 |
||||
|
||||
|
|
||||
by David Bowser
While the beef industry tears itself apart over the question of country of origin labeling, the Texas Cattle Feeders Association is tackling what they believe will be the next political fight within the industry.
The marketing system producers use will be substantially different in the not too distant future.
In the meantime, Dr. Richard McDonald, president and CEO of the Texas Cattle Feeders Association, is concerned not only about consolidation and concentration at the packer level of the beef production process, but about consolidation and concentration at the retail level.
The question, he said, is whether to let the economics of the situation lead to a solution or use some sort of regulatory solution. McDonald said that this issue, like other questions facing the beef business, is constantly being hashed out by committees within TCFA, and it's not always pretty or fun, but the debates and discussions allow the organization to look at possible consequences of various actions, many of them unintended. Four packers control more than 80 percent of the market. IBP has about 32 percent of the market. Excel has about 21 percent. Swift has about 19 percent of the market. Farmland National has somewhere about nine percent. McDonald said a lot of people think the packers ought to be broken up, and if the federal government would enforce the Packers and Stockyards Act, cattlemen would no longer be faced with such a monolithic packing industry. The problem, McDonald said, is if the packers were broken up, how big should they be? "In other words," he said, "should there be an upper limit?" Many cattlemen think packers should be limited to no more than 10 percent of the market. "IBP would have to sell off two-thirds of their packing capacity," McDonald said. "Excel would have sell off about half their packing capacity. Swift would have to sell about half." National would be all right. They could continue where they are as long as they don't get any bigger. Then the question becomes, who will buy the packing capacity if three of the biggest packers were to be broken up? "The most important question is, if you downsize like this, who would you allow to buy it?" McDonald said. "There's a difference between who will buy them and who can buy them. You would have to answer that question as you work through it." In addition, he said, there are regional concerns. "If you live in Texas, you want to make sure that IBP sells its plants elsewhere and keeps its plant in Amarillo operating," McDonald said. "You'd like to keep it in your market." Both IBP and Excel serve specific cattle feeding regions. "With Excel," McDonald said, "it's the same thing. If you were to make them sell one-half of their plants, you would want them to sell some of their plants elsewhere, not their Texas plants." These are problems McDonald said he does not think the industry has thought through. They are the prerequisites for figuring out the financial stability of the packing plants. "Three of the four largest packers have had a change in ownership within the last couple of years or are going through a change of ownership," McDonald said. A couple of years ago, IBP wanted to sell to Tyson, but when Tyson started looking at the deal, they tried to back out. A lawsuit had to be filed to consummate that sale. "It took a judge to force Tyson to go ahead and buy IBP even though Tyson was trying to back away from it because of economics," McDonald said. Swift was taken over by ConAgra, but then quite a few concessions were made, McDonald said, for a new set of owners to buy ConAgra's packing operation and put it back under the Swift name. "The packer that most people like, Farmland-National Beef, is going through bankruptcy right now," McDonald said. The bankruptcy, he admits, is on the Farmland side of the operation, not the packing operation. Farmland owns 50 percent of the packing operation, though. "You have to worry about the financial stability because the current plants may not be in good hands, but if they changed hands, would they be in better hands?" McDonald said. McDonald, who has been in the cattle feeding business for three decades, said he's been through times when his members were paid for cattle with worthless checks because the buyers were not financially stable. He said a lot of cattle feeders don't like what the packer is bidding for their cattle, but the cattle feeders are getting paid. "That sure beats not getting paid at all," McDonald said. ©
| ||||
|
|
||||
|
|
||||
|
All information is copywrited by Feed Lot magazine and cannot be printed or re-printed
without the publishers express consent. Please contact
Feed Lot Magazine for reprint and copy authorization.
|
||||