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Problems can create opportunities, says Leo McDonnell,

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HAY MAKER

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R-CALF Head Outlines Viewpoint
On Issues Cattle Industry Faces

By David Bowser

DENVER — Problems can create opportunities, says Leo McDonnell, president of R-CALF.

"You know, I don't think there's ever been a time in the history of this country where we've had as many problems in the industry at one time," McDonnell told R-CALF members at the group’s convention here earlier this year, "and then had such a short window of opportunity to address them in some kind of meaningful fashion."

There's animal ID, COOL, fast track trade liberalization talks, import safeguards and food safety problems from foreign countries.

"We've never had so many issues on our table," McDonnell said. "Interestingly enough, if you look at them all, they're somehow all related to this extreme trade liberalization that's going on today."

No issue is going to have a bigger impact on the survival, profitability or shape of the U.S. cattle industry, McDonnell opined.

"Demand is not going to protect you from it," McDonnell said. "Country of origin labeling is certainly not going to protect you from it."

He said trade liberalization is the number one issue for today's rancher and his children.

At the same time, he added, some of the problems the industry faces creates tremendous opportunities.

"Sometimes, the weight of these issues can keep you down and keep you from finding the opportunity within it," McDonnell said.

He said the problems faced by this generation of ranchers pales in comparison to what ranchers faced in the Great Depression of the 1930s and during World Wars I and II.

"Our problems are fairly insignificant compared to what they went through," McDonnell noted. "They certainly rose above it and built a great country and a great industry."

Today's problems and challenges, he said, shouldn't weigh ranchers down.

"You've got to realize it's part of the process," McDonnell said. "It's part of life."

He said ranchers today live in a country where they can address their problems in meaningful ways.

"Over half the population of the world doesn't have that opportunity," McDonnell pointed out.

He said ranchers should enjoy the economic opportunities afforded them.

"When you're looking at some of the things we're seeing, such as individual animal ID — which I'm not a great fan of, but it's coming," McDonnell said, "you can certainly take the national ID and make it an opportunity."

But he said ranchers have to be involved in the process.

"If you don't want to be caught on the railroad tracks like a deer in the headlights," he said, "just stand around and say 'No.' You'll get knocked over."

He indicated that he's optimistic about the future of the cattle business.

"There are some great things that could come out of it," McDonnell said. "Source verification. A lot of export markets require that today. If we had it in place, we'd probably have some of our export markets back."

He said, however, that what he doesn't like about individual animal identification is the way it's being shoved at producers. He said the government claims it's needed in case BSE or foot and mouth disease is found in the U.S.

"That's the whole hype behind it," McDonnell said.

But he pointed out that it will increase the regulatory burden on U.S. producers. He said there is also a cost associated with it, and that the producer will bear much of that cost.

He accused the federal government of liberalizing historically conservative import standards that have kept such diseases out of the country.

"We're going to have to get over it," McDonnell said.

He said R-CALF and its affiliate groups need to turn it into an opportunity. McDonnell said U.S. cattle producers need to take control of it. If producers don't take control of it, he said, someone else will who doesn't have the needs of the producer in mind.

"Another thing I don't like about the national ID is that I'm not a great believer of climbing in bed with the regulators," McDonnell said.

That's why he thinks producers should make it their program.

"Make it flexible enough that it will work with the existing programs we have today," he advised.

He said that over the years, the industry has rapidly cleaned up brucellosis, tuberculosis and other diseases in states with brand laws.

"You have quick traceback," McDonnell said. "Keep it flexible."

But the action has to be taken by ranchers.

"You only get out of it what you put into it," McDonnell said. "That's one of the neat things in life. Life rewards action. It certainly doesn't reward inaction."

It's been the rancher, he said, who has gotten things done in the past.

"Even country of origin labeling today — what a battle," McDonnell said. "We got that through in the 2002 Farm Bill."

R-CALF's lawyer, Terry Stewart, told them when it passed that the battle had just started, McDonnell recalled. He predicted that the battle would last at least five years if they wanted to keep it.

McDonnell said a lot of nonsense has gone on with country of origin labeling.

"They said we needed a national ID to have it and those kinds of things," McDonnell said. "We know that's not true."

He said the General Accounting Office, the investigations arm for Congress, put out a report in the fall of 2003 that stated that under the country of origin labeling law, the U.S. Department of Agriculture could follow the model of the national school lunch program. That model required imported product to be identified. The balance, by default, would be domestic product.

"They've done that for years and years," McDonnell reminded. "It doesn't cost the ranchers any more money. It doesn't cost the importers any more money."

Even spokesmen for the packers agree with that, he said.

