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A cattle war of words

By Staff | Oct 23, 2009

Roger Schulze, who raises cattle near Fort Dodge, herds calves toward a chute where they would be funneled into an examination area to check their overall health. The calves had recently been transported from Pennsylvania, Schulze said. Due to chronic low prices, Schulze said his feedlot is less than half full.

Roger Schulze herds new feeder calves from Pennsylvania into a chute where they are examined by a veterinarian and inoculated against a slate of respiratory diseases.

Schulze has been in the cattle business for over 50 years. “I’m supposed to be retired,” Schulze said, pausing from his labors for a moment. “A lot of guys get out of livestock and just go to grain farming, but I went the other way.”

Schulze’s feedlot, located just four miles northwest of Fort Dodge, has room for 350 head of cattle. But right now, all he has is about 70 finished cattle that are sold and waiting to go to market and his 76 new feeders.

Schulze said that not keeping the feedlot full is more of an indication of the depressed cattle market, rather than his semiretirement status. The Schulze operation is indicative of what’s happening throughout Iowa.

“Cattle numbers are down all over,” confirmed Dr. Jim Illg, a Humboldt veterinarian, who was working on inspecting the health of Schulze’s feeder calves. “They’re down because these guys have been losing money for so long.”

Robert George, an employee of a Humboldt veterinarian, Dr. Jim Illg, injects a hiefer with a seven-way vaccine to protect the calf from a series of respiratory diseases on the Roger Schulze farm, four miles northwest of Fort Dodge.

A cattle war of words broke out last week along the front lines of new Country of Origin Labeling laws that went into effect in the U.S. last March. On Oct. 7, Canada filed a complaint with the World Trade Organization, asking for a review of the U.S. COOL laws, claiming that COOL creates unfair competition against Canadian beef in this country. Mexico is expected to file a similar complaint. WTO’s dispute settlement board was expected to review Canada’s complaint today.

In support of Canada’s complaint is the National Cattlemen’s Beef Association saying that it fears COOL will create unspecified retaliation against U.S. beef value-added products that flow back into Canada and Mexico.

Taking on both the Canadians and NCBA is Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, or R-Calf USA, based in Billings, Mont., which states that COOL is a recognized trading tool around the world that existed well before the WTO was organized in 1995.

In addition, R-Calf USA maintains that since U.S. cattle producers have been losing an average of $1.3 billion in trade deficits between Canada and Mexico in each of the past five years, that COOL puts the U.S. beef in a better light to U.S. consumers.

COOL laws, in regards to agriculture, requires labels on covered commodities – beef, pork, chicken, goat and lamb – that indicate the origins of the products.

A Humboldt veterinarian, Dr. Jim Illg, secures a calf Monday to check her overall health condition. The calf was one of 76 new feeder replacements on the Roger Schulze farm, four miles northwest of Fort Dodge. Illg said that independent cattle feeders are buying fewer feeder calves, even though they have plenty of space for more, he said, "because they’ve been losing money for so long."

Labeling is historic

“If you check the tag on your shirt,” Schulze said watching his calves move through a chute to be examined by the vet, “it’ll tell you whether it’s made in Taiwan, China or U.S. If you bought Washington apples, they’re labeled as Washington apples.

“But (without COOL) you don’t know where your hamburger is from.”

Jay Furhman, an R-Calf USA member in Cleghorn, indicated that Canada was being hypocritical in complaining about unfair trade practices. “I know for a fact,” Furhman said, “that Canada can use drugs on their cattle that we can’t. This is just politics.

“When Canada had its first BSE (bovine spongiform encephalopathy, or mad cow) case, we shut the border on them. This is retaliation.”

R-Calf USA charged that the U.S. has a sovereign right to require labeling in order to let consumers choose if they want U.S. beef or imported meat.

In addition, R-Calf USA reminds that COOL is not a tariff nor does it limit qualities of products imported to the U.S. In addition, no country is required to ship products here, so marketing is voluntary and subject to COOL laws; and finally, COOL is limited to U.S. retailers and subjects all covered commodities marketed by U.S. retailers to identical information requirements.

“COOL enables consumers to freely choose between food products of various origins,” said Bill Bullard, chief executive officer for R-Calf USA. “Consumers’ choices will influence the market demand for products from any given country. This is how a competitive market is supposed to work, and neither Canada nor the WTO has any right to take that competitive market away from U.S. consumers.”

