Mar 20, 2009

More or less government
I have been traveling to bull sales the past few weeks and it is stunning how well the breeding bull market is going. Most operators are selling a lot of volume at good prices. I think having a $75-80 slaughter bull market last summer helped these bull sales in a big way. It also appears that some areas in the West have had some trichomoniasis outbreaks which generally requires a wholesale bull exchange.

There was a lot in the news last week. It would appear that Mexico isn’t too happy about what’s going on in the U.S. government. Congress and the Obama administration decided to suspend the pilot program which allowed Mexican trucks to operate outside the U.S. commercial zone around the border. Never mind that the safety violations are fewer than U.S. trucks. This was all about standing up for the unions. The word is that Nancy Pelosi, D-CA, speaker of the House was who pushed the button.

In retaliation, Mexico decided to slap tariffs on about 90 products we export to Mexico. Tariffs range between 10 and 45 percent. Fortunately, beef is not on that list. Mexican officials said they would not impose tariffs on products that were in the typical Mexican food basket. Ironically, many of the products that had tariffs imposed are produced in California and many are agricultural products.

Nonetheless, it is starting to appear that the North American Free Trade Agreement (NAFTA) could be at risk. Mexico imports roughly 35 percent of their meat products from the U.S. and is a very important part of our beef market. I would hate to see the Obama administration take on NAFTA. It would ruin a great amount of commerce which the administration doesn’t seem to recognize.

Last month, it was Country of Origin Labeling that had the Mexicans fired up because they were taking a $25 discount on feeder cattle. Ironically, feeder calf imports to the U.S. are up substantially the first two months of this year. Sources tell me that many Mexican cattlemen are retaining ownership of those calves in U.S. feedlots, hoping the fed price won’t present them with as large of a discount. I suppose if they have the money to feed them, they might just as well take the cheap compensatory gains that are typically associated with Mexican cattle.

The National Animal Identification System (NAIS) was also in the news last week. Congress held hearings on the issue and whether or not to continue with the program. It appears that the cattle industry is in lock step and opposed to the idea of mandatory animal ID, while the hog and dairy industries are ready to go. Trace back on disease has been USDA’s selling point for NAIS, which would be the only justification for a mandatory program. Currently, there are just over a half-million premises registered for the program. But the only reason cattlemen are using any tags at all is for marketing reasons.

We know that chairman of the House Ag Committee, Collin Peterson, D-WI, wants NAIS and Rosa DeLauro, D-CT, wants it as it relates to food safety. Even Ag Secretary Tom Vilsack has made a reference to NAIS as a food safety issue. But, in reality, NAIS and food safety couldn’t be further apart. I wouldn’t be surprised if mandatory NAIS is shoved down the cattle industry’s throat in the near future.

I have been told that food safety is high on the radar screen with this Congress and that they are planning on revamping the food safety system.

Those changes could be painful for agricultural processors and, ultimately, producers. More government in your life, just what you need. All of a sudden, there are quite a few issues that could affect the cattle industry in Washington, D.C. If possible, we need to work at keeping these issues at the agency level instead of allowing Congress to participate. That way, the laws of the markets will speak loud and clear.