McDonnell said that's the way the law is written and the GAO said it would work.

"We've heard a lot about costs," McDonnell said, "but what do we know?"

He said a GAO report stated that the cost to the processing sector wouldn’t be a major factor.

McDonnell noted that the GAO pointed out that the packers are going to have to identify cattle and meat anyway under new Homeland Security laws.

"They're not only going to have to identify what they bought, but who they bought it from, who they sold it to, and what they sold," McDonnell said.

He insisted that many of the accusations laid out against country of origin labeling simply aren't true.

"When somebody said it's a poorly written law," McDonnell said, "I always ask for who?"

McDonnell said it's a good law.

"We don't need to compromise it any more," he insisted.

McDonnell said trade issues are going to be the major issues facing the industry in the future, whether it’s a battle over hormones with the European Union, BSE in Canada, or regaining export markets to Japan and Korea because of the Canadian BSE problem.

"We've never had a case of BSE in our native herd," McDonnell reminded his listeners.

He said he's concerned about the liberalization going on with all the free trade agreements that the country has or is negotiating around the world.

"In two or three years, you're going to have a free trade agreement with every major beef producing country in the world," McDonnell predicted.

At the same time, he said, the average tariff for beef going into consuming countries around the world is 80 percent.

"In the U.S., which is the major consuming country," he said, "it's basically zero."

McDonnell said the U.S. is locking its borders open to major producing countries, but making it more difficult for consuming countries to buy U.S. beef.

"You're not winning," McDonnell said. "You can, but you're not winning."

He said there are export subsidies by other countries that are also hurting U.S. exports.

"There are export subsidies from major beef producing countries," McDonnell said. "They're used to getting their product out on the global market cheaper than we can."

It makes U.S. producers less competitive, he said.

"It guarantees that you aren't going to be able to compete in the global market," McDonnell added, and "it makes it a little tough to compete in your own market when that stuff comes in."

Some countries hide behind state trading enterprises, he pointed out.

"Things like the Canadian Wheat Board," McDonnell said, "which the National Cattlemen's Beef Association identified in 1996 as giving Canadian feeders a $60 advantage."

He questioned whether that's a level playing field.

"Don't get caught up in the smoke and mirrors and card tricks of this phrase that 96 percent of the consumers live outside the borders of the United States and that is where your future is," McDonnell advised.

He said the Washington apple industry fell for that. The State of Washington built a beautiful port to export their apples. What nobody thought about, McDonnell said, is that things would come into that port. There wouldn't be just exports.

"Why in the world didn't they figure out that port works both ways?" McDonnell said. "You can go through Washington today and look at acres and acres of apple orchards that have been torn up. Go through California and look at their farmer co-ops for fruits and vegetables. Over 90 percent of them have been shut down in the last 10 years."

McDonnell said the global market is like the domestic market.

"It goes to the low-cost producer," he stressed. "They probably also found out that super high-quality products that they thought they had — and there's nothing better than a Washington apple — didn't keep them from the realities of the market. It didn't protect them."

Demand is not a protection, he said.

McDonnell said producers have to have input into trade agreements. He said R-CALF was able to have some input to the Australian Free Trade Agreement, and that special rules were prepared for livestock.

"One of the problems we really have today in this industry is that we send mixed messages," McDonnell said. "We have a fragmented industry."

He said trade negotiators take the easy positions presented by some in the industry so they can say, when there are objections, that the cattle industry backed the proposals, even if 90 percent of the cattle industry didn't support it.

McDonnell said the Central American Free Trade Agreement has been negotiated and will probably be introduced to Congress this spring.

"There are no phase-out quotas in there," McDonnell said. "There are no safeguards like we have in the Australian Free Trade Agreement. In fact, we lost some of our domestic safeguards."

McDonnell warned of the danger of trans-shipments of products. Exporters bypass their trade obligations, go into trade zones and send their products on to the U.S. A trader can ship a calf into a country in CAFTA, throw it out on grass and let it gain a few pounds, then ship it on to the U.S.

"You know there's a couple of countries down there that raise quite a few cattle," McDonnell said.

He said CAFTA is the most liberalized free trade agreement he's ever seen.

"It is also well understood," he said, "that it is the model for future free trade agreements in South America."

He said NCBA joined Wal-Mart, Cargill and several other companies recently to sign a joint letter asking that the Dominican Republic be allowed to join CAFTA.

McDonnell said he's more concerned about U.S. consumers and the domestic market than about the fortunes of Cargill and Wal-Mart.
 

