Multinational Monitor

JUL/AUG 2000
VOL 21 No. 7


Freedom to Fail: How U.S. Farming Policies Have Helped Agribusiness And Pushed Family Farmers Toward Extinction
by Ben Lilliston and Niel Ritchie

In Firm Control: Industrial Concentration in the U.S. Livestock Market
by Michael Stumo

Flimflam on the Farm: The American Farm Bureau and the Betrayal of Family Farmers, Taxpayers and the Environment
by Vicki Monks

The Dirt on Factory Farms: Environmental and Consumer Impacts of Confined Animal Feeding Operations
by Mark Floegel


The Case for Small Farms
an interview with
Peter Rosset

In The Fields of Indonesia
an interview with Nila Ardhianie

Taking on Corporate Pork
an interview with Bryce Oates

A Serious Beef with the National Cattlemen's Beef Association
an interview with Jeanne Charter


Letters to the Editor

Behind the Lines

Agribusiness Market Hypocrisy

The Front
Truth about Trade?
- Dioxin Diet

The Lawrence Summers Memorial Award

Names In the News


A Serious Beef with the National Cattlemen's Beef Association

An Interview with Jeanne Charter

Jeanne Charter is a Montana-based rancher active in the Northern Plains Resource Council, a member group of the Western Organization of Resource Councils.

Multinational Monitor: What is the National Cattlemen's Beef Association (NCBA)?

Jeanne Charter: Until 1996, when they merged with the Chicago Livestock Meat Board, it was called the National Cattlemen's Association. Through the merger, which was approved by USDA, they got control of what is called the beef check-off fund, which is supposed to go for non-partisan beef promotion. Now the vast majority of NCBA's funding comes from the check-off. The check-off brings in about $85 million a year, and they get at least $55 million of that. As a result, their annual budget grew from $12 million to $55 million. It covers all of their overhead and staff costs.

MM: How does the check-off work?

Charter: It's assessed each time a cow is sold, whether it's a calf sold to a feedlot, whether it's the same calf when it's sold again to be slaughtered, or whether it's a mother cow when it's culled from the herd and slaughtered. So it's assessed each time there's a sale. It's a mandatory assessment that has been in force for 12 years under the Beef Promotion and Research Act of 1985.

In some Western states, where cattle are branded for ownership purposes, the state brand inspection officers are often the ones who collect it. A lot of brand inspectors hate it, because it undermines their police authority because there is a lot of unrest about this and it has turned them into tax collectors.

Because they administer the check-off, NCBA claims in public and before the U.S. Congress to represent a million cattlemen. It's not a voluntary representation; their voluntary membership is only about 3 percent of cattlemen in the country, something like 30,000.

MM: What does NCBA do with the money it raises through the check-off?

Charter: NCBA does a lot of lobbying in Washington, and a lot of advertising in agricultural publications. They're probably the biggest advertisers (mostly to support the check-off) on rural radio stations, which in rural areas is where most people get their news. There are very few agricultural stations that will say anything critical about them because of that. In the last three or four years they've put about $8 million dollars into advertising to create a media blitz in support of the check-off program itself. And the U.S. government is letting them do that.

MM: What else does the NCBA do with the money?

Charter: In recent years, most of the $55 million goes to branded trademark product promotion for table-ready products like table-ready pot roast sold by giant food wholesalers such as Sysco and Sara Lee. This is our money, being used to develop products for these giant firms. NCBA has 18 product development professionals who do this. They develop the product and then let the company they're working with trademark it. I'm also not so sure about the nutritional value of these products. They're not just meat -- they're full of preservatives and other chemicals. That's where our money is going -- to develop those kind of nutritionally questionable products. I think their weak-witted idea is that if they sell a lot of this, the benefits will trickle down to the industry.

MM: What kind of lobbying positions does NCBA take in Congress?

Charter: We object most of all to the positions that they take -- supposedly on our behalf -- on market and trade issues. NCBA's position on livestock markets is basically that there should be no government policing of them. But the markets are getting more and more manipulated because the buying sector is becoming increasingly centralized. The arrangement is becoming increasingly like the chicken sector, where people are basically under captive contracts where it starts out good but it becomes increasingly predatory over time. In Congress, NCBA has always opposed a series of initiatives to get more competitive market enforcement. And they say they do that on behalf of everyone in the industry.

