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CattleNetwork.com – Friday – September 29, 2006 – 10:49 a.m. CDT

Jolley:  Five Minutes With The Beef Checkoff Task Force

Eighteen cattle industry representatives, all good and true, met in Kansas City over the summer to discuss the future of the Checkoff program and how its work might be improved.  It was a summer filled with wrangling and research, caution and concern, and an eye toward an uncertain future. 

The result was four recommendations that must now be taken back to each organization’s home constituents and presented in excruciating detail before any of them can be accepted or rejected.  As with any program of this magnitude, the politics, perceptions and hoped for impact behind each of the suggestions will determine their future.

The Task Force ceased to exist after a press conference in mid-September.  The questions created by the recommendations will go on until resolutions are reached, something that could stretch well into 2008.  To help shed some light on the thought process behind the recommendations, I’m going to spend the next 4 weeks asking members to share their viewpoints.

I’ll take the recommendations one at a time and try to get as many members involved as possible.  To be sure, I might not be able to contact all of them and a few might not feel comfortable answering the questions.  The effort will be made in good faith, however, and I’m issuing an open invitation to all the Task Force members to “confirm, clarify or question” any comment made throughout this series of columns.

The most controversial recommendation made by the Beef Checkoff Task Force was doubling the contribution to $2.00 per head.  In an 11 to 4 vote, they asked for the first increase since the beginning of the program over 20 years ago.  A survey of the members of the Beef Checkoff Task Force shows a consensus of opinion that an increase in checkoff dollars is necessary.  Even those that voted against the proposal agree that more dollars are needed.

The problem seems to be procedural.  A timing issue.  Recognition by some that the current political situation isn’t right for an increase. 

To be fair, I posed the same set of questions to task force members representing four organization – two that voted “no” and two that voted in favor of the proposal.  People representing three organizations – the National Livestock Producers Association, R-CALF and the NCBA – responded.  Their comments were all carefully and thoughtfully composed and accurately reflect the position of each person involved.  Whether you agree with them or not, their opinions are published below exactly as they were offered.

The National Livestock Producers Association 

One of the four “no” votes came from The National Livestock Producers Association.  NLPA CEO, Scott Stuart and Chairman, Jack Hanson who also served on the Task Force, assured me that the organization respects and understands a ‘critical need’ for more marketing dollars.  During our phone conversation, the two gentlemen offered as proof an emailed copy of this NLPA memo Hanson sent to members of the Task Force:

“Subsequent to our final Task Force meeting and my initial statement articulating the National Livestock Producers Association's (NLPA's) position on the Task Force and the Beef Checkoff, I have detected some confusion within the industry about our position.  There should be no misunderstanding, NLPA remains in strong support of the Beef Checkoff, the state beef councils, the Federation of State Beef Councils and the critical need to increase the financial resources available to the checkoff.”

“Our concern centers around our feeling that there does not exist, at this time, sufficient support "in the country" to successfully carry a referendum in support of an increase in the amount of the checkoff.  It remains our position that there should be simple but substantive changes in the current structure of the checkoff procedures and management which would increase the chance for success in implementing the enhancements and, more importantly, increase the stakeholders’ support of the program.  Simply stated, the autonomy of the checkoff program, the Cattlemen's Beef Board and the Federation of State Beef Councils is critical, and there should be immediate changes implemented to strengthen this autonomy.  Whether it is perception or reality, the existing fire walls are not adequate. “

“Again, I would like to thank our co-chairs.  It was a pleasure working with all of you.  If any of you have any questions or comments on NLPA's position, please do not hesitate to contact me.”

That should take care of any doubt about the association’s position.  But what about their “No” vote?

“We think the timing is premature,” said Hanson who is also uncomfortable with the perception that the NCBA and the Cattlemen’s Beef Board are too closely tied.  Stuart agreed saying, “We represent the livestock marketing industry and during the early part of August Jack talked with the Board of Directors and almost to a man they had the same feeling.  The timing is just not right for this.”

“To be accepted, we need substantial support,” Stuart continued, “and not just a simple majority.  The Supreme Court just ruled on constitutionality of the checkoff.  Let’s not drive it down the producers’ throat right away.”

