Usual suspects blast factory livestock farms

Two cliches come to mind, when I consider the Pew Trust and Bloomberg School of Public Health study on factory farming of livestock, whose results were just released: 1. closing the barn door after the horse is already out, and 2. recycling old bromides that already have been disproven.

Factory farming, particularly in chickens and hogs, and the feedlot finishing of cattle, are a reality and aren't going anywhere any time soon. Where were these people back in the 1950s, when it was still possible to do something about it?

The fact is, the idyllic small family farmer with a few chickens and a pig or two out in the backyard, is a thing of the past. If you think the pollution is bad from a factory chicken or pig farm, where all the odor and runoff is concentrated and can be easily treated, is bad, what was it like when it was spread all over the place, in little drops and dribbles here and there, with too little volume for any sensible treatment program?

The world's food requirements can no longer be met by pre-1950s idealism, by small farmers turning out a few head of livestock a year, none of them uniform, none of them fed the same way or raised the same way. The vast quantities of food the world requires today, which will only grow as the decades unfold before us, cannot be met with outmoded, old-fashioned methods, no matter how fond we are of nostalgically hanging on to them.

For centuries, man has dumped manure on his fields each year before the new crop was planted, and the natural leaching of the soil broke down all the impurities and no one worried about pollution. It was a food cycle, in which animals ate plants, and their waste went back into the soil to raise more plants. It worked fine.

The idealism of those not intimately familiar with, or involved in, agriculture never ceases to amaze. It is great to sit on a high hill and contemplate how things ought to be. It is entirely a different thing to actually do--to be forced to make a living growing food for a hungry world, the most practical way that it can be accomplished, on a scale that meets the need at hand.

Once again, the academic and the practical have collided, with murky results at best.

Bush warns of coming Farm Bill storm

President Bush held a press conference today, to quite justifiably blast the Democratic Congress for doing nothing to head off a recession or jumpstart the economy. Not to be too cynical, but of course they aren't--the worse things get, the better chance they have for a big win in the November elections.

The president reserved special mention for the bloated "compromise" farm bill, which continues big subsidies to wealthy corporate farmers and carries a massive price tag. Ag Secretary Ed Schaefer also blasted the bill in meetings with congressmen and senators and their staff negotiators. The clear implication is that Bush will veto the bill, if it comes to his desk in its present form. It would have been a much stronger presentation if he'd actually said that, but he did leave the clear implication.

The real problem is that the only "compromise" in the bill is to add enough money to take care of the pet projects both the House and Senate ag committees want, without really changing anything in the way agriculture operates. Big corporate interests like Archer Daniels Midland have poured enough millions into congressional campaign coffers to insure that no real reform of the system will pass.

This should result in a farm bill veto, and possibly a look at what a real Farm Bill should contain. More likely, it will lead to an extension of the present law until after the November election.

In the overall scheme of things, the Farm Bill is a very minor player on the the Congressional and presidential agenda, and its brief moment in the sun today. There are much bigger fish to fry, as they dispatch this controversy by doing nothing.

Mark my words.

Packer ignorance astounding on beef shipments

Yet another shipment of U.S. beef has been rejected in Japan for containing bone fragments. The rules are very clear in shipping beef to Japan and South Korea. It is to be boneless, period. No wiggle room, no tolerance, no bones.

Since it is well known that Japan and South Korea politically love to kick sand in the face of the big United States of America, handing them the shovel is not a good idea. Nonetheless, it almost seems to be a game for U.S. packers, to see how much bone they can slip through Japanese and South Korean borders. These countries have shut down importing beef from the U.S. numerous times for bone fragments, but slovenly U.S. packers continue to get it wrong.

They have no one to blame but themselves.

The latest incident involved a shipment from National Packing's Brawley, California plant to Japan. Of course it touched off a big political stink, allowing Japan for once to show its great kindness and generosity (ha!) by only banning that plant from shipping beef to them, rather than shutting down the whole shebang.

It defies credulity that U.S. packers are unable to inspect the relatively minor amount of shipments from its plants that are going to these two countries, to be certain they are in perfect shape, before they leave the plant. There should be U.S. government inspectors to look at them one more time at the dock on the west coast before they leave this country, to be absolutely certain that the meat is truly boneless. Government always screws up, so its lack of diligence is par for the course, but private firms that derive great income and prestige from exporting U.S. beef have no excuse.

It is astounding that U.S. packers are not able to pull their act together. U.S. beef producers, and American citizens as well, should demand better.

Arby's buys Wendy's--neutral for beef

The fast food biz is all agog about Tri-Arc Corp., owners of Arby's, buying Wendy's in an all stock deal. Wendy's has been on a steady downward slide ever since the death of founder Dave Thomas a few years ago. His daughters and early franchisees made a competing bid for the company, but the board of directors chose to sell to corporate raider Nelson Peltz and his firm.

Both companies are major purveyors of beef. Since 80% of the beef sold in America is ground, what happens in the fast food segment is always very important to the beef industry. I've always been critical of Arby's for bastardizing good roast beef. I remember the early days of the chain, when they sliced beef right off roasts to the bun. It was great. I couldn't get enough. Some 30 years ago, they went to plywood beef, pasting together little snippets of beef with gelatin into "roasts" and slicing that.