The other place NCBA is notorious is international trade. The inner circle of members that they serve tends to be both packers who have international operations and very large feeders that are also large multinationals. They're basically advocating wide open borders to the United States, arguing that we're going to export more beef.

In Europe, the NCBA is really pushing beef with artificial growth hormones. While they say they are doing that for the cattlemen, they're really doing this for the pharmaceutical makers, who are considered an "allied industry."

Similarly, NCBA supports opening up South America for trade. It's really scary for someone in our position. Brazil has a herd that's bigger than the U.S. beef herd. In this case the "allied industries" sell them semen and other things.

MM: How has the industry come to be dominated by large corporate interests?

Charter: Twenty years ago the packing market was quite competitive and there were lots of packers. Since then it's been consolidated. There's not that many of them left. There are three dominant firms -- Iowa Beef Packers (IBP), ConAgra and Cargill. They basically operate as a cartel. They control nearly 85 percent of the fed slaughtered animals. We mostly sell feeders to feedlots where they're slaughtered under different ownership. It's not like the old days where people would raise cattle.

The companies form "strategic alliances" where feeders get under long-term contract with one of the three packers, with no competitive pricing ability. They commit to deliver product -- fully-fattened animals ready to slaughter -- and they derive their prices off a reference market. There's still a cash trade that's not forward-committed and they'll give them a premium off of that. Or sometimes they'll do it off of futures, which are weakly competitive. All of these arrangements create a negative downward pressure on prices.

It's not bad for everyone. If you're big enough as a feeder, you can do all right. Also, the packers have their own feeders. For instance, ConAgra feeds hundreds of thousands of heads themselves. If you feed hundreds of thousands of animals a year, you can get by with a very small margin. At the feedlot level, their biggest cost is cattle, so if they can do something to drive down the cost of input cattle, it means a lot to a big feeder. So our interests are opposed to the interests of those we sell to -- whose interests are represented by the NCBA.

MM: What have you done to challenge NCBA's work on behalf of these corporate interests?

Charter: We had been upset for some time by the fact that NCBA got control of the check-off fund, so my husband and I deliberately refused to pay the check-off on a yearling sale in the fall of 1997. It was about 247 head of yearlings. We wanted a hearing because we thought the government had made a mistake when they approved the merger in 1996. The next spring, we sold three cows, for which we also refused to pay. So it was a total of 250 animals. We wrote a letter to the editor of our paper explaining why we didn't pay and that we wanted a hearing.

The government filed suit against us in the summer of 1998. Their opinion was that they could fine us $5,000 per head. Later they asked what we were worth, because they thought they could fine us what we are worth.

We finally had a hearing before a U.S. Department of Agriculture administrative law judge on this in the summer of 1999. Her ruling was basically a rubber stamp of what the USDA bureaucrats said, which is that the check-off is a government program voted in by a national referendum of producers in 1986. But once we voted for it, it was USDA's program. In her ruling this April, the judge said that the USDA should be given "substantial deference" in how they interpret their own regulations.

The NCBA knew the outcome three weeks before we did, because the USDA's marketing service had faxed it to them. That's how close they are.

We are appealing the decision. We have to first go through a second administrative review before we expect to go to district court.

We think we're in a good legal position. There was a Sixth Circuit Court of Appeals decision in Tennessee in 1999 related to a parallel forced check-off in the mushroom industry. A big mushroom processor sued on the basis that it was unconstitutional, and they won unanimously at the appeals court level. The opinion is clear.

MM: What is the check-off campaign and how did it start?

Charter: It's similar to the pork check-off campaign. Independent ranchers and cattle producers have joined together with the Livestock Marketing Association (LMA) to demand a recall vote on the beef checkoff. LMA is the national trade association for livestock auctions and cattle buyers. They have as much to lose from a captive supply system as independent cattle producers. They're based in Kansas City.

LMA organized a petition drive. A total of 146,000 signatures were handed in to USDA secretary Dan Glickman over eight months ago. That's far more than the minimum necessary, which is about 108,000, to insure that USDA will find enough valid signatures to call for the referendum. Glickman has yet to respond.

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