country-of-origin labeling (COOL) and close the WTO-exploited loopholes with new legislation.
In his one-hour message, Bullard stressed, “We must restore mandatory COOL that reserves the USA label only for beef that is born, raised and slaughtered in the U.S.”
Bullard held a captive audience as he explained why beneficial trade, and not just any trade, is important. He says the beef industry needs trade that has livestock disease import restrictions, economic realities, global governance and deals that protect the nation’s sovereignty.
He rounded out the evening by explaining how price manipulation in the cattle markets is the cause of the collapse in cattle prices.
“The meat packers are destroying the cash discovery market,” said Bullard, as he called for new regulations to ban packer ownership of livestock. “They act as gatekeepers. They decide who does and who does not have timely access to the marketplace. Meat packers are forcing cattle out of the cash market and into the formula market.
We must pass legislation to stop the big four from using captive supply cattle to capture control of the live cattle supply chain. (New regulation to ban packer ownership)
Ulmer reiterated Bullard’s thoughts with findings of his own.
“Livestock producers have experienced over a $500 market increase in 2014 and over a $500 decrease in valuation in 2015,” said Ulmer. “Beef sales at the retail counter are well over $2 per pound higher than last year, but live cattle sales are lower? Why is this happening? I believe it is due to the changes that have been made in the CME trading rule book and trading procedures.”
Ulmer explained how the CME took out the delivery of feeder cattle requirements in the mid-1980s; since then, trading amount limits have expanded. Without volume limits, there are more livestock trades than what is actually produced.
“Traders can trade feeder cattle for about 3 percent of actual cost, which gives them an unfair advantage when based on a no asset, delivery format, as it is, it’s only a money exchange format,” he said. “The latest report showed 714 stockholders with $29 billion plus in assets that control the CME, and they are self-regulated. They think they have the right to write the rule book on how to deliver live cattle, and the power they hold over 700,000 livestock producers is unbelievable.”
Ulmer warned that with market manipulation, he sees the cattle industry losing producers in droves, much like the hog industry.
“We can’t sit by and watch them push out more and more beef producers until this industry is just a big corporation,” said Ulmer.
Ulmer is traveling the country urging producers to speak out about their concerns regarding CME trade. He has put together a survey, and with 13 more stops to make this month, he hopes to take a stack of completed surveys back to Washington, D.C., to show to the congressional ag committees.
“If producers would like to fill out the CME Trade Survey, they can contact the office at Huron Continental Marketing at 605-352-8682 or hcmlivestockrus, and we’ll mail you a survey to complete,” he said. “We’re getting responses from all over the nation with folks telling us that the CME feeder and live cattle futures are no longer considered to be a risk management tool. I believe the survey results will help bring change to protect producers and the future of our industry.”
The evening ended with a Q&A session where producers voiced their concerns and discussed what needs to happen in Washington, D.C. to restore and protect the beef cattle industry. The sale barn was full, the mood was somber, but R-CALF USA hopes the end result is positive action for ranchers across the country.
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