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Oklahoma-Specific Cattle Industry Information Billings, Mont. (June 24, 2008) – In a six-page letter, along with 19 exhibits, sent to Oklahoma Attorney General W.A. Drew Edmondson, R-CALF USA Oklahoma Membership Chair Wayne Foley provided concrete and specific evidence to show the negative and significant impacts upon the Oklahoma cattle industry should the JBS merger be approved. JBS wants to purchase National Beef Packing Co., Smithfield Beef Group and Five Rivers Ranch Cattle Feeding – the largest feedlot corporation in the United States. The proposed acquisitions currently are under review by the U.S. Department of Justice. “While there are cattle feeders in Oklahoma that could feed cattle efficiently, they have limited outlets for marketing their cattle once they are slaughter-ready, so the lack of access to the market for Oklahoma cattle feeders is a barrier to the future growth of Oklahoma’s cattle industry, and the additional concentration that would occur with the JBS merger certainly would worsen the present situation,” Foley pointed out. Data from the U.S. Department of Agriculture’s (USDA’s) National Agricultural Statistics Service (NASS) show that in 1998, Oklahoma feed 928,000 head of cattle, yet in 2007, only 714,000 slaughter-ready cattle were marketed from Oklahoma feedlots with one-time capacities of greater than 1,000 head. This means that fewer than 37 percent of the cattle born annually in Oklahoma are actually fed in Oklahoma. The remaining 63 percent of cattle born in Oklahoma are either retained as replacement heifers and bulls, or sold to out-of-state feeders. The price paid in Oklahoma for Oklahoma feeder cattle is based on the expected future price of slaughter-ready steers and heifers in the Plains Region where most of the feedlots are concentrated. “If the expected price for slaughter-ready steers and heifers is reduced due to a lessening of competition or increased exercise of market power, then prices paid for feeder cattle in Oklahoma will likewise be reduced, along with an additional reduction for transportation costs, which have increased significantly,” Foley explained. “Based on 2007 data, the average price of Oklahoma calves (feeder cattle) is less than in states with significant slaughtering plants.” A USDA-developed chart, included in materials sent to Edmondson, depicts the number of slaughter-ready cattle sold in Texas, Oklahoma and New Mexico under cash arrangements (cash and negotiated grid) versus the number sold under contract (formula and forward contracts). “This chart shows a precipitous drop in the volume of cash cattle procurements (15.2 percent) since 2005, and a corresponding and significant increase in the volume of non-cash procurements, otherwise known as captive supplies, as they enable meatpackers to avoid the cash market where the base cattle price for all procurements transactions is established,” said Foley. “The chart shows that in the beginning of 2006, the meatpackers controlled more cattle through captive supply arrangements than they purchased in the cash market, and that the volume they control has increased each year since.” Also included in the materials sent to Edmondson is a review, in an easy-to-read map form, of the effects of declining competition on cattle prices between 1987 and 2007 (Exhibit 18), which show that the national cattle market is disappearing and suggest that the blue states – those that receive below-the-average national cattle price – are increasing in number because there are fewer significant buyers and thus, below average prices. “The reduced competition and increased exercise of buying power that’s already occurred in the entire U.S. cattle industry due to the exceedingly concentrated U.S. meatpacking industry has impacted the cost of transportation to bring Oklahoma cattle to slaughter,” Foley continued. “Oklahoma’s distance from the remaining U.S. meatpackers causes a magnification of the systemic problem caused by reduced competition, but these price differences cannot be fully explained by transportation costs alone.” Instead, Foley said, the data suggest that, like what happened in the hog industry, the profitability of the production sector of the cattle industry is becoming concentrated around the concentrated meatpackers. As this concentration level increases, as would occur under the JBS merger, Oklahoma cattle prices likely will become even less competitive, further harming Oklahoma’s overall economy. R-CALF USA suggested to Edmondson that perhaps the auctions yards, video auctions and other commission firms there would need to be surveyed to accurately determine the reduction in competition that will occur in the Oklahoma feeder cattle market if the JBS merger is approved. “We are requesting that Attorney General Edmondson, along with attorneys general from around the country – especially cattle-producing states – join together and use their authority to formally challenge the JBS merger,” Foley emphasized. “When prices for slaughter-ready cattle are reduced, feedlots will necessarily reduce the price they pay for feeder cattle, which are the primary class of cattle sold by Oklahoma producers. We hope Attorney General Edmondson will take the lead by stepping forward to protect Oklahoma’s cattle industry against the JBS merger.” As of 2007, Oklahoma had the third largest number of cattle operations in the U.S., with 55,000 cattle operations, third only behind Texas and Missouri. These operations have 5.25 million head of cattle, both beef and dairy, and 2.08 million of these cattle are mother cows that birthed calves during the year. Oklahoma retained 420,000 of these calves as replacements to replace its aging mother cow herd. The state’s calf crop was 1.95 million head, and 980,000 cattle from out-of-state were shipped into Oklahoma for feeding or breeding. Oklahoma marketed 2.52 million cattle and calves during 2007, and annual cash receipts from the 2.52 million cattle and calves marketed in Oklahoma were $2.47 billion. Note: To view the letter to Edmondson and the exhibits that go along with it, visit the “Competition Issues” link at www.r-calfusa.com. # # # R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is a national, non-profit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA represents thousands of U.S. cattle producers on trade and marketing issues. Members are located across 47 states and are primarily cow/calf operators, cattle backgrounders, and/or feedlot owners. R-CALF USA has dozens of affiliate organizations and various main-street businesses are associate members. For more information, visit www.r-calfusa.com or, call 406-252-2516. |
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This page was last updated on Wednesday, December 24, 2008. |