The flavor and texture have never been the same, so I eat turkey or ham when I go to Arby's. Wendy's, like most of the fast food chains, have quit cooking burgers on the grill and serving them hot off the grill onto the bun. Now they are cooked once a day, kept warm in a drawer and made into sandwiches when the customers order. The fresh taste is history. McDonald's, Burger King and Wendy's are all guilty of the same crime.

That said, Arby's has showed considably more marketing prowess recently than Wendy's, so from that standpoint it might be a positive thing for Wendy's. Arby's deli sandwiches are far superior to Wendy's attempt, and Arby's salads are far more creative than Wendy's. Arby's has tried creative ways to market beef, such as the pot roast sandwich, which was very good but didn't catch on, and a reuben sandwich, with the jury still out. If Tri-Arc brings such creativity to Wendy's, it will be a good thing.

Both Arby's and Wendy's have beef-driven menus and are heavy sellers of the product. That's good for the beef industry, and we want them both to be successful. There can be upward beef sales if they are successful, but at least the Wendy's deal probably is a neutral for beef sales and not something for the cattle industry to get too exercised about.

New Farm Bill action heats up

Democratic poobahs in the House and Senate have sprung into action, meeting behind closed doors repeatedly in the last two days, to patch together a Farm Bill, before the old one expires in a week.

There is a real possibility of a presidential veto, as the new bill is a budget buster, with over $10 billion in new spending for food stamps and other welfare programs. The latest version also cuts subsidies for ethanol, a stand becoming increasingly popular as food prices rise. There is no change in crop subsides or price supports, with no move at all back toward free enterprise in agriculture. That alone is thought to be enough to draw a Bush veto.

A severe ego clash between Senators Max Baucus of the Finance Committee and Tom Harkin of the Ag Committee has delayed action, but seems to be resolved with more spending in the bill to placate both. Minnesota Rep. Clayton Peterson, chairman of the House Ag committee, was also at odds with the two Senate power brokers and that's where the differences remain, before a bill sees the light of day Monday.

It is still an even bet that the old farm bill will be extended until after the election, particularly if Bush vetoes this one. This remains the most likely scenario, and would probably have not been challenged but for two factors:

First, rapidly rising food prices and worldwide complaints about it, left lawmakers needing to look like they were doing something, which passing a farm bill gives the impression of.

Second, predictions of a drought in the corn belt and other places could stunt crop yields and leave parched farmers in need of federal assistance that only a new farm bill can deliver.

The new farm bill doesn't do much to address either problem, but as they say in politics, "perception is reality." As long as they pass something with "farm" in the title, solons can go on the campaign trail and claim they did something, no matter how irrelevent and impotent.

Silly season breaks out on food prices

All the socialist types, who loath the principle of supply and demand in the best of times, are bloviating over high food prices, and all the world starvation they will bring to the poor.

The Secretary-General of the United Nations in New York, Ban Ki-moon, blasted high food prices today, which he characterized as a global crisis, in a speech in Vienna. Riots in Haiti and Cameroon have led to deaths, sparked by high food and oil prices. Asia is facing a poor rice crop, so rationing has already started. Sam's Club and other discount houses are limiting rice sales to four 20-pound bags per customer, as hoarding sets in.

(Do you know how much rice 20 pounds of uncooked rice is? If I cook a quarter of a cup of rice for a family of four, we wind up throwing half of it away. If you throw rice at the bride and groom after a wedding, just the few kernals birds pick up off the ground swell in their little stomachs enough that they explode and die. You mean we're limited to only four 20-pound bags? What a crisis.)

The only half-way legitimate comment that's been made is that corn going to ethanol, rather than food, is at the root of the crisis. Since the government subsidizes ethanol in the U.S., it is profitable to divert a lot of corn to ethanol. Grocery lobbyists are calling for an end to the subsidies. This is a government-caused economic dislocation, which has interfered with the principle of supply and demand, and raised food prices.

There's a lot of reasons for higher food and energy prices: bad weather, burgeoning population growth in Asia and Africa, idiotic leftwingers opposing genetic engineering for more efficient food production--but the thing that definitely is not a cause is a filthy plot by the haves to deprive the have-nots.

Totalitarians, socialists and other big government types will seize on any problem to blame the free enterprise system. They're using food prices for that purpose today.

Proposed fed rules add operating costs, not safety

The federal government has swooped in to the livestock industry with two new rule changes that will probably be costly to producers, and most likely, do very little, or nothing, to solve either real or imagined problems.

One is from the Food and Drug Administration, greatly narrowing the list of ingredients that may be included in meat animal feed. The industry has voluntarily quit putting animal parts in feed, ever since the BSE outbreak four years ago. This codifies that and raises the ante. It will greatly increase costs for feed mill operators, both in terms of more costly ingredients and greater time needed to watch over and test the feed before it can be sold.

