The State of U.S. Cattle Industry After 26 Years of       Beef Checkoff Program Operations                      Presentati...
Purpose of Beef Checkoff Program        Enacted in 1985• To enable cattle producers to establish,  finance, and carry out ...
Beef Checkoff Program Abuses        Discovered in 2010• $216,944 in Checkoff Abuse Identified in  2010 Independent Account...
2012 OIG Audit of 18 Producer           Checkoff Programs•   Found evidence of misappropriated producer checkoff dollars. ...
Beef Demand Fell for 18 of 26 Years andIs Now 28 Index Points Less than in 1985                                           ...
Per Capita Beef Consumption Fell by                                        More than 20 Pounds Since 1985                 ...
Consumers’ Beef Prices Increased                                           More than $2.50 per Pound                      ...
While Retail Beef Prices Increased Steadily,                                      Feeder Cattle Prices Were Highly Volatil...
Like Feeder Cattle Prices, Fed Cattle Prices                                      Were Much More Volatile than Beef Prices...
A Function of Cattle Price Volatility, the Producers’ Share of  the Consumers’ Beef Dollar Fell to All Time Lows in the   ...
Increased Retail Prices and Cattle Price Volatility Allowed Packers      to Charge Consumers More and Pay Producers Less  ...
A Long-Run Lack of Profitability for Cattle Producers                                Resulted in an Unprecedented Herd Liq...
Running a Close Second Only to the Horrendous Exodus of U.S.                         Hog Producers, 488,000 Cattle Produce...
Margin Operating Feedlots Continually Face Fatal Cost/Price Squeezes                        that Already Forced the Exodus...
Independent Farmer-Feeders and Mid-Sized Feedlots                              Decline While the Largest Feedlots Continua...
As Feedlots Consolidate Unabated, and as Packers                                         Own or Control More and More Catt...
Falling Production Post Beef Checkoff Program Reversed when the U.S.Cattle Industry Began It’s Unprecedented Herd Liquidat...
After 26 Years of the BeefCheckoff Program, the U.S.Cattle Industry Is in a “CODE RED” State of EmergencyThe Beef Checkoff...
Disconnect Between Retail Beef Prices       and Live Cattle PricesC. Robert Taylor, Auburn University                     ...
How Consumers Are Impacted                                                                         CONSUMERS RETAIL BEEF P...
The End          21
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120810 presentation to ocm

  1. 1. The State of U.S. Cattle Industry After 26 Years of Beef Checkoff Program Operations Presentation to The 14th Annual Food and Agriculture Conference by Bill Bullard, CEO, R-CALF USA August 10, 2012 1
  2. 2. Purpose of Beef Checkoff Program Enacted in 1985• To enable cattle producers to establish, finance, and carry out a coordinated program of research, producer and consumer information, and promotion to improve, maintain, and develop markets for cattle, beef, and beef products. 2
  3. 3. Beef Checkoff Program Abuses Discovered in 2010• $216,944 in Checkoff Abuse Identified in 2010 Independent Accountants Report – Charging Checkoff for policy activities • 50/50 travel expense split for NCBA officers • Pay for non-Checkoff meetings, travel and speaker costs • Pay NCBA employees’ time for non-checkoff activities • Pay NCBA employees’ spouse’s travel expenses • Pay legal fees to maintain NCBA 3
