Nov 11, 2011

Game over

A collective sigh of relief came over the cattle industry last week after the Grain Inspection,

Packers and Stockyards Administration (GIPSA) sent their revised marketing rule to the Office of Management and Budget for review. The final rule didn’t contain any issues regarding the cattle industry and marketing practices, and will only contain provisions required by the 2008 farm bill regarding the poultry industry, although there are a few other elements of the proposed rule that will remain under consideration USDA will no longer pursue provisions from the original proposal regarding prohibiting packer-topacker sales, packer buyers buying for more than one packer, and requiring packers to maintain purchasing records, along with justification for value of differences in livestock.

GIPSA will still have to craft rules regarding the definitions of unfair practices, undue preference and unlawful discrimination to satisfy the farm bill language. This will come at a later date. If that portion of the farm bill language isn’t satisfied, US- DA could be open to lawsuits from activist groups. Washington sources tell us that there is absolutely no interest in crafting a new livestock title in the next farm bill.

This now famous GIPSA rulemaking process is essentially over for now and I would doubt very much we’ll see any more exciting news over the issue. The few remaining points of consideration in the rule will not cause much concern for the cattle industry.

This episode over livestock marketing was essentially internal industry politics that got out of control and should have never been pushed this far. It started with the beef industry’s more radical-minded groups who were able to get a livestock title in the 2008 farm bill, which produced the proposed marketing rules that the industry has been arguing over this past year.

The cattle and hog industries came together to reject the rule based on the belief that valuebased marketing was at stake and that these proposed rules would take the business of livestock marketing back in time. The rule was also poorly written and would have allowed disgruntled producers to file frivolous lawsuits if they thought they were harmed. It would have created a record keeping problem for packers. Also, every livestock contract would have to be posted on GIPSA’s website. The expected result would have been the destruction of value-based marketing programs that have rewarded quality-minded beef producers.

The politics of this thing were ugly! Since USDA was required to produce a rule by the 2008 farm bill, they chose GIPSA Administrator Dudley Butler to write it. Butler was a founding member of R- CALF and the Organization for Competitive Markets, and everyone connected to the livestock industry knew how he would attempt to write the rules. And it’s more perplexing why Agriculture Secretary Tom Vilsack let him do it.

When it came time to get some political muscle behind the issue, the proponents of the rule had little to no support. While, on the other hand, the opponents of the rule had their senators and congressmen all lined up and gave them support to defeat the overbearing portion of the proposed marketing rule. When USDA briefed the industry about their decisions, a week ago Friday, none of the proponents were in the room. This doesn’t say much about any political clout or any passion proponents had for this rule. The proponents of this destructive marketing rule are the same people who were attempting to tear down the National Cattlemen’s Beef Association and the beef checkoff.

It’s easy to throw rocks and run away from what one starts.

As one might expect, the supporters of the GIP- SA rule were back at work stirring the pot. R- CALF USA released a statement shortly after the announcement that they are calling for investigations into the Department of Justice, USDA’s GIP- SA and the Commodity Futures Trading Commission, claiming that since USDA’s announcement, the markets have reacted wildly for unexplainable reasons. Most serious market analysts understand the dynamics of the modern cattle markets and meat markets. Volatility is simply the market trend for now. But what would you expect from paid activists? —PETE CROW