Packers and Animal Ag - strange yet necessary bed fellows

The recent news of JBS planning to take stake in Pilgrim's Pride got me to thinking about the state of animal agriculture in the United States. For the longest time, there has been a constant battle between the three main sources of protein in the U.S.: beef, pork, and chicken. During the 1980's the poultry industry was indirectly responsible for labeling red meat, especially beef as being high in cholesterol, and being bad for everyone. This has since been proven wrong, and red meat, especially beef should be a part of a balanced diet. However, this notion changed the way proteins were perceived and still do for the most part. As a result, pork still uses the very successful catch phrase "Pork...the other white meat", to differentiate itself from poultry.

So, there is always animosity between the big three proteins, and probably always will be, or will it?

In 2001, Tyson, one of the largest poultry producers in the U.S. (2nd behind the now bankrupt Pilgrim's Pride) bought out IBP (Iowa Beef Packers) then the #1 beef processor and #2 pork processor in the US. Since that time, revenue from beef has accounted for 44% of the company's sales in 2008, while poultry accounted for 33% of total sales. And now with JBS (a huge beef packer based out of Brazil) buying out Pilgrim's, you have to wonder if the lines of animal protein are beginning to get blurry, from a purely agriculture view point.

Basically, who do the packers side with on important trade, health, and political issues when it comes down between beef and chicken? For instance, the U.S. government is planning on levying tariffs on Chinese tires currently, and China is willing to stop importing U.S. poultry, if the U.S. does goes through. Now, wither or not American beef would be able to capture anymore of the Chinese market due to the absence of American poultry, I doubt it. However, this probably won't happen, because China LOVES chicken feet, yes I said chicken feet! It’s a delicacy over there, and they have to have it. The threat of banning the importation of American poultry is more of a grandstanding move by the Chinese government than an actual promise. But with this being the case, where do the packers stand on this? Do they not care, and hope that the beef revenues make up enough to cover the potential losses from poultry? Maybe so.

Secondly, what happens if, God forbid, we have another BSE or perhaps a foot and mouth disease outbreak in the U.S. and it terrifies the American public and causes them to quit eating beef or significantly cut back on it? The same question from above can be asked again. I used to work for Sanderson Farms, a large poultry processor, and back in 2003 when the first case of BSE was found, it seemed like the whole damn company was happy as hell, because people were scared of eating beef, and turned to chicken. This is one of the many reasons why I don't really care for the poultry industry and the way they do things, mind you I still eat chicken, just not that much.

One final example, national animal identification has been proposed for the last several years as a means of tracking animal diseases more easily. This proposed program would mainly affect beef and pork because each individual animal would have to have an ID number, but chickens could possibly be allowed to be identified by pen/house number, basically be numbered in groups. This would increase production costs for beef and pork, but not chicken. So, once again who do the packers side with? The most likely answer is nobody. As I mentioned before, as long as one protein can make up for the other, they won't care. All that matters is that they reach their target revenues and stock prices, so that the stock holders will remain happy.

Now, if there comes up a rare situation where beef, pork, and chicken all have to work together, then, that's when you will see the packers jump in and do something. For instance, animal rights groups are constantly attaching animal ag, and hopefully packers have been and will continue to work with the representative livestock associations to stop these groups from doing more harm than good to animal agriculture.

However, in the mean time, livestock associations and their members will have no choice but to continue to raise their animals the best way they know how to, while maximizing profits to stay in business. This includes marketing their respective products to try and gain more market share from competing proteins or at least hold onto their current share.

One thing's for sure, there's fewer and fewer packers/processors to sell animals to, so farmers and ranchers will continue to have their hands tied behind their backs when it comes harvest time. There’s not much that the agriculture community can do when it comes to packer consolidation, because they have to sell their products to someone.

The only thing they can hope for is that the Justice department continues to uphold antitrust laws and protect both consumers and producers. Earlier this year the Justice department blocked a merger between JBS and National Beef Packing Co. that would have given an unfair advantage for the company and hurt the competiveness of beef producers in the U.S. But that's another blog for another time...

Cass Sunstein to be the Administrator of the Office of Information and Regulatory Affairs

Cass Sunstein is or was a law professor at the University of Chicago and Harvard University. Mr. Sunstein is a radical animal rights supporter. While I do not know if he is a member/supporter of the Humane Society of the United States (HSUS, and no this is not your local animal shelter) or PETA, he obviously agrees with most of their ideals.