You cna bet that these added costs will be passed on to feed purchasers such as feedlots, who may well not be able to recoup the added cost in higher prices for the cattle, when they sell them. In commodity products, like live cattle, higher operating costs are not a consideration in the price setting mechanism. Most likely, the beef industry will wind up absorbing the added costs out of profit margins.

The second new rule is at the slaughter house, where so-called "downer" cattle will no longer be slaughtered for human consumption. This blanket prohibition cuts out lots of non-diseased, perfectly good meat that will sell not at beef prices but at offal (pet food) prices. Again, its the producer who takes it in the shorts, as he gets less dollars out of his cattle that may well be perfectly healthy, but trip walking up the slaughter ramp.

Discretion and common sense are what needed to be applied in both these situations, not federal regulations. Bad press, both the result of staged protest events that do not happen as a matter of natural course, goaded regulators into taking "see how tough I am" stands, instead of evaluating each individual case based on its merits.

This is unfair to producers, with no added safety for the meat consuming public. What a shame.

World auctioneer championships set June 28

Everyone that raises livestock, at one time or another, takes at least some of their cattle to sell at the local sale barn, or goes there to bid and buy something they need for their ranch. The auctioneer conducting the sale is the central focus of these sale barn visits, and his acumen goes a long way in setting prices and keeping the market moving. A bad auctioneer is also a substantial impediment to the market, and doesn't usually last very long. The bidders and sellers vote with their feet.

This coming June 28 at the market in Sioux Falls, South Dakota, the 45th annual World Livestock Auctioneer Championship will be conducted. 33 contestants will compete, selling real cattle in a real sale barn, working from a real auction block. I've attended over the years, and it is fascinating, if you're a fan of the auction method of selling at all.

To the untrained ear, they all sound alike, or at best, the differences between them are very subtle. If you're heard and attended hundreds of auctions over the years, and done a little amateur auctioneering yourself, it's easier to separate the wheat from the chaff. None of the 33 will be terrible. They've survived video competition regionally, shot at the sale barn where they work and judged by experts, to winnow the field to 33.

Not to be too crass, and say publicly what many are afraid to say, but the stain of politics does enter the ring on championship day. It does make a difference who sponsors you into the competition, and what their relationship is to the sponsoring Livestock Marketing Association and its directors. It's also well known that if you enter long enough, your turn will eventually come. This is inevitable in a competition organized and run by human beings. To deny that it happens is all that defies credulity.

Like any other competition, some winners use it as a springboard to jumpstart their career, while others drop out of sight, never to be heard from again.

The championship is a matter of great professional pride and prestige. That's why auctioneers enter year after year.

McDonald's sales decline first in five years

McDonald's fast food restaurants posted their first month-to-month sales decline in five years in March. Blamed was the slowing U.S. economy, which has people eating more at home and eating "lower on the hog" when they do go out.

McDonald's is the number one marketeer of beef in America in terms of total tonnage, so the sales drop is not good news for the cattle industry. After all, if McDonald's sales fall, you can only imagine what they'll do in the white-table-cloth restaurant segment. Cattle numbers are down, so beef production is down, so some sales drop is probably already built into the system. The loss will be in imported beef McDonald's uses to fill out its grinding needs, as The U.S. traditionally sells all the beef its producers produce.

McDonald's is introducing lattes and other fancy coffee drinks to build its breakfast trade, as well as other non-beef items at other times of the day. It's too early in this process to say if they contributed or not. In fact, there was no breakdown provided of where in the McDonald's menu the sales decline actually came.

Of concern for the cattle industry, is that most likely, McDonald's is not alone in declining sales. Lesser brands like Burger King and Wendy's are bound to be down too. One can only hope that supermarket beef sales go up smartly, as an indication that people are cooking and eating at home, rather than eating out.

The one thing we can be sure of, is that people are still eating--it's a necessity.

Big pork, poultry competition seen for beef

USDA's Cold Storage report on meat supplies in the locker shows record pork supply of 657.1 million pounds as of March 31, the largest pork supply on record. This tops the 605.72 million pounds in storage the month before, showing a definite upward trend, and the previous record, 597 million pounds in April, 1999. Coupled with the record supplies of live hogs that will eventually be slaughtered, lower pork prices and heavy available volumes may swamp beef demand, analysts said.

Chicken and turkey also were plentiful. The report showed 1.22 billion pounds of the two meats as of March 31, up 28% from a year earlier. The larger supplies followed increased chicken and pork production in 2007 and early 2008, as producers reacted to profitable prices.

Poultry and pork expansion is much quicker than beef, and contraction in reaction to poor prices can also happen more quickly.

Beef supplies were down with the March 31 supply of 424.1 million pounds, compared to 427.2 million pounds a year ago.

With all this meat available, returns to producers could be lower, but prices to consumers will stay high, at least for the immediate future. Grocers will take advantage of the lower wholesale prices to fatten profits by leaving retail prices the same, as long as they can.

Cattle, chicken and hog producers are all being pinched by high feed and fuel costs. If combined with lower prices received for their animals due to such heavy supplies, it could be a lean year on the farm.

