An exclusive BEEF reader survey on the GIPSA rule shows most producers are content with the current marketing situation.
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Historically, beef producers have been known for being a little too tied to tradition. Of course, traditions can be formed both short and long term; in the case of cattle marketing, it appears BEEF readers, according to an exclusive survey, prefer the status quo of value-based marketing.
Since the Grain Inspection, Packers and Stockyards Administration (GIPSA) publication of a proposed rule on livestock competition in June, the U.S. livestock industry has been awhirl on whether the intention to restructure livestock marketing in the U.S. is a good or bad idea. An online poll on beef
magazine.com in August showed a consistent 80% majority against the proposed GIPSA rule throughout most of the poll’s month-long run.
So, we decided to see if a survey of BEEF readers would corroborate that result. In early September, we sent an electronic survey to more than 16,000 BEEF readers. Over the course of five days, we received a total of 730 usable surveys in response, an effective response rate of 4.4%. Here is what those readers told us.
Heavy cow-calf presence
Among all respondents, the vast majority (75%) consisted of cow-calf producers, while stocker/backgrounders made up 12.7% of respondents, and feeders 10.5% (Figure 1).
As a general group, 78% of respondents said they believe that current marketing practices in the beef industry are positive for beef producers (Figure 5). By production segment, 77.5% of cow-calf producers said they believe that current marketing practices in the beef industry are positive for beef producers (Figure 10), while 82.4% of stocker/backgrounders did so, and 77.3% of feeders.
When broken out by percentage of income based on cattle (Figure 17, page 34), those respondents who indicated that cattle constituted 25% or less of their household income favored current marketing practices by 76.4% to 23.6%; those whose cattle income constituted 26-50% of their household income favored current marketing practices by a margin of 80.2% to 19.8%; respondents claiming cattle income as making up 51-75% of their household income favored current marketing practices by 80.3% to 19.7%; and those with cattle income of 76-100% of their household income preferred current marketing practices by 76.3% to 23.7%.
When analyzed by those who had actually read the GIPSA rule, the results were similar to the other crosstabs (Figure 9). Among respondents who said they had read the rule, 83.4% believed that current marketing practices in the beef industry are positive for beef producers vs. 16.6% who believed they were not positive. Among those who hadn’t read the proposed rule, 75.7% believed that current marketing practices in the beef industry are positive for beef producers vs. 24.3% who saw them as negative for the beef industry.
Scott Grau, BEEF research manager, says the overall survey results indicate that “the more informed readers are about the proposed GIPSA rule, the more pessimistic they tend to be about it.”
Grau added, however, that he was surprised – given all the media and industry interest in the rule and its potential effects – that while 68.1% of total respondents indicated they were aware of GIPSA having submitted the proposed rule (Figure 6), only 31.1% said they’d actually read the specific rule from gipsa.usda.gov or another source (Figure 7).
“Though much of this rule is aimed at the poultry and swine sectors, the rule stands to dramatically impact the beef industry. It’s important that producers educate themselves on this rule and its implications to their operation, and relay those concerns – good or bad – to USDA before the Nov. 22 comment period ends,” Grau says.
Among all respondents, 54.4% reported that they typically market their calves through local auctions (Figure 3), while 33.2% sell direct to an order buyer or feedyard, 18.2% market calves via video auction, 11.6% via special feeder-calf sales, and 3.9% in graded auctions.
Almost 63% of the 621 respondents who typically market calves said they had received market premiums for those calves (Figure not shown). Preconditioning was the most mentioned by 48.7% of those respondents followed by 32.5% for source verification, 32.1% for age verification, 16.7% for “natural,” 15.1% for breed eligibility, 13.9% for non-hormone treated.
Of total respondents, only 24.8% participated directly in a quality systems assessment (QSA) or process-verified program (PVP) to verify market attributes in their calves; 75.2% did not (Figure 4).
Among those who didn’t believe that current marketing practices in the beef industry are positive for beef producers, the top rationale was concern over the number of packers relative to the industry, which was mentioned by 76% of those voting no (Figure not shown). Packer ownership was cited by 67.5% of respondents voting no, followed by market access in certain parts of the country (49.4%), captive supplies (48.1%), number of cattle selling outside the cash market (44.8%), and lack of legal recourse in packer/producer conflicts (37.7%).