In the introduction of "Animal Rights: Current Debates and New Directions", a volume edited by Sunstein and his then-partner Martha Nussbaum. On page 11 of the introduction, during a philosophical discussion about the source of animal rights under the law, Sunstein notes that person hood need not be conferred upon an animal in order to grant it legal standingfor suit. Instead, Sunstein hypothesizes, animals could be granted "the right to bring suit" while represented by an attorney. For example, under current law, if someone say their neighbor beating a dog, they currently cannot bring suit for animal cruelty because they do not have legal standing to do so. Sunstein suggests that granting standing to animals, actionable by other parties, could decrease animal cruelty by increasing the likelihood that animal abuse will be punished.

In this introduction he does not propose doing so, but please, if he had these philosophical discussions/hypothesis and then wrote them in the introduction, then he believes this is how things should be!

Basically, his appointment as Admin of the Office of Information and Regulatory Affairs means he is now the regulation Czar, which allows him to have the final say in the consideration of alternatives to the rule making and analysis of the rule's effects on society, both its benefits and costs (from whitehouse.org). So the OIRA has a considerable amount of power, and can influence many different items to fit what he/she wants. Hence the apprehension of having an Animal Rights activist/supporter in this position, when you are involved in animal agriculture. It is very possible that his personal feelings against animal agriculture could lead him to try and shape federal regulations that will ultimately harm the agriculture industry.

For the record, myself and all of animal agriculture, believes in animal welfare, which is the proper care and handling of all animals throughout their lives. Farmers and ranchers know that if they don't treat their animals with the utmost care (proper handling, good nutrition, etc...) they would not be able to stay in business, but at the same time, they do it because it is the right thing to do (taking care of their animals) and they love what they do! Animal Rights groups believe that all animals should be able to roam free, no zoos, no hunting, no furs, no meat, milk, or cheese should be eaten, etc... These people are radical in their thinking.

Back to the matter at hand, here is a breakdown of the vote:

Alabama: Sessions (R-AL), Nay Shelby (R-AL), Nay

Alaska: Begich (D-AK), Nay Murkowski (R-AK), Nay
Arizona: Kyl (R-AZ), Nay McCain (R-AZ), Nay
Arkansas: Lincoln (D-AR), Nay Pryor (D-AR), Nay
California: Boxer (D-CA), Not Voting Feinstein (D-CA), Yea
Colorado: Bennet (D-CO), Yea Udall (D-CO), Yea
Connecticut: Dodd (D-CT), Yea Lieberman (ID-CT), Yea
Delaware: Carper (D-DE), Yea Kaufman (D-DE), Yea
Florida: LeMieux (R-FL), Nay Nelson (D-FL), Yea
Georgia: Chambliss (R-GA), Nay Isakson (R-GA), Nay
Hawaii: Akaka (D-HI), Yea Inouye (D-HI), Yea
Idaho: Crapo (R-ID), Nay Risch (R-ID), Nay
Illinois: Burris (D-IL), Yea Durbin (D-IL), Yea
Indiana: Bayh (D-IN), Yea Lugar (R-IN), Yea
Iowa: Grassley (R-IA), Nay Harkin (D-IA), Yea
Kansas: Brownback (R-KS), Nay Roberts (R-KS), Nay
Kentucky: Bunning (R-KY), Nay McConnell (R-KY), Nay
Louisiana: Landrieu (D-LA), Yea Vitter (R-LA), Nay
Maine: Collins (R-ME), Yea Snowe (R-ME), Yea
Maryland: Cardin (D-MD), Yea Mikulski (D-MD), Yea
Massachusetts: Kerry (D-MA), Yea
Michigan: Levin (D-MI), Yea Stabenow (D-MI), Yea
Minnesota: Franken (D-MN), Yea Klobuchar (D-MN), Yea
Mississippi: Cochran (R-MS), Nay Wicker (R-MS), Nay
Missouri: Bond (R-MO), Nay McCaskill (D-MO), Yea
Montana: Baucus (D-MT), Yea Tester (D-MT), Yea
Nebraska: Johanns (R-NE), Nay Nelson (D-NE), Nay
Nevada: Ensign (R-NV), Nay Reid (D-NV), Yea
New Hampshire: Gregg (R-NH), Nay Shaheen (D-NH), Yea
New Jersey: Lautenberg (D-NJ), Yea Menendez (D-NJ), Yea
New Mexico: Bingaman (D-NM), Yea Udall (D-NM), Yea
New York: Gillibrand (D-NY), Yea Schumer (D-NY), Yea
North Carolina: Burr (R-NC), Nay Hagan (D-NC), Yea
North Dakota: Conrad (D-ND), Yea Dorgan (D-ND), Yea
Ohio: Brown (D-OH), Yea Voinovich (R-OH), Yea
Oklahoma: Coburn (R-OK), Nay Inhofe (R-OK), Nay
Oregon: Merkley (D-OR), Yea Wyden (D-OR), Yea
Pennsylvania: Casey (D-PA), Yea Specter (D-PA), Yea
Rhode Island: Reed (D-RI), Yea Whitehouse (D-RI), Yea
South Carolina: DeMint (R-SC), Nay Graham (R-SC), Nay
South Dakota: Johnson (D-SD), Yea Thune (R-SD), Nay
Tennessee: Alexander (R-TN), Nay Corker (R-TN), Nay
Texas: Cornyn (R-TX), Nay Hutchison (R-TX), Nay
Utah: Bennett (R-UT), Yea Hatch (R-UT), Yea
Vermont: Leahy (D-VT), Yea Sanders (I-VT), Nay
Virginia: Warner (D-VA), Yea Webb (D-VA), Nay
Washington: Cantwell (D-WA), Yea Murray (D-WA), Yea
West Virginia: Byrd (D-WV), Not Voting Rockefeller (D-WV), Yea
Wisconsin: Feingold (D-WI), Yea Kohl (D-WI), Yea
Wyoming: Barrasso (R-WY), Nay Enzi (R-WY), Nay