Dismissing the absolute urgency of increasing the checkoff dollars, Hanson pointed out that we should look at the whole picture.  “You’ve got a 20 year old dollar there and it’s not going to be as effective.  But if you look at the total amount of dollars spent on beef promotion in this country – on branded beef products, for instance – it’s huge.” 

When asked about the outcome of the vote and how those who might have more or less of an iron in the fire sided with the issue, Stuart said, “You’ve got to look at the composition of that task force.  We were invited to participate, we wanted to be involved.  But we were concerned about the composition of the task force, too.  Was it truly representative of all the groups that needed to be at the table?” he asked.

Looking at the make up of the committee, there were 18 organizations represented including the NCBA, their Livestock Marketing Council, Farm Bureau and six state affiliates of NCBA.  When it came time to vote, there were 9 closely aligned groups sitting around the same camp fire.  Add two packer votes – they don’t make contributions to the checkoff fund unless they own an animal for a minimum of 10 days - and a vote of at least 11-4 on anything is almost assured.  It’s a voting bloc as solid as the old Dixie democrats of the early 1900’s.

R-CALF

Jim Hanna, R-CALF USA Checkoff Committee Chair, responded via email to the same questions about that organization’s “no” vote on the suggestion.

Mr. Hanna, after careful consideration, your organization voted against the suggested increase in the beef checkoff program which proposes to take it from the current $1 to $2.  Would you talk me through the process that led to the decision?

It was fairly simple.  Our membership overwhelmingly passed resolutions that directed us to address several issues concerning the Beef Checkoff.  Increasing the assessment was not among those approved resolutions.  Until we are satisfied that our concerns are given serious consideration, and included in any proposed changes to the Act and Order, R-CALF cannot and will not support any increase.  This issue will be readdressed at our next annual meeting, and our position will be based on member input.

Those who voted for it are convinced an increase is long overdue and the extra money is needed to continue the promotional efforts at the same high level as in the past --- especially in light of the much higher contribution packers are making to an Australian checkoff program.  Do you think an increase, however modest, might be necessary to remain competitive?

The much advertised Australian checkoff is a one time payment, equal to about $3.75 US. 

In the states, most cattle are subject to multiple assessments.  From a calf sale, to backgrounder, to a stocker, to a feedlot, to a packer would constitute $4.00 being generated for our Checkoff program.  The competitiveness of our beef is dependent on a number of important factors, many of which need to be addressed.  I would submit that a Mandatory COOL program, reasonable trade programs and adherence to global health and sanitary standards, would be far more beneficial to cattle producers than would an increase.

My editorial comment that those with more of an iron in the fire voted no and those with not as much at stake voted yes drew considerable fire.  Was it a justifiable observation?

To answer the question, Hanna chose to pick up Tracy Brunner’s response to my September 12 editorial (click here to see it and here to see Tracy Brunner’s response) and offer a point/counterpoint reply.  It’s an interesting “debate-in-print” that accurately reflects the differences of opinion that exists among the task force members.

Brunner is a past chairman of the Kansas Beef Council and a member of the Task Force.  His comments are published below followed by the opinions expressed by Hanna.

Brunner: Your editorial also mentioned that the taskforce recommendation of increasing the assessment rate to $2.00 was “staggering.”  I would guess that cattlemen who have been working hard to increase their beef quality while paying the increased costs of doing business for the past 20 years are not nearly as shocked as your exaggerated comments would suggest.

Hanna: I submit that there are a huge number of producers that will not accept a 100% increase in their Checkoff.  When put to a vote, Tracy may be the one who is shocked at the outcome.

Brunner: All representatives strongly agreed the 20% beef demand increase we have seen in recent years is a function of the beef producers’ investment in research and promotional programs.  To build on that demand increase for our premium protein is the only sound business decision possible.

Hanna: Not all representatives agreed that there was a distinct correlation between the Checkoff and increased demand.  The evidence is sketchy at best.  There have been a number of other factors (e.g., high protein diets and tighter supplies) that have been critical in increasing demand.  It is rather convenient that the demand upswing we see on their charts coincidently coincides with the NCA-Beef Board-Federation merger.