Retaliation possible

But that’s not how the NCBA sees things.

Colin Woodall, vice president of government affairs for the NCBA, said Canada’s and Mexico’s complaints could lead to the WTO finding in favor of the two countries. If that happens, Woodall said, “potentially the WTO could give them retaliatory options including higher duties or even closing the door completely on U.S. beef products.

“We’d expect Mexico would close the door and Canada would apply the duties,” Woodall said.

When asked if the WTO would likely be inclined to decide against the U.S., Woodall said it was unclear. The first step of the review process starts Friday. “We expect the process to take about three years.”

NCBA said it has requested that the U.S. Department of Agriculture re-implement conduct a study to determine the economic impact on the beef, pork and lamb industries.

Woodall said NCBA is pushing hard for funding the study so that the industry can see the economic impacts both positive and negative – COOL has on the industry. “We can’t truly understand what’s going on without that analysis,” Woodall said. “Without it both sides can swag what they hear about COOL from the countryside. We’d also like to know how COOL is working by regions.”

Woodall said so far, efforts have been unsuccessful in getting USDA to fund the study.

Trade imbalance

“Canada and Mexico are our top two trading partners,” NCBA’s statement reads. “Together accounting for 59 percent of total U.S. beef, beef variety meat and processed beef product export revenues last year.

“Any disruptions to either of these markets will have a significant economic impact on our industry. Unfortunately, it’s becoming clear that COOL has damaged these critically important trading relationships, and is not putting any additional money into the pockets of cattlemen.”

But again, R-Calf USA objected, charging the NCBA with being deceptive concerning beef marketing between the three countries. Bullard maintains that “the U.S. continues to have a horrendous trade deficit with these two combined countries because U.S. beef and cattle exports to Canada and Mexico are smothered by the amount of cattle and beef these countries send to the U.S.”

In essence, he said that the U.S. packers import $1.3 billion more in live cattle from the two countries than it sends back in value-added products. Citing records from the USDA’s Foreign Agricultural Service, Bullard noted that in 2004 the U.S. imported $1.8 billion in cattle from Mexico and Canada, while exporting $517 million in beef products. In 2005 the U.S. imported $2.39 billion and sent back $870 million. In 2006 it imported $2.6 billion and sent back $1.3 billion. In 2007 it bought $2.9 billion in cattle and exported $1.46 billion in products. In 2008 it imported $2.8 billion and exported $1.74 billion.

The deficits tally $1.27 billion in 2004, $1.5 billion in 2005, $1.29 billion in 2006 $1.44 billion in 2007 and $1.09 billion in 2008, for an average of $1.31 billion each year.

“There are winners and losers in trade, and the U.S. cattle industry is a long-term net loser when it comes to trade with Canada and Mexico,” Bullard continued. “We’re losing because of the millions of cattle being sourced from foreign countries instead of from domestic producers.

“Just look at today’s overall cattle market in which we have historically low supplies, and our prices nevertheless are being forced downward because meatpackers are supplanting our domestic production with imported cattle and beef.”

Bleeding continues

In Cleghorn Jay Furhman, who markets 2,000 finished cattle annually, said he lost $250 per head when he marketed last spring. So far, he said he is down $50 to $75 per head.

“There are a lot of people who would like to raise cattle,” Furhman said, “but they can’t get big enough for packers to even come out to their site and look at the cattle.”

He said it disturbs him to know that packers are buying cheaper meat from Mexico and Canada, mixing it with U.S. beef and selling it at U.S. prices. “Packers don’t want COOL because they can’t mix the meat,” he said. As a result, he indicated, the financial blood-letting continues.

He said the U.S. was the last country in the world to implement COOL regulations.

He indicated that unless packers are held to more honest product marketing, he is not far from closing shop on his cattle business. “The calves I have right now I bought in the mid 90-cent range,” Furhman said. “I bought them right. If I can’t make these work, then nothing will work. We’re done.”

Meanwhile, Schulze keeps moving calves through the chute and his spreadsheets. Like Furhman, last spring was bad for him. He said he was more optimistic for this fall; since, historically, fall is a better marketing season than summer. “But right now,” Schulze said, “the prices are lower than they were in June and July.

“If we can hold our money together through fall, we’ll be lucky.”

Contact Larry Kershner at (515) 573-2141, ext. 453, or by e-mail at kersh@farm-news.com.

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