Oct 22, 2010
Change for the better

The midterm elections are just around the corner and this election may have more voter turnout than any midterm in history. It’s the economy, and that pretty much sums up the voters’ concerns this goaround.

When I boil things down, it’s all CROW about fiscal responsibility, less government intervention, lower taxes and regulations that won’t blindside small business if they happen to stumble into a violation. By taking care of these few items, the government might be able to stimulate the economy and allow individuals and business to create wealth. Unfortunately, wealth appears to be a dirty word with the Obama administration.

There are quite a few regulatory issues affecting agriculture that have been promoted by the Obama administration. Most of the real damage is coming from the Environmental Protection Agency (EPA). Just the clean water and clean air issues alone pose a great threat to the profitability of agriculture. Then you add in the energy issues, taxation and the health care reform bill, and the problems really begin to add up.

The only issue where we can begin to calculate the damages yet is the ethanol mandate. EPA has said it will allow blends up to 15 percent ethanol while at the same time, the past two corn reports from USDA have cut into expected supplies. The result has sent the corn markets into an upward spiral. Last week, things settled down a bit as traders started to rationalize the market. Lower feed prices are always good for livestock production.

The proposed rule changes to the Packers and Stockyards Act has also been a tumultuous political event in livestock circles. USDA has been a bit stubborn about transparency on the issue and has shown less than an open mind during the rule-making process. The comment period closes on Nov. 22 and I’d bet USDA will have quite a bit of paper to go through. However, I have the feeling the decision on the final rule has already been made.

Fed cattle had quite the rally last week with live cattle trading $4-6 higher and dressed trade $6-8 above a week earlier. It appears the reason for the huge move is that there are still short supplies of cattle and even shorter supplies of high-quality cattle. Sources say that packers have sizeable orders for high-quality middle meats and need to process lots of cattle to fulfill their orders. Nonetheless, it looks like cash trade is alive and well. I also suppose you could say that cattle feeders are taking advantage of packers and taking them to the wood shed.

Who in their right mind would want to mess around with a marketing system that responds to the market signals as quickly as the livestock markets? Last week’s fed cattle markets show us that the markets are alive and well and fair.

Congress has been asking USDA to perform a complete economic impact study on the proposed regulations, which seems like a logical request. US- DA Secretary Tom Vilsack replied to the 115 members of the House that asked for the study and pretty much told them they have all the research they need and he will not embark on an economic impact study. USDA thinks the rule changes will have an economic impact of less than $100 million, which is the trigger level for a mandatory study.

Instead, the American Meat Institute decided to conduct their own study displaying the impacts of the rule. The study was done by John Dunham and Associates and found that the rules could cost the livestock industry 104,000 jobs. Most of the cuts would occur in production, distribution and marketing. The study determined meat prices would rise by 3.3 percent and that would result in a 1.7 percent decline in consumer demand. They point out that the meat industry contributes $832 billion to U.S. gross domestic product (GDP) and the rule would result in a $14 billion decline in GDP.

It doesn’t appear there is a lot to gain with these new rules regarding livestock marketing and it’s somewhat perplexing why the administration has concerned themselves with this issue. It clearly has little regard for the impact of the measure on the meat-producing industry. But then again, it could go away after the election. In fact, I hope there are a lot of things that go away after the elections, including the elections. One thing is for sure, change is constant. But it would sure be nice to see some change for the good of everyone, not just the specialinterest politicians. — PETE CROW