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Response to Ken Knuppe on checkoff confusion

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Quote: "A House Ag Committee member asked how the Stockgrowers propose to promote beef, and provide education and research that would help cattle producers without checkoff dollars."

Ken Knuppe, SDSGA president (in response): "The answer is: Voluntary donations made by some of the very cattle producers who oppose the checkoff. The Stockgrowers are involved in the Cattlemen's Competitive Marketing Project, a clearinghouse for voluntary contributions. The project is not another organization, but a vessel for directing the donated fund to the organizations that work to improve market conditions for U.S. cattle producers. The funds are divided evenly between R-CALF USA (national organization that works to influence legislation that will better the trade and marketing environment for the U.S. cattlemen), Organization for Competitive Markets (OCM - a think tank of professionals who output polished information regarding the market structure, interpret laws, and provide legal assistance,) and the state stakeholder. The funds are dedicated to a specific purpose: to promote the demand for domestic live cattle through open and competitive markets."

The House Ag Committee Member asks a real good question Ken. I just wish you would have answered it with the specific benefits of these organizations as opposed to generalizing statements which really say nothing.

This CCMP racket kinda reminds me of lobbying for raising brand fees in SD, without paying brand inspectors more money, knowing that the surplus dollars beyond the costs of the program can be kept by the SDSGA to funnel towards R-CALF. I heard one sale barn even combined an R-CALF fund raiser with a fund raiser for our troops. Amazing how many ways you can fund R-CALF with a little imagination isn't there?

First I have to admit that I do somewhat sympathize with those of you who are forced to benefit from the beef checkoff dollars against your will. If some producers want to channel their dollars towards lawsuits against the same packers that they willingly entered into forward contracts with, they should be allowed to do so providing that there was a way to keep those producers from benefitting from everyone else's beef research, promotion, and education dollars. I have no problem watching others throw their money away and would enjoy seeing further seperation between progressive and regressive producers within this industry.

It's hard for me to believe that there is producers within this industry who are so naive about these issues that they believe that sueing ibp for more of ibp's $26 per head profit during ibp's profitable years and lying about the safety of Canadian beef to keep the Canadian border closed to live cattle will return more profitability to producers than beef research, promotion, and education. I suppose that will be puzzling scientists for years to come.

A clearing house for voluntary contributions? Yeh, that pretty well sums it up. I'm sure OCM and R-CALF lawyers would have no problem spending the money on frivilous lawsuits.

Ranchers Cattlelmens Action "LEGAL FUND". The name says it all.

The first thing you need to understand Ken is that any new money into this industry comes from the consumer. It will not come from within the industry. Even if you were successful in convincing a jury that forward contracts that producers willingly enter into is a form of market manipulation, that would only result in lower fat cattle prices for others. You basically rob Peter to pay Paul. Most progressive producers that were so convinced that ibp is making so much money off them would invest in a packing company with the same dollars they use to sue packers with.

Tell me Ken, what's wrong with this picture? Mike Callicrate has told producers that packers and retailers are making upwards of $400 per head profits off the backs of producers and industry packer blamers have believed him. Interestingly, in R-CALF's very own publication, they interviewed Mike about his Ranch Foods Direct branded beef program. In the article Mike says he is paying producers a TOP PREMIUM of $50 for their cattle and charging consumers 10% to 20% more for his beef products than the retailers that he claims are raping consumers and producers. Then he states that "consumer apathy" is a major reason why his company has yet to realize a profit selling "BORN, RAISED, AND PROCESSED IN THE U.S." beef products.

Does that add up for you Ken???

Why isn't Mike making at least the $400 per head for his "BORN, RAISED, AND PROCESSED IN THE U.S" beef products as he claims the large packers and retailers are making??? He's charging 10% to 20% more for the product??

Perhaps Judge Strom's instructions to the jurors to disregard Mike's testimony due to Mike lying under oath would be a good start in understanding this. Don't suppose Mike mentioned anything about perjury in his speech at the SDSGA annual meeting did he?

Here's what is wrong with that picture Ken:

1. Mike raised his prices 10% to 20% over the retailers he claimed were raping producers and consumers to the tune of $400 per head.

2. Mike only paid a top premium of $50 per head for the cattle, which is no where near the profits per head he claimed were made by ibp buying these same cattle.