Jason

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"Demand is not going to protect you from it," ... "Country of origin labeling is certainly not going to protect you from it."



individual animal ID — which I'm not a great fan of, but it's coming,"

"Source verification. A lot of export markets require that today. If we had it in place, we'd probably have some of our export markets back."


"Another thing I don't like about the national ID is that I'm not a great believer of climbing in bed with the regulators,"

"They said we needed a national ID to have it and those kinds of things," McDonnell said. "We know that's not true."

"There are export subsidies from major beef producing countries," McDonnell said. "They're used to getting their product out on the global market cheaper than we can." "Things like the Canadian Wheat Board," McDonnell said, "which the National Cattlemen's Beef Association identified in 1996 as giving Canadian feeders a $60 advantage."

and there's nothing better than a Washington apple — didn't keep them from the realities of the market. It didn't protect them."

Demand is not a protection, he said.


"We have a fragmented industry."


Leo doesn't want demand for his product, He doesn't think COOL will work but he wants it anyway.

Mandatory ID would be helpful but he doesn't like it. Climbing into bed with PETA is ok but not regulators.

Regulators say Manadatory ID is needed for source verification but Leo doesn't believe it.

Export subsidies are a problem only when they are from another country...explain how the wheat board makes it cheaper to raise cattle in Canada? Those trade alligations have been proven wrong 13 times now Leo.

Then he uses Washington apples as an example, says there is nothing better but consumers obviously found another source at a better price..he says they can't compete.

Then he again says demand is no protection...what other protection is there?

The industry is fragmented...gee Leo I wonder why?
 

Manitoba_Rancher

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Leo is full of Bull $hit. If he doesnt like ID tags then that tells me something...... I really feel sorry for you US ranchers if you have a dumbass like this making statements like this because I have a feeling your going down and not because of the Canadian rancher and his cattle. :? Why dont some of you step up and tell mr dipstick what you think. He s always so good at running Canada down I think its time to tear him apart.
 

HAY MAKER

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Manitoba_Rancher said:
Leo is full of BS. If he doesnt like ID tags then that tells me something...... I really feel sorry for you US ranchers if you have a dumbass like this making statements like this because I have a feeling your going down and not because of the Canadian rancher and his cattle. :? Why dont some of you step up and tell mr dipstick what you think. He s always so good at running Canada down I think its time to tear him apart.

MR you might want to study LEO a little before you start tearing him apart,last time the NCBA tried that he had them yelping like a cur dog with their tail tucked between their legs..............good luck PS I do admire your spunk tho.I think what the man was trying to say is some of these things we are going to have to accept
 
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Hayseed: "MR you might want to study LEO a little before you start tearing him apart,last time the NCBA tried that he had them yelping like a cur dog with their tail tucked between their legs.............."

And that's when Hayseed's mom came to wake him up for school.


~SH~
 

Texan

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HAY MAKER said:
"Why in the world didn't they figure out that port works both ways?" McDonnell said. "You can go through Washington today and look at acres and acres of apple orchards that have been torn up. Go through California and look at their farmer co-ops for fruits and vegetables. Over 90 percent of them have been shut down in the last 10 years."
Help me out some here, Hay Maker. Aren't Washington apples clearly labeled as to not only country of origin, but even state of origin? In fact, every individual apple has a sticker, doesn't it? How do your R-CALF leaders and cronies explain the demise of the apple producers that Leo talks about? Surely it's not because the consumers don't really care about origin? Maybe it's really more about cost........

HAY MAKER said:
McDonnell said the global market is like the domestic market.

"It goes to the low-cost producer," he stressed.
Exactly! It goes to the low-cost producer, regardless of origin!

HAY MAKER said:
"They probably also found out that super high-quality products that they thought they had — and there's nothing better than a Washington apple — didn't keep them from the realities of the market. It didn't protect them."
Is that quote really from Leo McDonnell? That sounds more like a quote from those of us on the V-COOL side of this debate. It's really hard to believe that any proponent of an M-COOL would admit this. How do you reconcile that statement with the position that all of the Canuck beef bashers take? That U.S. product is superior to theirs and the consumer will readily choose it? Now Leo admits that, even if U.S. beef is superior to Canadian (which is doubtful), that won't protect us from the realities of the marketplace!

Okay, Hay Maker. Help me out, please. Help me to understand the need for a government mandated COOL. Help me to understand the need for more government intervention in my business. Help me to understand the need for more divisiveness between us and the Canucks. Help me to understand the need for more choices for the consumer at the meat counter. Where am I going wrong?
 