Illegal immigrtion big livestock industry problem

The raids this last week by the federal government's Immigration and Customs Service (ICE) of eight Pilgrim's Pride chicken processing plants turned up over 400 illegal workers. This is about the same percentage turned up each time ICE has raided a meat packing plant, as its done over the years in many locations and companies.

Meat packing is one of the less desirable jobs one could do, and is therefore, chronically short of labor. We wouldn't go so far as to say plant management encourages illegals to come to work, but perhaps overlooks a lot of things. Otherwise, how would you explain why ICE has never failed to turn up a significant number of illegal workers at every packing plant raid its ever conducted?

This is quite a serious problem for the small, rural communities where most packing plants are located. The cultural gulf between the locals and the illegals is wide, and neither the town or its schools are equipped to deal with primarily Spanish-speaking residents and students. Crime problems, sanitation problems and over-crowding of the limited local housing stock all work together to create a powder keg in many local communities.

The cry of business is that there are jobs that need to be done and Americans won't do them, and they're right. Meat packing is a prime area they're talking about. Poorly paid, in areas without enough housing and other facilities to handle them, go a long way to explain why meat packing is always labor short. Despite steady advances in automation, it is still a labor-intensive business, so is ripe for illegals.

States and local areas within them, are deeply concerned about illegal immigration but are limited in what they can do. Its like squeezing a balloon--it just pops out somewhere else. Illegal immigration is a national problem, and until the federal government gets serious about border enforcement and serious penalties for hiring illegals, it will be status quo.

Liberal Democrats, who see big political opportunities for votes among illegals, as well as a natural constituency for the services of big government, and big business Republicans who employ them, stand in the way of significant reform. President Bush has only given lip service to immigration reform, as he was quite successful in courting Hispanic votes as Governor of Texas, and now with a Democratic majority in Congress, there just isn't a majority to do something serious.

But the ordinary folks, who have seen their communities over-run by illegals, still clamor for something to be done.

Beef imports into U.S. to fall

This is ho-hum news: beef imports into the U.S. will fall shortly. This is an annual event, just as when they rise early in 2009. Beef is only imported when the domestic supply leaves grinders short of what they need to meet the demands of the fast food restaurants like McDonald's, Burger King and Wendy's, as well as the school lunch and other government feeding programs.

Grinding beef is more plentiful in the fall, when the cows that didn't breed back are culled and output from the feedlots is at its highest. There is less need to import grinding carcasses from Australia, New Zealand, Mexico, etc. at this time.

The ads you see for Brazilian, Australian and other beef in the U.S. are full of pictures of happy diner, devouring delicious cuts. The truth is, 95% of that type of beef in the U.S. is domestic. There is very little grain fed, feedlot-fattened beef produced in the world, except in the U.S., which is where the steaks, roasts and other prime cuts come from.

While the health food crowd likes to trumpet grass fed beef for being low cholesterol and low fat, it is also low taste and tough. Any reasonably decent steakhouse serves grain fed beef, almost none of which is imported into this country.

Most of the grinding beef comes from culled cows, both beef and dairy, as well as old bulls. Added in is the trim in the packing house from grain fed carcasses. Much of the year, the U.S. has an adequate supply of old cows to meet this need. Since more than 80% of the beef sold in the U.S. is ground, due primarily to the fast food restaurants, some times of the year there aren't enough cull cows and trim to meet the need. Then we turn to imports--first from Canada and Mexico, because the freight is so much less--then from Australia and the farther-out countries.

Cattlemen love to denigrate foreign beef and decry the competition it presents to the U.S. product in the domestic market. The truth is, it is no threat, and in fact, very necessary at some times of the year.

South Korea beef deal must prove out

The news today that South Korea has fully opened its borders to U.S. beef imports is badly needed. It is the prelude to the summit this weekend at Camp David between President Bush and the South Korean chief.

There is no sense being naive--South Korea capitulated because they want a broader trade agreement with the U.S., and President Bush, a rancher himself, made a beef accord the lynchpin for the rest of the agreement. We in the beef industry can be grateful for that.

However, we also do not want to break an arm patting ourselves on the back. Twice since the BSE outbreak four years ago shut down the beef trade with Asia, South Korea has signed an agreement to let U.S. beef in, only to sabotage it and hand the U.S. a pyrrhic victory. We must be on guard for that again, and South Korea needs to prove its good intentions by actually accepting and promoting shipments of U.S. beef.

The reality is, that virtually no U.S. beef has made its way into South Korea, despite two previous, alleged, border openings. South Korea has been excruciatingly correct in interpreting international trade rules, and managed to turn down every U.S. beef shipment on the most narrow of technical grounds. The most popular excuse has been minute bone fragments, when the shipments are all supposed to be boneless, followed closely by beef that is older than 20 months of age.

The science of determining a carcass' age is very inexact, and subject to all manner of subjectivity, at best. Cattle, like human beings, are skeletal animals and quite naturally have bones. My understanding is that the bone fragments South Korea has been turning down U.S. beef shipments for, are not visible to the human eye.

Rather than lip service and good intentions, South Korea needs to demonstrate good faith and let in the most wholesome, most heavily inspected, best quality beef it can get anywhere--that from the United States. The time for hyprocrisy is over: the facts are that South Korea has had a virtual explosion of Mad Cow disease in it's own domentic cattle, and it has no grounds for rejecting U.S. beef, which has had no cases in its beef herd.