3. Consumers weren't willing to pay more for a "born, raised, and processed in the U.S. beef product" as many of you have claimed in your promotion of Country of Origin Labeling.

Talk is cheap Ken and Mike Callicrate is one of the guys you have chosen to hitch your wagon to.

Lets get back to the topic at hand and compare the two investments. First, here is what checkoff dollars have done.

Beef checkoff dollars funded the research that led to the development of the flat iron steak that added value to a cut that had been sold at ground beef prices before. The 10 minute microwavable products added value to the chuck and round. The Beef Quality Audit revealed the value that was being lost due to bruises and injection site lesions.

Flint Hill Farms stated that they were able to pay significantly more for fat cattle due to the added value of the chuck and round for their 10 minute microwavable products.

When BSE was discovered in the U.S., beef checkoff dollars were used to get the truth about BSE to the American consumer to prevent consumer demand from declining further. Ironically, that was the same time that R-CALF was standing with their anti beef cohorts telling consumers that USDA did not care about food safety. Quite a contrast huh?

Checkoff dollars are repeatedly used to educate consumers to the nutritional value of beef.

Those are just a few examples of how producers have benefitted from their measely $1 per head checkoff fees.

First I guess those who claim to be in the cattle industry and not the beef indusry would need to understand how retail beef prices determine the prices paid for fat cattle before you could realize the value of checkoff dollars.

I also find it interesting that those who claim to be in the cattle industry and not the beef industry think that country of origin labels on BEEF will add to their profitability. Wouldn't this simply benefit the packers as some of you have claimed the checkoff and our export markets do?

Consistancy in arguments has never been R-CALF's mainstay has it?

Now let's look at how you would prefer to spend checkoff dollars.

1. Pickett vs. IBP. Judge threw the verdict out on. Not surprising considering that the plaintiffs themselves had testified to entering into forward contracts and agreed that ibp had a legitimate business reason for using forward contracts (75% of captive supplies). Interestingly, in the judges instructions to the jurors the judge stated that the jurors had to agree that ibp LACKED a legitimate business reason for using forward contracts when the plaintiffs themselves testified to the contrary.


To say nothing of the fact that Taylor's theories were just that, untested theories. The damages assessed to ibp were more than ibp's total beef profits for that time period.

This is like a producer forward contracting 500 calves in July then selling the balance to the same buyer in the cash market in Oct. Then sueing that buyer because he was less agressive bidding on the cash calves in Oct. due to the forward contract calves you sold him in July.

That's how completely insane this packer market manipulation conspiracy theory really is.

2. The dumping case against Canada. FAILED!

3. The recent lawsuit filed against USDA. Basically says in a court of law that SRM removal, importing UTM cattle only, increased BSE surveilance of the highest risk categories of cattle, the feed ban, and any other BSE fire walls that the U.S. also has in place, does not assure consumer safety in our product.


R-CALF risks the integrity of 80% of our U.S. beef consumption (U.S. beef) to stop the importation of 5% of our domestic U.S. beef consumption while jeoprodizing our export markets in the process. If I didn't see it with my own eyes I would have never believed it.

I would love to hear R-CALF explain the difference between the BSE precautionary firewalls in Canada and the BSE precautionary measures taken in the U.S. in the event of another BSE outbreak. I'll guess you'll find out how loyal your anti beef cohorts are then won't you? They'll just read R-CALF's legal transcripts to make their case against beef consumption. Let's pray we never have to realize the consequences of R-CALF's ignorance on the issue of BSE in the event of another positive case of BSE in the U.S.

Now I see R-CALF is backpeddling claiming to not have stated that Canadian beef created a "HIGH RISK" to consumers. Talk about John Kerry political double talk. Lots of room to slither with the word "HIGH RISK" isn't there?

Beef promotion, research, and education to help increase consumer demand vs. frivilous lawsuits. Some choice!

$1 per head for beef promotion research and educattion vs. donated calves to make lawyers rich. Some comparison!

This industry took a wrong turn when it's producers allowed a vocal minority of LMA proponents in SD to assume the role of the voice of this industry.