Final Vote: 57 Yeas - 40 Nays - 2 Not voting - 1 (absence of Sen. Kennedy)

Democrats:
Yeas - 50
Nays - 5

Republicans:
Yeas - 6
Nays - 34

Independents:
Yeas - 1
Nays - 1

To break it down some more, out of the 58 democrats in the Senate, all but five voted for Sunstein. Those not voting for his nomination were from Alaska, Arkansas, Nebraska, and Virginia, which are all major animal Ag states with the exception of Alaska (they do have animal Ag, just not as much as the others mentioned here).

Out of the 40 republicans in the Senate, all but six voted against Sunstein. Those that voted for his nomination were from Indiana, Maine, Ohio, and Utah. Indiana and Ohio have large animal Ag operations, especially hogs, why those republican senators voted for the nomination is beyond me. Maine and Utah don't really factor in, but why did those Senators decide to go against the party, since it seems that both parties are sticking together? Not sure, but if I were Senator Lugar from Indiana or Senator Voinovich from Ohio, I would try to put out any fires I could with my agriculture constituents back home as soon as possible!

However, the thing I don't understand is all of the democrats from farming/animal Ag states that voted for Mr. Sunstein. States like Colorado, Florida, Montana, Missouri, North Dakota, South Dakota all of which have substantial beef cattle operations; Illinois, Indiana, Iowa, North Carolina, Ohio, which are big hog states, and also those states that are big in poultry like Maryland and dairy states like Wisconsin and Minnesota all had senators that ignored their constituents in the Ag sector and voted for Mr. Sunstein.

I can't really talk bad about party politics, because most of the republicans did follow suit and vote against Mr. Sunstein, if for no other reason to try and deal a blow to President Obama. However I hope that most of the republicans that voted no, were doing it because they believed Mr. Sunstein would be bad for their voters back home, who work in and depend on animal agriculture.

But when it comes right down to it, does it really matter what we say anymore? No it doesn't. Sadly, politicians are only worried about getting re-elected and who has the power.

I may be an idealist, and still believe in doing the right thing, unlike our elected officials all over the country, but if those that dared to believe gave up every time they faced a hurdle, we would still be living in the dark ages.

Japan - backpedling on 20-month old rule

Just when you think everything is going good, the train jumps the track! The USMEF (United States Meat Export Federation) and US trade officials had almost convinced the Japanese government to allow beef from cattle older than 20 months but younger than 30 months of age to be imported from the US once again. But now with a more left thinking ruling party (Democratic Party) taking over in Japan, this measure looks to be derailed with the country taking more of a protectionist stance.

Before BSE was discovered in the U.S., 30% of the US beef exports by volume went to Japan, but the Japanese took less than 8% last year. I understand that politics rule trade negations more than supply and demand, but this is ridiculous. Here's a link to an article about the trade situation:

http://www.forbes.com/feeds/reuters/2009/09/01/2009-09-01T173214Z_01_N01392490_RTRIDST_0_BEEF-JAPAN.html

Take a look at one of my earlier posts to find out how I really feel about the whole trade situation.

Nonetheless, who is paying off Japan to keep our beef out of their country? Now, since the BSE scare of 2003, Australia and New Zealand took over the bulk of our beef exports for Japan, but you have to wonder if Brazil has or is in the process of acquiring more quota based on the fact that they can produce a lot of beef for pretty cheap? Just something to think about...