  4. 4. 2012 OIG Audit of 18 Producer Checkoff Programs• Found evidence of misappropriated producer checkoff dollars. For example, the U.S. Soybean Export Council, a subcontractor of the United Soybean Board, used soybean checkoff dollars to pay employees unauthorized bonuses totaling approximately $302,000..• The OIG found that USDA’s oversight over the expenditure of approximately $528 million that is contributed by commodity producers each year was inadequate to prevent or detect the misuse of checkoff dollars.• The OIG found that USDA’s oversight of the various checkoff boards “increases the risk that funds could be misused by boards.” – USDA staff did not adequately enforce the agency’s own guidelines; – USDA’s oversight of checkoff board activities was inadequate, particularly when it came to enforcing regulatory requirements; – USDA did not even conduct a management review of the Beef Checkoff Program Board and other checkoff boards overseen by the USDA’s Livestock and Seed program in at least five years; – USDA did not ensure that independent auditor reports of the various checkoff programs included required statements of assurance that checkoff dollars were not being used for unauthorized lobbying.• Alarmingly, the OIG stated that USDA officials viewed the checkoff programs as low risk because, among other things, they did not involve Federal funding. 4
  5. 5. Beef Demand Fell for 18 of 26 Years andIs Now 28 Index Points Less than in 1985 Annual, Choice Beef Demand Index 1980=100 With 2-Year Moving Average Trendline Prepared by R-CALF USA 90.00 Source: KSU AgManager.Info 80.00 13-Year Decline 70.00 6-Year Increase 6-Year DeclineDemand Index (1980=100) 60.00 50.00 40.00 30.00 20.00 10.00 0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 5
  6. 6. Per Capita Beef Consumption Fell by More than 20 Pounds Since 1985 Annual, Per Capita Beef Disappearance (Consumption) With 2-Year Moving Average Trendline Prepared by R-CALF USA 90.00 8-Year Decline Source: USDA-ERS Beef Supply and Disappearance 80.00 9-Year Stabelization 10-Year Decline 70.00Per Person Consumption (Pounds) 60.00 50.00 40.00 30.00 20.00 10.00 0.00 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 t. Es 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 12 20 6
  7. 7. Consumers’ Beef Prices Increased More than $2.50 per Pound Annual, Choice Retail Beef Prices With 2-Year Moving Average Trendline Prepared by R-CALF USA $6.00 Source: USDA ERS Beef Price Spreads $5.00 Canadian Imports CurtailedRetail Beef Price (Dollars Per Pound) $4.00 $3.00 $2.00 $1.00 $0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 7
  8. 8. While Retail Beef Prices Increased Steadily, Feeder Cattle Prices Were Highly Volatile Feeder Cattle Prices (500-600 lbs, Kansas) With 2-Year Moving Average Trendline Prepared by R-CALF USA $160.00 Source: KSU AgManager.Info $140.00 Canadian Imports Curtailed $120.00Feeder Cattle Dollars Per CWT $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 8
  9. 9. Like Feeder Cattle Prices, Fed Cattle Prices Were Much More Volatile than Beef Prices Fed Cattle Prices (1100-1300 lb Steers, Kansas/Nebraska) With 2-Year Moving Average Trendline Prepared by R-CALF USA $140.00 Source: KSU AgManager.Info; USDA-ERS $120.00 Canadian Imports CurtailedFed Cattle Price Dollars Per CWT $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 9
  10. 10. A Function of Cattle Price Volatility, the Producers’ Share of the Consumers’ Beef Dollar Fell to All Time Lows in the 2000s and Was 10% Less in 2011 than in 1990 Producers Share of Consumer Beef Dollar With 2-Year Moving Average Trendline Prepared by R-CALF USA 65% Source: USDA ERS Beef Price SpreadsShare of Beef Dollar Returned to Producers (Percent) 60% 55% Canadian Imports Curtailed 50% 45% 40% 35% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 10
  11. 11. Increased Retail Prices and Cattle Price Volatility Allowed Packers to Charge Consumers More and Pay Producers Less Ranch-to-Retail Choice Beef Price Spread (Cost of Converting Live Cattle to Beef) Prepared by R-CALF USA $3.00 Source: USDA-ERS Beef Price Spreads $2.50Beef Price Spread (Dollars Per Pound) $2.00 $1.50 Canadian Imports Curtailed $1.00 $0.50 $0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 11