Oh, and BTW, do you really believe that Japan doesn't know that we have traded cattle with Canada for years? Do you really think they don't know that we have Canadian cattle in the U.S. today? You know, those same Canadian cattle that R-CALF said USDA should find without the Mandatory ID program they prohibited from Country of Origin Labeling? Do you really think that Japan doesn't know the BSE precautionary measures taken by Canada are even more stringent than those taken by the U.S.? Do you really think that Japan doesn't remember that the Washington cow, that came from Canada, was found in the U.S.? Do you really think that Japan doesn't realize that we are importing beef from the same Canadian cattle that we have banned imports from?

R-CALF must really think Japan is stupid to believe that opening our border to Canadian cattle will influence their decision to open their markets to the U.S.

To the contrary, Japan is wondering why the U.S. will not open their borders to the live cattle that produced the same beef that is now coming down in boxes.

Japan isn't buying R-CALF's BSE fear mongering rhetoric and for good reason. You R-CALFers are only fooling yourselves with your arguments about Japan. Then again, R-CALF even admitted that they had not met with any representatives from Japan yet they claim to know that opening the Canadian border to live cattle would jeoprodize our export markets. Another R-CALF blunder.

Ken Knuppe: " So why was the South Dakota Stockgrowers Association opposed to the state checkoff? Profitability increases when demand for our product - U.S. cattle - increases. How do we increase demand for U.S. cattle? With Country of Origin Labeling. Generic advertising will not build demand for a specific product! We label and then promote U.S. beef so that consumers will demand it, and have the option of choosing it."

Country of Origin Labeling is generic advertising and will have absolutely no affect on impacting consumer demand. Heck Mike Callicrate proved that and he was at the fore front of advertising a "born, raised, and processed in the U.S." branded beef product. Interesting that you imply being in the cattle industry and not the beef industry yet supposedly know more about marketing beef than those who actually market beef. That's pretty arrogant.

The Country of Origin Labeling law that you support exempted 75% of the beef that was imported into this country. Leo helped write that law and says it's a good law as it's written. You "M"COOL proponents prohibited "M"ID from "M"COOL because you didn't want to be burdened with traceback, remember? Ironically, consumers want source verification which is exactly what you prohibited.

Why would you think that Country of Origin labeling will increase consumer demand for U.S. beef when 95% of the labeled beef will be U.S. beef under this law. The 5% that is labeled as imported beef would be considered a novelty item just like New Zealand lamb was. Differentiating a small portion of U.S. beef consumption creates an incentive to purchase foreign beef, not a disincentive. Do you really think our Hispanic population will shy from purchasing Mexican beef? Do you really think that our consumers will shy from purchasing Canadian beef? First they would have to find it before they could buy it.

All this law will do will add expense to the industry to segregate foreign cattle and no it cannot be implemented like the school lunch program because the qualifications for the two programs are not the same. Instead of listening to those who claim to be in the cattle industry and not the beef industry, you should have been listening to the packers and retailers of all sizes that are actually in the beef industry during the "M"COOL listening sessions.

Ken Knuppe: "Through controls like packer owned cattle and consolidation, packers and processors force the cash markets down artificially."

Interestingly, the markets continue to move up and down. Explain that? You can't! To believe this conspiracy theory, one would have to ignore the fact that markets move up and down daily proving that they are not controlled.

You'd have to ignore consumer demand, discretionary consumer spending, carcass weights, competitive meats and all the other factors that impact cattle prices to believe such a baseless market manipulation conspiracy theory.

The fact is, we have just seen the highest cattle prices on record with the same level of packer concentration and basicaslly the same level of captive supplies. I thought you guys were telling us that packer concentration and captive supplies were the reasons for lower cattle prices? Well, which one of those two factors changed to allow prices to go higher?

Not to worry Ken, Mike Callicrate, Bill Bullard, and Johnny Smith couldn't answer that question on KBHB radio either. They danced around it like circus chickens.

Ken Knuppe: "The three big packers (IBP/Tyson, Excel, and Smithfield) own enough cattle in the U.S. and Canada that they could simply process their own cattle until the cash market drops to a level that they are willing to pay. That explains why the domestic price of cattle is higher now than at any time in history. With the border closed to live cattle, packers are not able to source their captive supplies of live cattle in Canada."

That has to be your most bogus statement of all.