Like the old American saying goes, South Korea--Actions speak louder than words.

USDA lab site controversy mushrooms

The U.S. Department of Agriculture (USDA) finds its Plum Island, New York animal disease testing facility outdated and in disrepair, and wants to build a new one. The current site is off shore, and isolated in a commercial area with no livestock herds nearby. This is important, because many of the infectious, contagious animal diseases can be tested and isolated from spreading an epidemic in U.S. herds.

USDA scientists want to locate the new proposed facility near existing university experiment facilities in Manhattan, Kansas, Athens, Georgia, Butner, N.C., San Antonio, Texas or Flora, MS. The numbers of livestock in the counties surrounding the proposed sites range from 542,507 head in Kansas to 132,900 head in Georgia, according to a study by the Homeland Security Department.

Plum Island is only accessible by ferry or helicopter, and researchers there are not allowed to own animals at home, due to the danger of carrying contagious diseases like Foot and Mouth on their breath, clothes or vehicles, to contaminate the mainland. As an example of what can happen, England in 2001 suffered an outbreak of Mad Cow Disease that devastated the nation's livestock herd, resulting in the destruction of six millon head of cattle, sheep and pigs.

There are those who thought the English government grossly over-reacted, but the crisis nonetheless shows what animals in close proximity to each other can get when exposed to contagious diseases.

That is why many are urging government scientists to rebuild at Plum Island or some other offshore outpost. Scientists point out that containment technology has improved dramatically in recent years, and since the new facility would not open until 2014, even greater improvements are likely.

It's probably a poor year to make a decision. Democrats in Gongress are already demogoguing the obviously dangerous prospects for the slightest faux pax to trigger massive disease and destruction. A non-election year could allow a less contentious, more calm level-headed decision.

A disaster movie was made from a simulated exercise USDA did in 2002, it turned out so badly. It had a trench 25 miles long dug in Kansas to bury all the dead livestock, and riots in the streets of major cities because of food shortages. This was overkill, and calls for much more scientific, dispassionate look at the whole situation.

A fictional, gory disaster movie is hardly the basis for rational, sound consideration of a new government lab.

Ideal hog market weight has changed

The new economics in the livestock business has hit the hog industry particularly hard.

It wasn't but a couple of years ago that hogs sold for $55 a hundredweight and corn was $2 a bushel. It didn't take a rocket scientist to figure out that marketing hogs at heavier weights made all kinds of sense. With cheap grain, the extra gain was very profitable.

The equation has drastically changed. Hogs are now selling around $40 a hundredweight, and corn is $5 a bushel. You lose the least by selling hogs at the lowest-possible weight.

This flies in the face of recent trends in the high end of the pork business. White table cloth restaurants and upper crust meat shops are selling pork from purebred hogs, because these are the only ones available with enough fat to give the meat maximum flavor and tenderness. Since the campaign of the last 15 years or so to market pork as "the other white meat," pork has become so lean that it affects tenderness and flavor.

This most recent economic decision to market hogs at lower weights only exacerbates this problem. If pork is too lean to develop tenderness and flavor at recent market weights, the problem will only get worse at even lower weights. Taste and tenderness comes from more time on corn, a costly proposition with $5 corn.

Pork fat is tasty. No one has yet figured out how to replace lard in authentic green chile or pastry. It makes far flakier and more tender pie crust, tarts, bagels, etc. than low cholesterol, unsaturated shortening does. The same is true of the meat.

Despite the economics, pork producers would be well-advised to pay attention to taste and flavor. That's what sells the meat, not color or low price.

Inflation, high food costs tied to ethanol

As the latest economic reports come out of Washington, showing massive inflation in food prices and energy costs, the Bush administration is refusing to lay the blame where it belongs: the ethanol boondoggle.

Ethanol is only economically feasible because of massive federal subsidies to the tune of some 50 cents a gallon, and a heavy tariff on Brazilian ethanol made from sugar cane. With all this federal cash in hand, ethanol producers can then bid up the price of corn. This has inflated food costs, as so many products are made from corn or corn sweeteners. It has driven up feed grain prices that livestock producers pay to fatten cattle, hogs and chickens.

This is bad enough, except that all objective studies show that it takes more energy to grow the corn and manufacture ethanol than it returns in motor fuel. Brazilian ethanol works, because sugar cane is so plentiful there and returns a great deal more energy than corn. But U.S. corn and corn refining firms lobby Washington to keep it out of this country.

This is at least a double whammy for livestock producers, because prices received for beef, pork and chicken are down at the same time grain prices are rising. It's not just grain prices that are rising: motor fuels used to run tractors and trucks, fuel for pumping irrigation water, as well as fertilizer and other ag chemicals made from petroleum, are all up in cost.

This is all an economic dislocation for consumers and producers, caused by farm state senators and representatives flush with corn industry campaign cash--passing the tariffs and subsidies to make corn-based ethanol economically feasible. Left to its own devices, ethanol from corn would die a quiet, slow death and corn prices would still be at historical levels without big food price increases.

