Marketing challenges

Dec 31, 2010

Most market analysts are expecting 2011 to be a good year for the cattle industry. The USDA forecast is calling for a 2 percent reduction in beef output next year which should shore up the supply side of the market. The supply side of live cattle markets is in a positive situation for the year ahead and for the foreseeable future. All we need is to be left alone to manage the positive marketing conditions before us.

Unfortunately, the federal government may be the only element to fear going forward. They always seem to manage to get in the way of a good thing by over-regulating or preventing the markets from working freely.

A good example is the ethanol industry and the government’s desire to make that industry work at any cost. There has never been an industry that has received as much support at the detriment of other industries as ethanol. No industry that I know of, having been built from scratch by the government, has had the use of its product mandated, competitors barred from entry and still managed to lose money. On top of that, the government still expects all other corn resource users to compete for the raw materials on an open market.

Ironically, it’s a little difficult to understand just where the Obama administration and Congress are coming from. The ethanol industry received a one-year extension on their government subsidies. Hopefully, they will be forced to make it on their own and Congress will allow the subsidies to expire in 2012. We’ve got a new Congress starting in a couple weeks and, for all we’ve put up with for the past two years, let’s just hope they can get their house in order by ending the fiscal year free. 

Agriculture has its friends in both houses of Congress, but the Obama administration hasn’t really gone out of their way to help the industry. It seems that all they do is create more challenges for ag to overcome. For instance, Secretary of Agriculture Tom Vilsack held a meeting a couple weeks ago on the issue of Roundup-Ready Alfalfa. This issue pre-dates Vilsack’s appointment and was fairly well settled until a northern California judge issued an injunction preventing the product from being marketed pending completion of an environmental impact study. 

The organic industry and the food safety crowd have been at the root of this legal maneuver. The science has been done and the product has been studied to death. However, USDA’s latest mandated study showed there would be little harm if the product is sold on the open market. Vilsack took it on himself, in December, by allowing activists groups to take part in the debate. He said the science can be subjective too.

The Wall Street Journal (WSJ) wrote an editorial last week saying: “If the Obama administration is trying to lose its anti-business reputation, you wouldn’t know it from the latest shakedown at the Department of Agriculture. In a move that caused jaws to drop in the farm industry, Agriculture Secretary Tom Vilsack has invited activists and biotech critics to shape the agency’s regulatory decision. If the precedent stands, it could permanently politicize a system that is supposed to be based on science.”

Imagine that. The administration and the USDA are ready to politicize food production in the U.S. I suppose that’s what you get when you appoint attorneys and politicians to federal agencies. Vilsack seems to be very sensitive to food activists. But you have to ask what credibility most activists groups have before you allow them to weigh in on an issue as complex as biotech crops. Any more, it seems like all one needs to be credible in the eyes of government is a website. 

USDA has a fairly well-defined process to help make decisions, but in the past, science has been the mainstay of this process. Opening this procedure up to opinion and conjecture of groups with other motivations seems a bit dangerous. This issue is about feeding people and allowing agriculture to utilize new technologies to do the job better.

Vilsack’s decision-making process is deviating from the well-defined process USDA is required to utilize to make decisions of this nature. The rule changes that the Grain Inspection Packers and Stockyards Administration is going through has a similar smell to it. Non-industry activists groups have also had their say in an area that has no effect on them.

WSJ also said that while alfalfa may not be one of the major biotech crops, alfalfa is a regulatory test that could open the gate for similar, politically driven negotiations on non-organic crops from sugar beets to soybeans. If non-science criteria are introduced as considerations for allowing the sale of biotech crops, the effect will be disastrous for the USDA’s regulatory reputation. 

But then again, what reputation does USDA have? In my opinion, it’s not a positive reputation at all. We don’t really need to fear the market next year, but we do need to fear what the government can do to the market. — PETE CROW