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Texan, "Help me out some here, Hay Maker. Aren't Washington apples clearly labeled as to not only country of origin, but even state of origin? In fact, every individual apple has a sticker, doesn't it? How do your R-CALF leaders and cronies explain the demise of the apple producers that Leo talks about? Surely it's not because the consumers don't really care about origin? Maybe it's really more about cost........ '"

Maybe you missed the part just prior to the apple story where Leo talked about subsidies? Subsidies, in effect, lower your cost. He also menitoned the tariff differences. For the most part, we have no tariffs for beef coming in, but the average for our beef going out is 80%. What does a tariff or lack there of do for your competitiveness? Now put it all together and ask yourself if the subsidy and tariff situation only applies to beef and not apples.
:wink:

Leo also didn't mean that MCOOL won't help us. He meant that it is not the stand alone save all - cure all. We're going to need more than one tool to battle the imports.
 

Kato

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Yes, problems CAN present opportunities, although I'm not sure how two years of the highest cattle prices in the history of American are to be considered 'problems'. :shock:

I am re-posting something from Agri-ville (thank you blackjack, for finding it) for your reading enjoyment.

Blackjack posted ...
...here is a segment from Agvision that I watched after the Canadian Satelite Auction yesterday...


Protectionism

Canadian farmers of every stripe can be forgiven if they’re not overly excited about free trade...some producers won’t dispute there have been benefits, they just don’t seem to believe many have trickled down to the farm.

Jen: About two years after the U.S. border closed to Canadian live cattle, those in the U.S. cattle industry began to realize that protectionism can have unexpected consequences. On the show today Dr Derrell Peel will explain what he calls the “bizarre logic” of protectionism, adding that it has only served to make Canada a tougher competitor in the world meat trade.

Kev: Peel who is a livestock and marketing specialist at Oklahoma State university, points to the 20-per-cent increase in beef imports and the emergence of Uruguay and Australia as processing beef suppliers to the U.S. meat industry, as examples of how America has shot itself in the foot with protectionism.

