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Feb 13, 2005
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-----Original Message-----
From: Mike Callicrate [mailto:[email protected]]
Sent: Monday, June 20, 2005 9:13 PM
To: [email protected]
Subject: SD Stockgrowers Correct False Claims by Mandatory Beef Checkoff Proponents


June 20, 2005

For more information contact Carrie Longwood at:

605-342-0429 or [email protected].

SD Stockgrowers Correct False Claims by Mandatory Beef Checkoff Proponents

The South Dakota Stockgrowers Association (SDSGA) president, Ken Knuppe, Buffalo Gap, S.D., says the organization is concerned about misleading information released by representatives of the Cattlemen's Beef Board (CBB) indicating the mandatory beef checkoff is responsible for adding hundreds of dollars in value to feeder cattle.

Knuppe says that supporters of the mandatory, $1/head beef checkoff government speech program have asserted that the checkoff is responsible for a $200/head increase in the value of a feeder calf. "If the mandatory checkoff has been so successful, why is it just the past two years that ranchers are finally seeing some profits?" asked Knuppe. "Data released last week by the U.S. Department of Agriculture (USDA) reflects that the producer share of the retail dollar hasn't changed, but retail prices continue to soar while the wholesale to retail margins are widening. In other words, profits are increasing at the retail level; it just isn't 'trickling down' to the producer."

"The checkoff has been in place for almost 20 years. It seems like quite a coincidence that just as the Canadian border closed checkoff proponents began touting the program's effectiveness in increasing producer profits."

Knuppe explains that, although CBB staff and board members claim that beef demand is on the rise, per capita consumption of beef in the United States is actually down. "In 1998, American consumers ate an average of 66.7 lbs of beef, this past year it dropped to 65.6 lbs. By what yardstick is this considered a success for an $80 million per year beef promotion campaign funded mostly by U.S. producers?" he asked.

While total consumption of beef in the U.S. has increased, Knuppe says much of this can be attributed to an increase in population.

Knuppe also points out that even an increase in beef demand or consumption doesn't necessarily equate to profits for the U.S. cattle producer. "Just because people eat beef, it doesn't mean that U.S. ranchers get paid more. Consumers could be unknowingly buying beef from Australia, Mexico, Canada or one of the other 30 nations that export beef into America which is sold under the guise of the USDA grade stamp of approval. It's pretty simple, really. U.S. ranchers benefit only when consumers buy U.S. beef. Without mandatory Country of Origin Labeling, consumers don't have the information they need to choose U.S. beef."

"Cattle prices are up partly due to short supply in the U.S.," Knuppe explains. "Cattle numbers in the U.S. are lower than they have been for over 50 years. It's a simple supply and demand theory. The packers have increased boxed beef production in countries like Canada and they are shipping that meat into the U.S. which, in turn, displaces demand for American cattle. Those imports of boxed beef are essentially a captive supply tool allowing packers the freedom to purchase fewer U.S. feeder cattle, which can drive down cash markets and give the packers the ability to manipulate the markets. With prices low or when they are unsettled, cattle numbers naturally stay low because there is no long-term incentive to increase numbers."

Knuppe goes on to say that with the sudden closure of the Canadian border, meatpackers lost some of their live cattle captive supplies, forcing them to turn to U.S. cattle to meet their needs. "It's true that the U.S. is still importing record amounts of Canadian boxed beef, but without the ability to import live cattle, total tonnage of beef imported from Canada annually (live cattle and boxed beef combined) is much lower now than prior to the border closure."

Limited supply isn't the only reason for good cattle prices. Knuppe believes the Atkins, South Beach and other high protein diets have strongly impacted consumers' eating selections. Plus, Knuppe says that today's Americans are willing to spend more freely than ever before. "A decade ago Americans thought they couldn't afford steak, today's consumers seem to buy what they want, when they want it."

Knuppe encourages cattle producers to be grateful for current cattle prices, but not to get comfortable.

"Ranchers are finally being paid a decent wage, but the truth is that in relation to other expenses, cattle prices would have to go even higher to actually compensate for the cost of transportation and regular living expenses," he commented. Cattle-Fax data for 1990-2004 showed returns to cow/calf operations averaging $36 per head. That translates to an income that's approaching poverty level," said Knuppe. "The CBB's claims about the beef checkoff adding $200 in value to U.S. feeder cattle sound great until you dig a little deeper and see that producers aren't realizing that profit."

"The South Dakota Stockgrowers Association, along with R-CALF and the Organization for Competitive Markets (OCM) are working to ensure that U.S. cattle producers claim their fair share of the consumer dollar; not just one year out of ten, but ten years out of ten."

Haymaker, it seems a bit surprising that you as well as Knuppe apparently do not understand that beef CONSUMPTION does not represent beef DEMAND.

The prices consumers are willing to pay for a given quantity of beef represents demand.

Take Kens' assertion that producer share of consumers' beef dollar declined: would you rather have (the numbers used are for purposes of demonstration only, not the actual numbers) ten percent of $20.00 the consumers spend on beef ($2.00), or eight percent of $40.00 consumers spend on beef ($3.20)?

BTW, demand started to go up in 1998--long before the Canadian border closed.

It is the more than 25% increase in beef DEMAND that has added the increase in value to cattle. While we cannot know exactly how much of that increase is from the checkoff, Knuppe appears to attibute the prices to supplies, looking ONLY at domestic production. Net supplies in 2004 equaled 2002 with near record live cattle imports from Mexico (exceeding live cattle imports in 2002 from Mexico and Canada combined!) plus boxed beef imported from Canada. With the Supply & Demand argument as the reason for current high cattle prices, to have a valid argument he has to recognize that supply is flat, and also to recognize that it must be DEMAND that has driven us to those higher prices.

What Knuppe apparently fails to understand, is that you can actually have a drop in demand even with an increase in the number of pounds produced--if they remember their history at all, that situation occurred in the '70's and into the '80's. Do "they" really not understand what demand is.....or is it a convenient excuse for trashing the Beef Checkoff to suit their agenda????

Does Ken Knuppe ever have anything positive to say. The only things that I ever read from him is whinning and complaining. I know that every producer in SD had a chance to get there cattle enrolled in a program called South Dakota Certified Beef, but only two did, and Ken wasn't one of them.

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