Did you hear the one about the lawyer, the used-car salesman and the packer onboard an airplane headed for a crash landing with only one parachute? Which one should get to use the parachute? Answer: who cares?
Actually, a lot of cattle producers would call that joke an insult to lawyers and used-car salesmen. It’s gotten that bad for packers. And each week, it seems, things get worse. Profit margins on most cattle slaughtered this year have been written with red ink, yet packers are often criticized for not paying more for cattle. In fact, it seems like they’re criticized for almost everything that’s wrong with today’s beef industry.
Livestock producers and packers have a long-standing adversarial relationship. It’s worse than the Hatfields and the McCoys, and nearly as bad as the Yankees and the Red Sox. And that’s ironic, since the packers are your customers. Most businesses in America try to foster good relationships with their customers, yet many livestock producers seem to treat packers with the same respect they would show for Attila the Hun.
The latest volley in the anti-packer wars was launched late last month by Sen. Charles Grassley, R-Iowa, when he introduced legislation that would prohibit packer ownership, control and feeding of livestock for more than seven days prior to slaughter. The bill was co-sponsored by Sens. Mark Dayton, D-Minn.; Byron Dorgan, D-N.D.; Mike Enzi, R-Wyo.; Tom Harkin, D-Iowa; Tim Johnson, D-S.D.; Ken Salazar, D-Colo.; and John Thune, R-S.D.
Sen. Enzi also introduced his own bill, The Captive Supply Reform Act, which would prohibit and severely restrict the use of forward contracts in the livestock sector. The bill would amend the Packers and Stockyards Act to outlaw “formula price” and “forward contract,” as defined by the bill.
Renewing the debate over prohibiting packers to own and feed livestock comes as our industry is just beginning to realize the impact of keeping the Canadian border closed. Imports of live cattle and beef were halted after the Canadian announcement of a BSE discovery in May 2003. Last August, the United States reopened the border to boxed beef from animals under 30 months of age but continued to prohibit the importation of live animals.
The result has been that Canada’s packing industry is expanding — apparently at America’s expense. Canada may harvest 700,000 more cattle this year than last, which is more than the total fed cattle exported to the United States for slaughter prior to the border closing. Meanwhile, several American packing plants have significantly reduced their slaughter, and some are in danger of closing. The region most affected by reduced slaughter and possible plant closings is the West and Northwest.
The unintended consequences of prolonging the closed Canadian border to live cattle are that some American feedyards have fewer marketing options for their cattle. It also means that packing-plant jobs are being outsourced to Canada, which will have an economic impact on the main street of some communities in the West and Northwest.
Prohibiting packers from “owning” or “feeding” livestock would also have unintended consequences. The most obvious impact is that it would remove a tremendous amount of capital from our industry. There would be fewer buyers for feeder cattle and calves, and prices most surely would go down.
According to a recent Kansas State University study, lost exports due to BSE cost America’s beef industry $3.2 billion to $4.7 billion in 2004. Losses for American cattlemen will be much greater if we continue efforts to drive our customers out of business. It’s a crash for which there is no parachute.