First, according to Can Fax, packer owned cattle in Canada only constituted 6% of the total cattle in Canada. Considering that the U.S. herd is 7 times as large as Canada's, you do the math.

To suggest that packers owning 6% of the cattle in Canada, with Canadian live cattle only constituting 5% of our total U.S. beef consumption, could have an impact on our markets speaks volumes to the ignorance surrounding your argument regarding Canadian captive supply cattle.

If you have a problem with packers owning cattle, why doesn't the SDSGA and R-CALF start insisting that packers not be allowed to bid on their feeder calves?

Interestingly, you just mentioned the highest U.S. cattle prices ever recorded. Now can you show me what the levels of packer owned cattle are in the U.S. to prove your theory? I didn't think so!

When it comes crunch time to back your theories, you need facts Ken, not baseless rhetoric.

Ken Knuppe: "Cattle producers right now are putting time and money into addressing this problem, through the proposed Packer Ban, the Captive Supply Amendment, the Pickett vs. IBP Case, etc. Funds donated to CCMP and R-CALF address these vital issues."

There is nothing more anti Amcerican than to support legislation allowing the federal government to pick and chose who can and who cannot own cattle in the U.S.

75% of captive supply cattle in the U.S. are from forward contracts that producers have willingly entered into. How smart is it to enter into a forward contract that you believe will be used against you? That's how backwards these issues really are. As if we need the federal government to step in and save producers from their own forward contracts. Ridiculous!

The fat lady has sung with the Pickett case for the reasons mentioned above.

All three are a complete waste of money.

Ken Knuppe: "Another factor affecting our profitability is our high health and safety standards. USDA is trying to force U.S. producers to co-mingle our BSE-free (as far as we know) U.S. cattle herd with the Canadian cattle herd known to have BSE. This unfair policy is being promoted by the very entity who currently administrates the federal checkoff, and who would likely continue to receive state checkoff dollars in the future: the NCBA."

How ironic that our high health and safety standards are administered by the same entity that R-CALF said does not care about food safety, the USDA. How ironic that our high health and safety standards are not even as high as Canada's. They have a traceback system and R-CALF prohibited Mandatory ID from Country of Origin Labeling because you didn't want to be burdened with proving what you demanded, remember?

Nobody is trying to force the U.S. producers to co-mingle the U.S. cattle herd with Canada. The fact is Canadian producers and U.S. producers have been trading cattle for years. Heck, what more proof do you need than the fact that the Washington cow was discovered in the U.S. and R-CALF demanding USDA to find the Canadian cattle within the U.S. without the traceback system that R-CALF prohibited from Country of Origin Labeling?

How ironic that R-CALF members are buying these same "unsafe" cattle in Canada. Such hypocrisy!

The NCBA cannot spend checkoff dollars in any other way other than beef research, promotion, and education. To suggest that the NCBA is funded by the beef checkoff as Johnny and Herman have stated is nothing more than a bold faced lie. NCBA policy is funded by dues paying members, not by checkoff dollars.

After reading your letter Ken, I can only say that I am very proud to NOT be a member of the South Dakota Stock Growers Association. The blaming road they have chose is nothing but a dead end.


Scott Huber
Kadoka, SD
"to promote the demand for domestic live cattle through open and competitive markets."
Thats my favorite part of what Ken said. How on earth can you increase demand for live cattle, other than increaseing the demand for beef?
Excellent work in doing the research for a much needed rebuttal of Knuppe's error filled propaganda, SH!

Andy, glad there are still some SD producers who haven't been sucked into the great propaganda machine we know as "LMA/R-CALF/NFU/OCM".

At some point the truth will surface. Ranchers.net is simply one avenue for that.

I can't make the facts jive with the article's claim that the beef checkoff system is broken. We all know what is supposed to happen when supply increases – prices go down. But do they? In 2004, the U.S. had the second largest net beef supply ever (domestic production plus imports minus exports). Canada sent us almost 357 metric tons of boxed beef in 2004 – a 39% increase compared to 2003. Only Australia sent more. So we have lots of Canadian beef already in this country, its just not coming on the hoof.

