WASHINGTON – During testimony before the House Committee on Agriculture Subcommittee on Livestock, Dairy and Poultry on April 6, Kenneth Bull, vice president, Cattle Procurement, Cargill, discussed opportunities and challenges facing the US beef industry. “It is critical we focus on three themes: quality and consistency, efficiency and trade,” Bull said.

Nowhere is trade expansion more critical than with US beef, Bull said. “We operate essentially a disassembly business,” he added. “And profitability means finding the best, highest-value market for every individual part of the animal.”

Last week, Bull said his company pulled together a list of seven beef products that are not traditionally in high demand in North America – products like tongue and liver. “The market prices last week said that all combined, the products were worth $91.65 per head in export markets,” he added. “The same products were worth $28.39 per head in the North American market. We can show this example over and over.”

As the global population approaches 8 billion people by 2020 and per capita GDP growth accelerates, there will be increased demand for protein including beef, Bull predicted. “There’s no better picture of this than China where meat consumption has grown by 600% per capita in the last 30 years. Since 1998, beef consumption has increased 30% per capita.”

The challenge is for the US to win this business in the face of strong global competition. “Brazil’s herd is now double that of the US,” Bull said. “But the US has until about 2004 maintained a production edge because of its higher carcass weights, but that is now at par with South America. While Brazil’s production numbers are growing, North America is in a flat holding pattern, to slightly declining.

“Our challenge today is whether the beef industry will have the opportunity to capture this growing global demand for protein – and the only way to do it is to grow market access through free-trade agreements,” he said.

Bull believes the single-greatest policy threat to the US livestock and meat sector is the controversial proposed rule from the US Department of Agriculture’s Grain Inspection and Stockyards Administration and the regulations that would establish strict requirements in the marketing of livestock and poultry. “One of the most critical is a concept that would make it easier for parties to sue packers for price discrimination and jury – awarded damages in federal courts,” said Bull. “This exact proposal has been ruled against by eight different federal appellate courts, and even considered for hearing by the Supreme Court – and rejected. Any final rule that includes these provisions will be beyond chilling in the marketplace.”

This same kind of law passed in the state of Missouri in the spring of 1999. Implemented on May 29, 2001, the impact on producers was immediate and severe as packers overnight shifted to purchasing on only the most basic formulas – rather than value-added or premium programs, Bull said.

The following was extrapolated from a study done by Dr. Ron Plain at the University of Missouri, on the impact of this law on a US national basis:

• Swine: During the implementation of the law in Missouri, market hog prices dropped by 4.4%. The total cost to Missouri swine producers for the time the law was in effect was roughly $2.7 million for the five-month period. “If we use only a 2% impact on a nation-wide basis, the result would be an impact of $424 million annually for pork producers,” Bull said.
• Cattle: In Missouri, there was a 2% negative impact on cattle prices. When applied to today’s cattle supply, the 2% discount represents an annual loss for cattle producers of $840 million.

Altogether, total losses for US market hog and cattle producers alone should be expected to be at least $1.264 billion per year,” Bull said regarding the proposed GIPSA regulation. “This does not include losses that would be suffered by our brands.”