Modernizing The Beef Business – Part 3

In this series, Mies examines aspects of the modern beef business that, in his opinion, need updating. This week, he turns his thoughts to the beef checkoff.

Watch the video interview with Bill Mies here.

If you bought a new pickup in 1965, you got the best technology Detroit had to offer – an AM radio and 2x2 air conditioning; that is, two windows and two hand cranks to roll ’em down with. Buy a new pickup today and it’s like climbing into the cockpit of an airplane.

Times, to put it mildly, have changed – at least as far as pickups are concerned. But what about some of the tools cattlemen use to determine markets? “Are those tools, those things we do, still valid? Are they still tools we need in the modern times we live in today?” asks Bill Mies.

Truth is, cattlemen are still driving 1965 pickups, figuratively speaking, while trying to keep pace in a crew cab, XM radio and GPS-guided world, Mies says. BEEF Cow-Calf Weekly continues its series this week featuring Mies, a former feedyard manager, professor emeritus in feedyard management at Texas A&M University, and one of the industry’s preeminent thinkers.

In this series, Mies examines aspects of the modern beef business that, in his opinion, need updating. In the first installment, Mies tackled cattle futures; last week he discussed the Cattle on Feed Report. This week, he turns his thoughts to the beef checkoff.

The beef checkoff

The mandatory $1/head checkoff became reality with the 1985 Farm Bill and cattlemen voted to make it permanent in May of 1988. “Twenty-five years later, the checkoff has done what we asked it to do. It did a lot of generic advertising, it improved the image of beef, it’s funded some great research that helped us sell a lot more product for a lot more money,” he says.

But 25 years later, that dollar is worth about 30¢ in today’s market. “So we’ve got a very small amount of money compared with what we had then,” he says.

Then there’s this – the beef checkoff is under the oversight of USDA. “Everything that is done, all the money that is spent, has to be cleared through USDA ahead of time.” The net result, Mies says, is the politicization of the checkoff as politicians and bureaucrats find ways to manipulate the process and the procedures to achieve their long-term social engineering goals.

Mies says the options available to cattlemen are to go to Congress and change the Act and Order legislatively to increase the amount of money collected and streamline its operations; or to have cattlemen vote in a referendum to accomplish those goals. Both of those options would be costly, controversial and may not accomplish what is needed to make the beef checkoff a truly industry-driven program.

Which brings Mies to propose a third option – start over. “Maybe it’s time to say the checkoff has done a lot of the things we want, but we’re in a different day and time now.”

Mies says there are 12-14 states that have legislation allowing for an in-state beef checkoff. However, those state-level programs haven’t been active since the mandatory, nationwide checkoff came to be. “Let’s say we discontinue the mandatory checkoff and replace it with a voluntary one of $2/head, with a refund to those who don’t want to participate.” Mies says. “Those states say we can fire up the legislation and move it to $2 pretty easy.”

If the industry did that, the net result would be almost as much money as is collected now, and maybe more, he says. In addition, he says a voluntary checkoff would have no USDA oversight, states that don’t produce many cattle could opt out, and overhead costs would be a lot less.

“But the real carrot is the operating board would be selected by cattlemen, not the USDA Secretary. If we had one person/state, we’d have 7-15 people making decisions on how to spend the money. Today, because of how the act and order are written, we’ve got 106 people deciding on how to spend that money. You can imagine how laborious it is to get a project through a committee of 106 people.”

Hog producers realized the problems with set dollar figures and large boards, Mies says. So they structured their checkoff to reflect a percentage of the value of each animal, meaning checkoff collections fluctuate with the market. What’s more, they have nine people who decide on how the money should be spent. “They can have a conference call, turn that thing sideways and head off in another direction the next morning.”

Mies realizes that one argument against the idea is the refund provision. That was a major area of discussion 25 years ago and it will be again. “But in 1985, when we passed this, we knew the main thing we had to spend money on was advertising, because of the hole we were in as far as how beef was valued and how consumers looked at it.”

Today, there are more than 50 different brands of beef, all promoting their individual brand to consumers. “We’ve got a different situation than we had then. We’ve got different needs. So maybe it’s time to do it our way.”