Sounds kind of idyllic, doesn't it?

COOL rules spooking U.S. producers

A little-noticed news item out of Canada tells a poignant story about the impact of the pending Country of Origin Labeling (COOL) of red meat and other ag products. Because Congress cannot agree on a new farm bill that might clarify or modify the rules, the U.S. Department of Agriculture bureaucrats are pledging to have rules in place by the September, 2008 deadline. Career civil servants doing the job, beyond the reach of Congress or farmers, scare most people to death.

It seems that hog weanlings are being killed in Canada, because U.S. producers who have contracted for 25,000 head per month are refusing to take them until they know the COOL rules as to whether they have to be labeled U.S. or Canadian. That's one big, confusing area of concern. The baby pigs certainly were born in Canada, but they are to be raised in the U.S. to slaughter age and slaughtered there. Is it U.S. pork or must it be called Canadian pork?

This is only one of dozens of unanswered questions, but is already having big economic consequences for both U.S. and Canadian producers.

There is a real glut of pork in the U.S. right now, which probably also weighs into the decision not to take in Canadian baby pigs. Producers on both sides of the border are hard-pressed by high grain prices and pork surpluses that are driving prices down while costs are going up. This economic vice concerns everyone.

In difficult economic times like the present, the uncertainty of no U.S. farm bill and the unknown COOL rules are making a bad situation much worse. Agriculture is a very low priority in the overall scheme of things in Washington, and yet Congress needs badly to pay it some attention.

Not wanting to turn blue, I won't hold my breath waiting.

Cattle stalwart Guymon going to the hogs

The news this week that the long time Chicago Mercantile Exchange live cattle futures delivery point at Guymon, Oklahoma is being eliminated speaks volumes about the changes in that once-robust corner of the cattle industry.

Home of the fabled Henry Hitch Ranch and some of the biggest feedlots in the industry that his son Ladd added, the cattle auction at Guymon has had kind of a checkered history, but was kept alive by the Hitch interests and being a delivery point for live cattle being tendered under futures contracts on the Chicago Mercantile Exchange.

While probably more coincidental than a quid pro quo, the death of third generation Hitch scion Paul Hitch two weeks ago from cancer, probably hastens the massive species change that has overtaken Guymon.

Seaboard has built a huge pork slaughter plant in Guymon, leading to a major expansion in hog breeding and fattening in the greater Guymon area. The plant has recently been expanded, and a bio-diesel byproduct operation added. As a result, the Guymon auction has become much more a hog, than a cattle, auction, leading to the Merc move.

Paul Hitch had continued the family tradition of leadership in the Texas-Oklahoma panhandle cattle industry, as incoming president of the National Cattlemen's Beef Assn. (NCBA), a post he had to resign to devote full attention to fighting his cancer. (A Hitch son-in-law, Clark Willingham, was also a recent, influential NCBA president). Hitch had also led the way in founding Consolidated Beef Marketing, a coop of large and small panhandle feedlots that markets their cattle to packers as a group, restoring a great deal of leverage to cattle owners and feeders. All this activity kept Guymon on the map in the cattle industry.

In the sale barn's and area industry's heyday 10-12,000 head of cattle a week moved through the facility. Now a portion of the pens have been torn down and replaced with new confined hog buildings to receive and ship pigs. There are 10 other Merc cattle delivery points, the closest being Texhoma, 20 miles from Guymon.

Henry and Ladd Hitch must be turning over in their graves.

South Korean leader visiting U.S.

Ho hum. The South Korean prime minister is coming to the U.S. this week to meet with President Bush and allegedly break the log jam on a free trade pact between the two countries. Excuse my lack of excitement, but this has dragged on for years, and there is no evidence of any committment, except for playing footsie, on the Korean side to actually do anything.

Korea refuses to believe in the resolve of key congressmen and senators, that unless the Korean beef market is opened fully to U.S. beef, all other trade issues are off the table. Until Korea accepts this, little progress is likely.

Korea and Japan are the Asian capitals of BSE (Mad Cow Disease), each with a couple dozen cases in their domestic beef herds. For them to shut their doors to the wholesome, heavily inspected U.S. product, where two cases total, have been found in dairy cows imported from Canada (none in domestically bred beef cattle) is the height of hypocrisy.

Congress itself is also to blame for the lack of progress. Foreign trade is like pregnancy. You can't be a little bit pregnant. You either are or you aren't. That's the way it is with foreign trade--it's an all or nothing proposition. Either you're for it or you're against it. There is no middle ground, and that's way foreign leaders doubt the resolve of the U.S. to fully commit to trade.

Just this last week, the U.S. House tabled a free trade pact with Colombia. This is inexcuseable, to stand up a strong U.S. ally like this, located right next door to Venezualan dictator and U.S. hater Hector Garcia--Raul Castro's best friend in South America, actually. A really dumb foreign policy mistake. But even worse, it confirms for all countries that the U.S. is a fickle and unreliable trading partner. Nothing could be worse for business.

