Certified Angus Beef LLC urges G.I.P.S.A. 'caution'

by Meat&Poultry Staff
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WOOSTER, Ohio – On Aug. 27, stakeholders in the U.S. livestock industry gathered in Fort Collins, Colo., to debate market access at a U.S. Department of Agriculture/Justice Dept. workshop on competition. Afterward, as many questions as answers remained, according to Certified Angus Beef L.L.C.

C.A.B. now asks the following questions: Was anything settled? Do all problems boil down to people leaving rural America because of corporate concentration? Does the Obama Administration have a mandate to “fix that problem” through government intervention?

More than 1,500 people who attended this workshop seemed divided over whether new rules from the U.S.D.A. Grain Inspection, Packers & Stockyards Administration (G.I.P.S.A.) should be put in place – rules which aim to “enhance fairness” and may affect value-based marketing of cattle.

John Stika, C.A.B. president, testified because the non-profit subsidiary of the American Angus Association has an interest in seeing that markets reward producers for quality as defined by consumers. Contracts paid on carcass merit are called alternative marketing agreements (A.M.A.s) because they are outside of the cash market for commodity cattle, C.A.B. said. Such contracts were criticized by some as unfair, but they simply pay premiums and discounts for actual beef value rather than estimates from live appearances.

Since the C.A.B. brand was born in 1978, the market has been moving in that direction and an estimated half of all finished cattle now sell on A.M.A.s. In support of that evolution, Stika suggested the Administration continue oversight to “see that any persons who have been excluded from value-based marketing opportunities may soon take advantage of that ability to be paid for cattle according to consumer desires.”

He warned, however, that the good intentions in seeking greater fairness can backfire. “We urge that great care be given to ensure that no one who has worked to add value to their herd in an effort to meet consumer demands find fewer marketing opportunities – even if that development is unintended,” Stika said.

Pull-through demand from consumers has functioned successfully because of increasingly available, value-based marketing opportunities, he said, noting Cattle-Fax research that quantifies current consumer support of premium brands at $500 million per year. Angus producers “planned ahead for the value-based future we have today, by investing in genetic evaluation and establishing this brand more than 30 years ago,” Stika said.

Since then, value-based opportunities have only expanded, and C.A.B. licensees will sell more than three-quarter of a billion lbs. of branded product this year worldwide, returning at least $25 million to cattlemen through A.M.A.s, such as grids.

“We recognize a stated intent in the proposed [G.I.P.S.A.] rules to level the playing field,” Stika said. “We urge that any low spots be raised to enhance access to consumer-focused marketing, rather than knock down the high spots of opportunity currently available to any enterprising beef producer.”

Granting that the new rules would not dictate a reduction in value-based marketing, Stika said that still could be the end result. “Unintended consequences of rule changes could actually harm the interest of fairness in the beef market,” he said. “If a proliferation of newly required paperwork makes it less profitable for packers to offer A.M.A.s, then producers will not be paid premiums based on true value. Anything that diminishes today’s value edge for quality could diminish what Angus and other quality-focused producers have accomplished, and reduce the value-added edge their cattle have earned in the marketplace.”

“It does little good to enhance fairness on one hand while potentially restricting it on the other,” Stika called for “greater consensus on both the direct effects and potential side-effects resulting from efforts to comply with any change.”
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