Brunner: Some reasonable debate took place on how to make the highly successful system we have today more understandable to beef producers paying the checkoff.  Increased visibility of the producer-controlled state beef councils (SBCs) and the national federation of SBCs was recommended by the task force.  Continued producer control and maintaining the strong checks and balances of the present system were priorities of the task force representatives.

Hanna: Simply insinuating that the uninformed masses in the cattle business will be swayed by more of the same rhetoric is a totally unrealistic expectation.  Cattle producers don’t want to see name changes and more propaganda.  They expect real, substantial changes in the relationship between NCBA, the Cattlemen’s Beef Board (CBB), and the Federation.

Brunner: A statement in your editorial contains the gross misperception that some had more at stake than others in the discussion.  I take exception to that.  Each representative was charged with working for the good of the entire beef industry.  How those representatives perceived the “best interest” of the industry likely was reflective of the organization they were asked to represent.  Everyone there had an iron in the fire, and although processors and livestock market operators are collection points, not checkoff payers, their input was heard too.

Hanna: This “industry” is multi-faceted regardless of how some are trying to spin the “one industry” idea.  In this instance, the organizations that represented only the Checkoff payers had certainly a differing viewpoint from those who represented Checkoff spenders.  Whether one or the other has a greater ‘stake’ could be debated. However, one thing is for certain, the stakes are enormous for the Checkoff spenders.

Brunner: Also, the editorial suggestion that producers are pitted against processors on the Checkoff misses the mark.  Checkoff research that brings enhanced beef safety technology to the production system or retail and foodservice partnerships that leverage producers’ promotional dollars funnel right back to strong cattle prices.  According to research conducted by Ron Ward at the University of Florida, an additional producer investment of $1 per head would return $1.7 billion in live cattle returns to our industry.  No one should want to leave that on the table.

Hanna: Dr. Ward’s research was, in my humble opinion, questionable at best.  If X dollars are perceived as producing X returns, then simply, 2X dollars should produce some increase in returns.  I am not sure where the $1.7 billion will come from.  That was not addressed. It was just a simple extrapolation of numbers.

Brunner: To the casual observer, all family discussions look heated and juicy.  The mainstream beef industry is more committed and focused than at any time in history.  Surely it is possible to compose interesting commentary that is balanced and avoids insulting the very industry that reads those columns.

Hanna: Apparently, R-CALF, LMA, NLPA and NFU are not part of the “mainstream” family.  Again, like it or not, this industry, even the cattle-production component, has differing viewpoints on what is best.  Certainly the first cost, cow/calf producer has a different opinion about what is best for his business versus those of a margin operator or a vertically integrated operation.

The National Cattlemen’s Beef Association

Responding on behalf of the National Cattlemen’s Beef Association are Jamie Willrett and Mike John.  Willrett served as co-chair of the Checkoff Task Force and as NCBA’s Task Force representative.  He is a cattleman from Malta, IL and a vice-chairman of NCBA’s Live Cattle Marketing Committee.  He’s also a past chairman of the beef industry’s Joint International Markets Committee.  Mike John, a cattleman from Huntsville, Mo., is the current NCBA president and a former chairman of the Missouri Beef Industry Council. 

Both gentlemen responded by email to the same set of questions posed to the others. 

Their comments, however, were primarily confined to the first question which is aimed at the heart of the issue.

After careful consideration, your organization voted to back the suggested increase in the beef checkoff program, taking it from the current $1 to $2.  Would you talk me through the process that led to the decision and what you hope the additional monies will be able to fund?

Jamie: First, I want to clarify that the Task Force was charged with determining what improvements or enhancements are needed for the Beef Checkoff Program to best serve cattle producers.  Our goal was to deliver these recommendations to the industry for consideration.  Before offering these recommendations, we evaluated a lot of information about the checkoff: the processes, its effectiveness, the power of our dollar today versus 20 years ago, and how the global competitive environment has changed.  I feel the proposal to increase the checkoff was made after due consideration, but it’s not my job to say whether or not NCBA will support the increase.  Only NCBA’s full membership can do that.