The Democrats who control Congress are trying to help Obama and Hillary in the primaries in rust belt states, where the unions blame cheap foreign workers for their own bloated wage and benefits contracts that have driven tons of technologically-outmoded factories out of business--with a big loss of jobs.

Such protectionism by the Democrats may seem to be smart short term politics, in the Pennsylvania and Indiana primaries. But it is bad long term U.S. policy.

The U.S. needs to sell products overseas to have a healthy and vibrant economy. It needs to sell them everywhere, sending a strong message worldwide that we're open for busines--whether it's with Korea, Colombia or whoever.

A strong and consistent trade policy by the U.S. is what will open markets, not playing each country and worker off against each other for short term political advantage. This is very small and shortsighted thinking.

USDA bills Hallmark for ground beef

The U.S. Department of Agriculture (USDA) has billed the Hallmark packing company some $57 million for the ground beef it purchased for the school lunch program, and then recalled. Not to use too bad an aphorism to describe USDA's chances of collection, but, fat chance.

They gave Hallmark until mid-May to pay up, or turn it over to the U.S. Justice Department for collection. This is a textbook example of what they created the bankruptcy laws for. It will be, as they say, a race to the court house.

What we're really witnessing is what happens when you have nannyistic Democrats in charge of congressional committees. USDA's gross over-reaction on the questionable Hallmark case ranks right up there with the unconscionable inconvenience put on the travelling public with the huge, immediate inspections of airplanes by American and Southwest.

There was no immediate danger to the flying public in either the American or Southwest cases. The inspections could have been carried out on an orderly plane by plane basis, as there was no danger to the flying public, stranding no one. But the FAA bureaucrats were afraid to face the headline-grabbing congressional committees, panicked, and left the flying public stranded for no good reason.

USDA bought and paid for the ground beef, and chose not to use it. The packer's unions were turning up the heat on congressional investigators, so USDA, rather than have to answer to congressional tyrants seeking re-election publicity, recalled the ground beef. The whole Hallmark flap is probably a union set-up, in conjunction with the vegetarian, animal rights radicals in PETA and HSUS.

It's bad enough that USDA has probably already put Hallmark out of business, with their failure to defend their own meat inspectors. Now they seek to rub salt in the wound by seeking to collect for the beef they chose not to use. There is no evidence, by USDA's own admission, that there is anything wrong with the Hallmark ground beef.

All I can say for Hallmark is: God help you if you get in a union dispute, and the unionized federal bureaucrats choose to put in with the union, rather than defend their own department.

What an outrage!

Cold economics chills cattle feeding in Canada

A few years ago, Canadian cattlemen bravely moved forward with finishing fed cattle in feedlots in Canada, enticing Tyson to buy a packing plant in Alberta expand it, in light of all the fed cattle that would be available for it to slaughter.

Right.

The economic realities have settled in hard, and the high cost of weight gain on cattle in Canada have led to a steady stream of Canadian cattle moving back to the U.S. for feeding, according to people in the industry. There are currently about 890,000 head of cattle in Canadian feedlots that have the capacity to feed 1.2 million head.

This was to be expected, to any reasonably seasoned observer of the beef industry. After all, Canada is too far north to have enough growing season to raise corn, the main ingredient in finishing cattle in the feedlot. That means the corn must be moved from eastern Canada or imported, always a costly proposition. Particularly when corn sells locally in the U.S., with very little freight on it, for over $5 a bushel.

"These cattle float to the place where they're cheapest to feed," said Bryan Walton, chief executive of the Alberta Cattle Feeders Association. He said other factors, including the strong Canadian dollar and poor incentives to grow feed grains, were also limiting the potential of the domestic feedlot sector. Walton said his organization was working on initiatives to help create both increased demand for Canadian fed cattle and increased supplies.

They primarily feed barley in Canadian feedlots and high canola prices are taking acres out of barley production into canola. There also is less competition in Canada for finished cattle, keeping prices lower than in the U.S.

All these things were thoroughly predictable back when the Canadian government subsidized producers to move into cattle feeding. Despite all the hoopla, cold hard economic realities have triumped yet again.

Foreign beef labeling regs coming soon

September, 2008 has been the deadline for some years to impliment mandatory Country of Origin (COOL) beef labeling. Narrowly passed by a tiny margin in Congress, opponents were successful in putting it off, but never able to get Congress to take the issue back up and clarify the procedure.

USDA is forced by language in the old farm bill that is operating on an extentsion, to promulgate regulations to implement COOL. It will do so by mid-summer, officials say. They could either simply allow an affidavit to be signed, stating a carcasses' country of origin, or could make it an extremely bureaucratic and complicated procedure that could be very costly to beef producers and packers.

In something of a star chamber proceeding, USDA has not really tipped its hand. The big hope is that Congress will pass a new farm bill by fall, with clarifying language on COOL. This is unlikely, due to the very narrow Democratic majorities in both houses of Congress making it impossible to forge a consensus on a new farm bill. More likely, the current farm bill will be extended in the crush to adjoin for fall electioneering, leaving it to a new administration to crank out a farm bill.