When asked whether they favored the GIPSA rule (Figure 8), the majority of all respondents were uncertain (52.4%), while 4.9% said that – from their understanding of the rule – they favored the measure, while 42.7% said no.
“While a majority of respondents are still uncertain about how they feel about the GIPSA rule, the results of this survey indicate that of those who have made up their minds, the vast majority (almost 90%) do not favor the measure,” Grau says.
Of those in favor of the GIPSA rule (Figure not shown), the largest number of respondents (61.8%) believe the measure will reduce packer ownership, reduce captive supplies (55.9%), increase the availability in legal recourse in packer/producer conflicts (52.9%), increase market access in certain parts of the country (47.1%), reduce the number of cattle selling outside the cash market (41.2%), and increase the number of packers (29.4%).
“It’s not the perfect solution, but it’s a start,” wrote one respondent who favors the rule. “Packer ownership and captive supply are the problems.”
Conversely, among those not in favor of the GIPSA rule (Figure not shown), 86.5% believe it will hinder the industry’s progress in value-based marketing, 85.2% say it will allow the government to define how producers market their cattle, 79.8% say the rule restricts industry competitiveness, both domestically and globally, and 75.1% say the rule puts lawmaking in the hands of regulators. In addition, 70.7% say the GIPSA rule will decrease the industry ability to provide consumers with what they’re asking for, while 70.4% say the measure would encourage frivolous lawsuits.
“Anything the government is involved with is inefficient, so why invite them into bed with us?” asked one opponent of the rule. Another called it “another more blatant attempt to socialize American agriculture.”
Those respondents who derive a larger percentage of their household income from the cattle business tend to dabble more in value-based marketing, results show (Figure 16). Those with cattle receipts comprising 76-100% of their total income led all income groups in receiving premiums for preconditioning, age and source verification, natural, breed eligibility and non-hormone treated. They were also more likely to participate in QSA and PVP programs to verify market attributes of their calves.
Interestingly, however, this group led all other income groups in concern about the number of packers relative to the industry, and the number of cattle selling outside the cash market. This group also had the highest score for having read the proposed GIPSA rule (41.7%) vs. 30.2% for the group deriving 51-75% of its total income from cattle, 27.3% for the 26-50% group and 26% for the 1-25% group (Figure 19).
Of those respondents who had read the GIPSA rule, support for current marketing practices in the beef industry was highest among the stocker/backgrounding segment (Figure 10) where 82.4% were in support. Among cow-calf respondents, 77.5% of those who had read the GIPSA rule supported current marketing practices, while 77.3% of feedlot respondents did. The biggest concern among all three sectors was the number of packers relative to the industry. Packer ownership of cattle ranked second.
Some GIPSA Rule Basics
Published June 22 in the Federal Register, the measure is open for public comment until Nov. 22. You can see the full rule at www.gipsa.usda.gov. As the rule pertains to the cattle industry, the GIPSA rule essentially:
- Defines the terms for forward contract, marketing agreement, production contract, competitive injury, and likelihood of competitive injury.
- Would require a packer to maintain written records that provide justification for differential pricing or any deviation from standard price or contract terms offered to livestock producers.
- Provides examples of conduct that would be considered an unfair, unjustly discriminatory and deceptive practice or device to provide more clarity and allow improved enforcement under the Packers & Stockyards Act. USDA maintains that an unfair practice can be proven without proof of predatory intent, competitive injury, or likelihood of competitive injury.
- Establishes criteria the USDA Secretary may consider in determining if an undue or unreasonable preference or advantage, or an undue or unreasonable prejudice or disadvantage has occurred under the Act.
- Requires that dealers who operate as packer buyers only purchase livestock for the packer that identifies that dealer as its packer buyer. Packers would be prohibited from purchasing, acquiring, or receiving livestock from another packer or another packer’s affiliated company.
- Would require packers to provide GIPSA with sample copies of contracts within 10 business days of entering into the agreement with a grower or producer.
- Provides the criteria the USDA Secretary may consider when determining whether the arbitration process provided in a contract provides a meaningful and fair opportunity for the livestock producer to participate fully in the arbitration process.
The deadline for public comment on the proposed GIPSA rule is Nov. 22. Submit comments at firstname.lastname@example.org; by mail to Tess Butler, GIPSA, USDA, 1400 Independence Avenue, SW, Room 1643-S, Washington, DC 20250-3604; or by fax to 202-690-2173.