Kevin; At a time when many Canadian farmers are questioning the benefits of the various free trade deals with the U.S. …American cattle producers are beginning to realize that protectionism can have unexpected consequences also. Dr. Derrell Peel a livestock marketing specialist at the University of Oklahoma and he joins me today from Stillwater. Thanks for taking the time.
Since May of 2003 there has been a great deal of discussion in this country about how to restructure the cattle industry to be less vulnerable, less dependent on export markets…the assumption being the nafta mechanisms seem to do little to reopen the U.S. While some Canadian farmers struggle to see how they’ve benefited from free trade deals you’re experience shows that protectionism also comes with a cost.
Derrell: it’s a big commitment any industry make a decision about we’re either going to go a protectionist route or going to go a free trade route unfortunately it when you end up somewhere in the middle that I think there is a problem. If you could achieve pure protectionism and you’re willing to live with those consequences that’s one thing but in many cases we wind up somewhere in the middle that’s I think where it gets confusing particularly when you have an industry as complex as the beef industry where you are talking about a multitude of different products in different forms and so you really have to look at all those as a unit rather than just focusing on just live cattle or just meat or specific products in the market.
Kev: on this side of the border beef producers have seen the record U.S. prices and you believe that this short term gain can also be long term pain.
Derrell; I think ya the transition from a more restrictive environment to a less restrictive environment in many cases is where most of the challenges lies, where most of the problems lie. And sometimes unfortunately that can be a relatively long process and of course what happens now is we tend to get into situations I think on all sides of the border where there is a tendency for bit of a reactionary mode and we do things based on the immediate pain without really thinking through the long term consequences so it takes a very strong commitment on all parts to realize the benefits of gain and in many cases when we do things short term there ultimately some consequences that occur.
Kev: you’ve been outspoken as a critic of some U.S. policy in terms of protectionism in agriculture gives us some examples where you feel the U.S. has shot itself in the foot with protectionist polices.
Derrell: again you have to make that commitment and see it through it does imply in some cases there are short term losers for example the U.S. was very insistent a number of years ago that the Canadians change their grain subsidies which was part of their process of trying to facilitate grain exports without debating whether or not the subsides should go one of the unintended affects I think ultimately was the fact that when you don’t have the subsidies in the interior of Canada to move grain to the coast it made grain cheaper it did a lot to facilitate over the last ten to fifteen years the development of the cattle and pork industries and to some extend the poultry industry in Canada so you have to think through those consequences its not so much a question of right or wrong its more an issue of whether you think through all of the linkages and anticipate the results that are going to happen
Kev: some of what I’m seeing in the U.S. media is that there is beginning to be some realization with producers in various pockets of the U.S. that this entire protectionist approach is costing them. Do we know how it’s costing them? Will you lose packers?
Derrell; I think in the most immediate case if you look over the past 18 months since may of 2003 when the first Canadian bse case happened where we stand today lets talk about 2004 as a calendar year, the net result was we have an increase in fed beef imports Canadian beef imports or U.S. imports of Canadian beef in 2004 were basically at pre bse levels on average and all of that now is under thirty months of age which means there is a net increases in fed imports were not getting thirty percent of that or thirty five percent that used to be cow beef out of that so there has been a net increase in fed beef imports and at the same time we’ve had a tremendous demand for the processing beef because of our hamburger meant demand in the U.S. so we’ve had an increase in imports from other places in the world to offset the meat that we’re not getting from Canada that’s cow beef and at the same time there are very strong indications that we are going to lose some infrastructure ultimately one or perhaps more than one packer may wind up closing as a result of this.
Kev: the old saying is there is never an ill wind that doesn’t blow somebody some good. In this case what has partly happened is because the Canadian industry has been forced through the fire forced to reinvent and reexamine itself comes out the other end in your opinion will they be a stronger industry a stronger competitor to the U.S.?
Derrel: I do believe ultimately they will be a stronger competitor. One of the things we try to emphasize it whatever trade polices whatever political approached anybody decides to take underneath that there is the economic reality of the supply and demand forces and I do believe those things work and so regardless if we have barriers that prevent some or all of the Canadian products from coming into the U.S. it doesn’t change the fact that there is so much cattle and meat being produced on the north American continent so we have to recognized and I think we are slowly beginning to recognize that even if we don’t permit Canadian cattle and beef into the U.S. or if we should go down that road completely it doesn’t change the fact that Canada is going to be a very strong competitor and Mexico and japan and other global markets so there is just a reality there Canadians are going to have a cattle industry so is the U.S. ultimately we have a lot more in common that we have to gain by these short term spats against each other
Kev; how do you feel protectionism impacts the American producer. Ultimately does it make them more dependent?
Derrell: I think as an industry if you make the decision that you’re going to go the protectionist route a couple of things have to be the case and again that’s a viable alternative as an economist it’s not really my job to say we shouldn’t do that but to make sure we understand the consequences. One is have to be able to effectively achieve it and that’s not always as easy as it seems partly because those economic forces are still there regardless whether you have political barriers and the second one is its kind of all or nothing you can’t just do it half way again we’re talking about an industry that is very complex very many different products so what were’ really doing here is not talking about total protectionism in most cases we talking about pushing on one side and anticipating where it’s going to pop out on the other side that ultimately hurts a lot of people because it causes changes in the industry but it doesn’t really change the overall end result in terms of what the market is going to achieve.
Kev; just out of industry outside the beef industry I know you tend to stick to the beef industry but how has protection ism impacted other sectors like the hog industry?
Derrell: I think there are some of the same issues. I don’t follow the hog industry as close but again some of the same things some of the hog industry in Canada has grown because there are certain resources and advantages available there that implies some transition so the U.S and Canadians have to ultimately decide whether or not we’re going together or whether we’re going to continue to do it its much the same issues because you’ve got live animals you’ve got meat so the tariffs that are currently in place on the hog side probably won’t stop hog production in Canada what it will probably do is force the Canadians to make additional investment in the infrastructure there and the net result probably that you have a bigger industry in total when you look a the whole continent.
Kev: when you hear that someone else is struggling as a result of currently policies I guess in this case we have seen some of the packers in the U.S. I guess in the North west that are struggling as a result of the decision to keep that border closed I guess in the end it’s cool comfort to many producers who have really been struggling since may of 2003
 

Bull Burger

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If the article Haymaker posted; "R-CALF Head Outlines Viewpoint On Issues Cattle Industry Faces" doesn't convince the R-CALF head-nodders that LEO needs psychiatric help, I don't think there's help for them or him. Is he still watching old Kerry speeches? He sounds like a sixth grader answering questions.


BB
 

Texan

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Sandhusker said:
Maybe you missed the part just prior to the apple story where Leo talked about subsidies?
Nope. I didn't miss that. But, the truth is that all of the protectionist strategies that Washington apple growers surely attempted must have failed them. I don't know what those strategies were, but surely they didn't go down without a fight, did they? Protectionism does not work! Ask the automakers. Look at the imports on the roads today. You either conform with the natural trend toward global trade, or you get buried.

I'm gonna leave this topic with a great quote. Thanks to Hay Maker and The Livestock Weekly for publishing it. But thanks most of all to the head of R-CALF for recognizing the realities of modern trade when he said:

"They probably also found out that super high-quality products that they thought they had......didn't keep them from the realities of the market. It didn't protect them."
-----Leo McDonnell
 

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