COOL is one of those great ideas in theory that is not so great in practice. Sure it would probably cut down foreign beef sales in the U.S. if all the packages were labeled. But this is a two-way street and forces U.S. beef to be labeled in foreign countries. The whole certification procedure promises to be an expensive one for the beef industry, as it will have trouble passing the cost along to consumers.

In a tough livestock economy, with high energy and grain prices sapping profits for producers, a heavy surcharge for labeling foreign beef is probably not helpful.

But it looks like the industry is stuck, as Congress dithers and fails to pass farm legislation.

Historic St. Paul Stockyards closing

The big city, central stockyards have been an endangered species for a couple of decades, at least. As first Chicago, then Denver, Kansas City, Omaha and finally Ft. Worth shut down, a whole new era in livestock marketing has opened up.

It's hardly a footnote to history then, when the St. Paul Stockyards hangs 'em up this Friday, April 11.

The unions and railroads, who quit hauling livestock, started the trend, which led to the shutdown of the multi-story, inefficient packing houses in the stockyards district of big cities. Non-union firms built single-level, assembly line packing plants out in the country where the cattle are, in far-off places like Stratford, Texas, Guymon, Oklahoma, Garden City, Kansas and Greeley, Colorado. Packer buyers bought cattle direct at the feedlots and had them shipped straight to the nearby packing plant. No central stockyards was needed to add to the shipping and feed bill, stress the cattle and cost a commission or two.

Feeder cattle, those sold as calves and light yearlings not yet ready for the feedlot, had long ago quit going through big city stockyards. Corrupt commission firms and their traders at the central stockyards finally drove ranchers to trade in the country, either directly to order buyers or through country auctions that grew quite large in places like Torrington, Wyoming and Roswell, New Mexico. The last vestige of a big city stockyards is in Oklahoma City, where commission firms still operate and trade feeder cattle. Numbers are down, but still large enough to sustain the operation.

This system has changed too, as video and on-line auctions of feeder cattle have grown to market several million head of feeder cattle annually. Buyers and sellers both have taken quite a liking to this system. For buyers, they get ranch-fresh cattle shipped directly off the ranch, straight to the grow lot or feedlot without passing through a sale barn or a few traders along the way, losing their bloom or picking up diseases.

For the seller, his cattle are video taped on the ranch, and shown on the satellite auction. Buyers bid by watching the sale on their home or office television or on line, calling in on an 800-number. If it's a down day on the market, the seller can choose not to take the bid and run his cattle through again or sell them direct. He still gets the advantage of exposing his cattle to many buyers, bidding against each other for his cattle without the expense of shipping them to the sale barn and taking whatever they bring that day. The auction method, with competitive bidding, is a far superior way to set prices than taking the word of an order buyer who rolls up on your ranch, frequently to lowball your cattle.

While it's nostalgic to mourn the loss of central stockyards, the fact is that the world has changed and will never go back to the old way of doing things. Those old dinosaur stockyards are more valuable now for their real estate.

It all falls back to the old economic principle of "highest and best use." The land is now more valuable than the stockyards.
I guess that's what you call progress.

Wedding Day -- Next post April 7

It's a matter of great joy and celebration in our family that my son Zach is getting married this Saturday in Tyler, Texas to Beth Reynolds. I'm one proud pappa and very pleased with my son's selection of a mate.

Due to travel and family time, I'll resume posting on Monday April 7.

EU-U.S. beef soap opera contiinues

The World Trade Organization ruled yesterday that the European Union (EU) had failed to justify its ban on imports of hormone-treated beef from the U.S. and Canada. A companion ruling also said the U.S. and Canada had violated international trade rules by offsetting the EU ban of it's beef with sanctions on EU exports in response.

The 12-year-old dispute is strictly a protectionist move by the EU to keep its farmers who raise cattle from facing competition from U.S. beef. Both the U.S. and Canada have far stricter rules governing hormones in beef production than the EU itself has. Random tests of EU produced beef have turned up heavy amounts of stilbesterol, a hormone that is illegal in any amount in the U.S.

Just like the more numerous BSE cases are in Europe, Japan and South Korea, with only two in the U.S., hormones in beef are far less controlled and more common in the EU, which turns down U.S. beef for using hormones. Hypocrisy hardly begins to describe the EU position.

Anyone who has travelled to Europe and attempted to eat the beef there, knows how desperately they need to import clean, safe, wholesome, delicious U.S. beef. Chicken and pork are far superior in Europe to the available local beef, and you learn quickly on a trip there, chicken, fish and pork are what you order.

When the U.S. exported beef to Europe, it was mostly organ meats (livers, hearts, tongues and kidneys) that we were glad to get rid of, but are thought of as delicacies on the continent. The better cuts of beef were imported only in sufficient quantity to serve American tourists in major hotels.

The U.S. did very well opening markets for beef in Asia, as the EU ban took effect, much more than offsetting losses in Europe. Until BSE, which originated in Europe, intervened, U.S. beef exports overall were way up over the years when we sent beef to the EU.

World Trade Organization rullings in favor of the United States are nice, but have no power of enforcement. That ruling and a dollar bill will get you a cup of coffee. You can count on the fact that Europe will find other ways to keep U.S. beef out and protect their farmers.