One thing's for sure, I don't see the Obama administration really caring that much about trade, unless it has to deal with human rights issues and so called "fixing" of the trade agreements put into place by the Bush administration. It will be interesting to see for some time to come!

Texas A&M Study Reveals Negative Impact of Waxman-Markey Climate Change Bill on Farms

Everything I have read about the cap and trade bill would be bad for business and especially Agriculture (big and small, in particular small farms). While there probably should be changes in some environmental regs, this bill is not the answer, especially at a time when our economy is still on life support.
A bill like this would handcuff business with new environmental regulations that would limit production and increase costs for all involved, especially consumers. With this being said, do you think that the economy could withstand more drawbacks? For instance, the stock market and the overall health of the economy is now (at this point in time) solely based on how many jobs are being created or kept open within the country. Today, the unemployment rate in the U.S. hit 9.7%, an increase of 9.4% from last month, subsequently the stock market futures went down to negative territory this morning after the report. The Waxman-Markey bill would continue to hamper business' ability to be profitable at a time when we can least afford it.
And as long as companies are not making profits, they won't be hiring, the economy will continue to trudge along in a long slow recovery. Oh, and those 2nd quarter profits from a few months ago, were not due to greater productivity, they were due to cutbacks in supplies, productivity, and firings, that's all. And companies won't hire as long banks don't lend, but that's a whole other topic...
Anyhow, back to agriculture. According to the study conducted by TAMU, the only area of the country that would reap any benefits would be in the Midwest corn belt. And they would only benefit from crops being taken out of production, thereby raising the costs of crops. This is where the profit would come from, not carbon offsetting as has been preached by the Secretary of Agriculture. Below is the press release from Senator Chambliss' office over the study, and below is a link to the actual study.

New Study Reveals Negative Impact of Waxman-Markey Climate Change Bill on Farms PDF Print E-mail
September 03, 2009
NEW STUDY REVEALS NEGATIVE IMPACT OF WAXMAN-MARKEY CLIMATE CHANGE BILL ON FARMS (WASHINGTON, D.C.) U.S. Senator Saxby Chambliss (R-Ga.), Ranking Republican Member of the Senate Agriculture Committee, today reiterated his call for additional hearings on comprehensive global warming legislation upon release of a new study conducted by The Agriculture & Food Policy Center (AFPC) at Texas A&M University. The study, which was performed at the request of Sen. Chambliss, examined 98 representative farms in the AFPC database to understand the farm gate implications of the House-passed American Clean Energy and Security Act and discovered that 71 of the operations would be worse off under the bill.

“Clearly the data outlined in the Texas A&M University study is troubling,” said Sen. Chambliss. “I have said before this bill, particularly the cap and trade program, will undoubtedly raise production costs for farmers and ranchers. Perhaps most troubling is that the Waxman-Markey bill will result in more than 7 million acres shifting out of production in the first 5 years, with nearly 50 million acres by 2050. It does not make sense to rush action on a policy of this scope when we are now just beginning to understand the tremendous costs associated with the bill.”

According to the AFPC study, nearly all of the 27 farming operations that realize benefits under the Waxman-Markey bill are located in the Midwest Corn Belt. The study indicated the benefits are predominantly the result of increase revenue from higher prices, a result of fewer acres planted to these crops, not from payments under an offset program. In other words, geographic disparities would exist as a result of the Waxman-Markey bill. Virtually all cotton and dairy operations would be worse off and no rice farms or cattle ranches would experience any benefit under the bill. This is in direct contrast to what U.S. Department of Agriculture Secretary Vilsack said while testifying before the Senate Agriculture Committee hearing in July, at which he stated that all agriculture would benefit from this plan.

“The study makes the point that despite what Secretary Vilsack says, the Waxman-Markey bill does not benefit U.S. agriculture, and in fact, will make it harder for farmers and ranchers across the country to make a living under cap and trade,” said Sen. Chambliss. “Payments from a carbon offset program provide some benefit to some producers, but are not a significant factor in the profitability of farms in the analysis. As pointed out by AFPC researchers, higher crop prices provide the bulk of new revenue for crop farms due to ‘the price increasing effect of shifting land out of commodity production to forestry.’ We need to pursue legislation that reflects the realities of producing food, fiber, feed, and fuel in the United States, and not favor one geographic region.” A link to the study can be found here:

http://www.afpc.tamu.edu/pubs/2/526/rr%2009-2%20paper%20-%20for%20web.pdf


In conclusion this bill will do more harm than good. I will try and expound on this subject more in future posts, but for now this is a brief explanation of what I think about cap and trade.