  12. 12. A Long-Run Lack of Profitability for Cattle Producers Resulted in an Unprecedented Herd Liquidation Declining U.S. Cattle Herd Prepared by R-CALF USA Source: USDA-NASS 105 95 Total Cattle Inventory: Beef Cows and Bulls, Dairy Cows and Bulls, Steers, Heifers and Calves 85Cattle Herd Size (Millions) 75 65 Canadian Imports Curtailed 55 45 Beef Cow Mother Herd 35 25 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 12
  13. 13. Running a Close Second Only to the Horrendous Exodus of U.S. Hog Producers, 488,000 Cattle Producers Ceased Their Operations Since 1985 Declining Number of Beef Cattle Operations Prepared by R-CALF USA 1,300,000 Source: USDA-NASS 1,200,000Number of Beef Cattle Operations 1,100,000 1,000,000 900,000 800,000 700,000 600,000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 13
  14. 14. Margin Operating Feedlots Continually Face Fatal Cost/Price Squeezes that Already Forced the Exodus of 35,000 Feedlots Just Since 1996 Declining Number of Feedlot Operations Prepared by R-CALF USA 120,000 Source: USDA-NASS Data Unavailable for Period 1985-1995 110,000 100,000Number of Feedlots 90,000 80,000 70,000 60,000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 14
  15. 15. Independent Farmer-Feeders and Mid-Sized Feedlots Decline While the Largest Feedlots Continually Expand, thus Shrinking the Number of Feeder Cattle Buyers Changed Structure of Feeding Industry Small- and Mid-Size Feedlots Marketing Fewer Cattle Prepared by R-CALF USA 18,000,000 16,000,000 14,000,000Number of Cattle Marketed 12,000,000 Data Unavailable for Period 1985-1995 10,000,000 8,000,000 6,000,000 4,000,000 Source: USDA-NASS Various Cattle on Feed Reports 2,000,000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Capacity Less than 1,000 Capacity 50,000 and More Capacity 1,000 to 49,999 15
  16. 16. As Feedlots Consolidate Unabated, and as Packers Own or Control More and More Cattle, the Price Discovery Market Is Vanishing Vanishing Price Discovery Market Prepared by R-CALF USA 55% Data Unavailable for Period 1985-2004 50%Cattle Sold in Cash Market (Percent) 45% 40% 35% 30% 25% Source: USDA Market News 20% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 16
  17. 17. Falling Production Post Beef Checkoff Program Reversed when the U.S.Cattle Industry Began It’s Unprecedented Herd Liquidation in the Mid-90s Domestic Beef Production From U.S.-Origin Cattle With 2-Year Moving Average Trendline Prepared by R-CALF USA 26 Source: USDA-ERS (Note: Does not Include Beef Equivalent of Imported CattleDomestic Production (Billions of Pounds) 24 22 20 18 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 17
  18. 18. After 26 Years of the BeefCheckoff Program, the U.S.Cattle Industry Is in a “CODE RED” State of EmergencyThe Beef Checkoff Program Is the Principal FundingSource for the NCBA – an Industry Trade AssociationNot Only Oblivious to the Vanishing Opportunities forIndependent Cattle Producers, but also, the Principal Catalyst for Eliminating those Opportunities 18
  19. 19. Disconnect Between Retail Beef Prices and Live Cattle PricesC. Robert Taylor, Auburn University 19
  20. 20. How Consumers Are Impacted CONSUMERS RETAIL BEEF PRICES COMPARED TO CATTLE PRICES JAN. 1980 - APRIL 2012 600 500 In just the past 10 years - 2002 to 2012, spread has increased $2.46 per pound (from $1.85 to $2.48 Jan. to Jan.) 400 Cents Per Pound 300 200 100 0 Jan/80 Jan/81 Jan/82 Jan/83 Jan/84 Jan/85 Jan/86 Jan/87 Jan/88 Jan/89 Jan/90 Jan/91 Jan/92 Jan/93 Jan/94 Jan/95 Jan/96 Jan/97 Jan/98 Jan/99 Jan/00 Jan/01 Jan/02 Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Source: USDA-ERS Net Farm Value (Cattle Price) Retail Beef Prices R-CALF USA 20
  21. 21. The End 21

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