My Point: Do the facts support that prices in 2004 were so good because of less supply, such as keeping borders closed to live cattle? Sorry, they just do not. From a food marketing perspective, it's because of the proactive and aggressive checkoff marketing programs that have made great strides in increasing demand. It's the new products, protecting beef from activist attacks, research that resulted in a safer product, helping youth understand why beef is good for them, and convincing retailers and restaurant owners to promote beef instead of chicken or pork. Scaring consumers about the safety of any beef certainly didn't make prices improve. Reassuring them did.

I am also concerned with the view that we must put all of our efforts into live cattle marketing. Is it the live animal that caused demand to increase? I can't make the facts work to support this, and I tried. Wouldn't it be great if we could do our best at home and forget it when the cattle cross the autogate?

My Point: Consumer don't eat cattle, they eat beef. We have great prices not because we raise great cattle, but because we raise great beef. We all know what happens when the pipeline for live animals is full but there is no significant consumer demand for the meat. Ask your neighbors or relatives (including mine) who turned to the exotic breeds in the 1970s or to buffalo in the past decade.

Did I understand correctly from the article that all we need is country of origin labeling to promote U.S. beef?

My Point: Go for it! If people think that labeling their beef as U.S. beef will increase the value of their product, then what are they waiting for? Why are they waiting for a date written into a law? (By the way, have you read the law yourself? You should. It immediately exempts any beef sold to foodservice – that's 50% right there.) Why not do it voluntarily now? Get a verification system in place, sell it to retailers and foodservice operators. I do wonder, though, if this is the big answer, why hasn't a company or group of producers already made their fortune? Actually, from a food marketing perspective, mandatory COOL does have a big flaw – it forces high quality product to share a label with low-quality product. That goes against a major food marketing fundamental. Why does Certified Angus do so well? Because it does not make a point of origin claim but a quality claim.
Big Muddy rancher said:
Notice NO R-Calfers here to refute this. Good job SH.

Lok at all that checkoff does and what R-CALF spends it's money on.

I see where the check-off is giving a contest for the best burger. The price is $50,000, now if that isn't bloated government spending. Don't you think the price money is over inflated for the check-off to be spending.
rancher said:
I see where the check-off is giving a contest for the best burger. The price is $50,000, now if that isn't bloated government spending. Don't you think the price money is over inflated for the check-off to be spending.

If that new burger gets people to just eat one more burger it recaptures the cost a 100 times over. What you see as inflated cost or spending I see as cheap and beneficial advertising if it does nothing more than to remind people to eat a burger of their choice.
Do you really think that Japan doesn't know the BSE precautionary measures taken by Canada are even more stringent than those taken by the U.S.? Do you really think that Japan doesn't remember that the Washington cow, that came from Canada, was found in the U.S.? Do you really think that Japan doesn't realize that we are importing beef from the same Canadian cattle that we have banned imports from?

R-CALF must really think Japan is stupid to believe that opening our border to Canadian cattle will influence their decision to open their markets to the U.S.

To the contrary, Japan is wondering why the U.S. will not open their borders to the live cattle that produced the same beef that is now coming down in boxes.

Japan isn't buying R-CALF's BSE fear mongering rhetoric and for good reason.
Food Safety. Japanese consumers and food businesses are anxious about food safety. Current concerns include E.coli, Mad Cow Disease (BSE), Foot and Mouth Disease in the EU, and Avian flu in China and Hong Kong. As a result of the appearance of BSE in Japan, Japanese consumers are moving to soybeans as a protein source. Public attention has also focused on GMO food. Some consumer groups are also concerned about the possible effect of GMO feeds on livestock product safety.

Micro-Branding. To address consumer fears regarding the safety of meat products, "micro-branding", which often identifies the actual producer, where the animal was raised, or how it was fed, is becoming more common. Retailers believe "micro-branding" helps increase consumer confidence as well as differentiate their products from those of competitors.

Trends. Japanese consumers are becoming more value conscious and focusing more on "Kirei" (clean), "Kenko" (healthy), and "Kodawari" (good value) foods. Accountability and traceability are becoming a requirement for food inputs. The demand for organic or natural foods is growing due to consumer concerns about environment, health, and nutrition.
Japan does NOT want MIXED MEATS from unknown countries. They want meats with traceback,TRACEBACK to orgin and its known handlers.

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