Mike: That’s correct. NCBA appreciates the expertise and hard work of the Task Force participants.  Now the Task Force’s recommendations are in the hands of cattle producers.  In NCBA’s case, we have a member-driven process in which we will take up each proposal at the Cattle Industry Annual Convention in February.  Members not attending the convention will also have the opportunity to vote by mail-in ballot.

Jamie: Also keep in mind that the role of the Task Force was not really to speculate on what was feasible or “passable” at this time.  We certainly tried to make the recommendations realistic and reasonable.  But our charge was to determine what was needed in order to keep beef demand growing and keep the U.S. beef industry as competitive as possible in the global marketplace.  We considered many factors that have impacted the checkoff over 20 years, and what it will face over the next 20 years; such as inflation, increased competition from poultry and other proteins, and the marketing efforts of other beef-exporting nations.  We also considered the growth in beef demand, and its impact on producer profitability. 

Cattle-Fax reports feedlot returns increased almost $10/cwt in the past five years, while cow/calf returns have increased almost $20/cwt in the same time period.  Dr. Ronald Ward, an economist from the University of Florida, predicts based on historical data that live weight revenues could increase $32/head with a $1 increase in the checkoff.  That’s more than a 30-fold return on the producers’ checkoff investment.  These factors led us to the conclusion that a $1 increase was justified, and in the best interests of the industry.

Mike: And those will also be very important considerations when our membership takes up the question of whether NCBA policy will support the checkoff increase.  But anyone that thinks this is a foregone conclusion simply does not understand how NCBA’s policy process works.  It begins with a member, and it ends with a member.  Any member who supports or opposes an increase in the checkoff can bring a resolution forward – either at convention, or at the state or local affiliate level. 

Frankly, this is the kind of issue that I think deserves a lot of debate, and I know NCBA’s producer-driven process - from county to state to national policy - will ensure a thorough discussion of all points of view.  Some organizations create policy from the top down, to gain attention and publicity.  But NCBA is interested in results – in getting things done for cattlemen.  It’s a time-tested, member-driven process that begins and ends with cattlemen.  I can’t tell you what NCBA policy will be in the end, because our members will make that call.

Jamie: As for how the additional monies would be spent, that’s a question that is really beyond the purview of the Task Force.  Obviously, the majority of the Task Force feels that the Cattlemen’s Beef Board and state beef councils are spending the money wisely and effectively, or we would not have proposed an increase in the assessment level.  I think we all envision that an increase in the checkoff would allow more good work to be done to build beef demand and global competitiveness through programs such advertising and promotion, new product development, international marketing, research and consumer education.  These are examples of the programs that have helped increase beef demand by more than 20 percent in the last eight years.  But inflation and other factors have stretched the checkoff dollars very thin.  This threatens the effectiveness of any program, no matter how well it is run.

Mike: I agree with Jamie. Specific spending priorities will always be determined by producers through the Beef Board and state beef councils, just as the law prescribes.  But increased revenue would allow these industry representatives to consider more aggressive proposals, and hopefully from more eligible organizations.  I think you would certainly see the industry build on many of the programs that have a successful track record.

Jamie: As a past chairman of the industry’s International Markets Committee, I have seen first-hand the challenges we face relative to our competitors.  Australia’s checkoff assessment is now $5 per head, which - in American dollars - is nearly four times as high as our checkoff.  That’s just one example of how the beef industry changes over time, and how we need to provide the U.S. industry with the tools it needs to respond.

Mike: We also see changes in consumer tastes and expectations, and the industry must respond in that area as well.  With the help of the checkoff, we have made huge strides in beef safety and nutrition.  But this work is never finished.  On the contrary, consumers always want products that are safer and healthier, but also meet their needs in terms of flavor and convenience.  If the beef industry doesn’t have the tools and resources to keep up with those expectations, someone else will. 

The conclusion if you’re in the cattle business, you’ve got an iron in this fire and most likely a vote somewhere.  Read the points made by each of the gentlemen, get in touch with the organization of your choice and make your opinion known.  When the smoke clears, the only thing that really counts is the effect on your bank account.

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                            This page was last updated on Wednesday, October 12, 2011.