Cattlemen's Capitol Concerns
September 20, 2007

The Cattlemen’s Capitol Concerns (CCC) is a weekly report from Washington, D.C., giving an up-to-date summary of top policy initiatives concerning the cattle industry; direct from the National Cattlemen’s Beef Association (NCBA). Please feel free to reprint in full or in part. If you’d like to include NCBA’s logo, contact us at 202-347-0228.

USDA Rule Will Expand Canadian Beef and Cattle Trade:  USDA released its final rule to amend the BSE minimal risk region rule (Minimal Risk Rule II, or MRRII).  This rule normalizes the trade of cattle and beef products from Canada into the United States.  The final rule was published in the September 18^th edition of the Federal Register and will take effect on November 19, 2007.

This rule expands upon the Canadian Minimal Risk Rule I released by USDA’s Animal and Plant Health Inspection Service (APHIS) in January 2005 that allowed the importation of certain live ruminants and ruminant products, including cattle under 30 months of age for slaughter from countries recognized as minimal risk for BSE. Currently, Canada is the only minimal-risk country designated by the United States.

This final rule allows for the importation of the following:

- Live cattle and other bovines (i.e., bison) for any use (including breeding) born on or after March 1, 1999, which APHIS has determined to be the date of effective enforcement of Canada's ruminant-to-ruminant feed ban;

- Blood and blood products derived from bovines, collected under certain conditions;

- Casings and part of the small intestine derived from bovines; and

- Beef and beef products from Canadian cattle of any age (This was allowed as part of the first MRR rule, but USDA delayed the applicability of those provisions that dealt with beef and beef products from animals 30 months of age or older).  

In its economic analysis, USDA adjusted the annual estimate of older live cattle imports pertaining to this rule from 657,000 head to only 75,000 beginning in 2008. “Once this rule enters into effect, the primary result is expected to be additional imports of Canadian non-fed beef - rather than live cattle - which will replace lean beef imports from other countries such as New Zealand and Australia,” said Gregg Doud, NCBA chief economist.   

Doud and other industry economists do not expect this rule to vastly impact the U.S. cattle market, for the following reasons: 

- The age requirement in this rule will disqualify most Canadian beef cows from importation for lack of proper age documentation;    

- Transportation costs, the strength of the Canadian dollar, and a surplus of packing capacity in Canada are additional disincentives to live cattle imports;

- The extra Canadian packing capacity boosted Canadian cull cow and bull slaughter by 50 percent between 2004 and 2006 and has greatly reduced any backlog of cull cows in Canada;  

- Although the price of cull cows in Canada is currently about 20 percent less than it is in the United States, annual Canadian cull cow slaughter is only 13 percent of that in the United States. As a result, it is widely expected that Canadian cull cow prices will appreciate to U.S. levels almost immediately after this rule goes into effect; and   

- In the short term, analysts expect U.S. cull cow prices to dip slightly but still stay above 2006 levels.

NCBA is still reviewing the details of the rule but says it appears to represent a move toward normalized trade with Canada based on scientific standards, which NCBA supports. 

“Over the long term, this will have a positive impact for U.S. cattlemen.  For example, we are now able to have discussions with Canada and Mexico – our two most lucrative export markets – about taking U.S. feeder cattle and breeding stock,” says Doud.  “Our international trading partners are watching how we handle the resumption of trade with Canada and will likely apply some of the same standards to resuming trade with us.”

Johanns Announces Resignation: U.S. Agriculture Secretary Mike Johanns resigned his position yesterday, September 19^th.  He will return to Nebraska where he is expected to launch a Senate bid in the coming days.  “If it's Mike's decision and Nebraska's choice, he would make an outstanding member of the United States Senate. There is no doubt in my mind,” President Bush said today. 

NCBA President John Queen said, “Mike Johanns has been a great friend to NCBA and to the cattle industry, as well as to production agriculture as a whole.  We hate to lose a friend like that.  But we’re hopeful that he will continue to be a friend to cattlemen, no matter where his life of public service takes him.”

For cattlemen, Johanns’ most revered accomplishment was his steadfast attention to restoring and expanding beef export markets.  “Mike Johanns has properly insisted on establishing trade policies based on sound science and in accordance with international standards,” said Queen.  “Thanks to his responsiveness and aggressiveness in this area, U.S. cattlemen are now providing more international consumers with the best and safest beef in the world.”

Chuck Conner Named Acting Secretary of Agriculture:  In the wake of Johanns’ resignation, President Bush has asked Chuck Conner, USDA’s Deputy Secretary, to serve as the Acting Secretary.  Conner grew up on his family's farm in Benton County, Indiana, where he worked with his father and brother raising corn, soybeans, and cattle. He holds a Bachelor of Science degree in Agricultural Economics from Purdue University.

“Chuck Conner knows the ins and outs and technical aspects of U.S. farm policy about as well as anyone in this country,” said NCBA Vice President of Government Affairs Jay Truitt.  “This will be a great opportunity for him to shine as Congress and the Administration work to iron out the 2007 Farm Bill.”

ITC Releases Economic Analysis of Korean FTA:  As part of the process toward ratifying the U.S.-Korea Free Trade Agreement (FTA), the International Trade Commission issued a report today indicating the economic impacts of this agreement on the U.S. economy. 

“We’ve said all along that U.S. beef producers could be one of the biggest beneficiaries of the U.S.-Korean FTA, and this analysis confirms it,” says NCBA Chief Economist Gregg Doud.  Doud points to South Korea's 40 percent tariff on beef as one of the biggest barriers U.S. beef producers face in the international marketplace. The study says "the long-term effects of tariff and TRQ liberalization estimates that U.S. beef exports to Korea could increase by $0.6-1.8 billion (58-165 percent)." The report assumes a full reopening of the Korean market to U.S. beef and is based upon 2003 (pre-BSE) levels of trade.

"The key assumption in this report is the return of full and unfettered U.S. access to the Korean beef market," says Doud.  "It bears repeating that any reduction in tariffs is meaningless if we don't have access to the market in the first place."

In 2003, U.S. beef and beef variety meat exports to Korea were $815 million, making it our third largest market. Doud believes that upon regaining full access, the weaker U.S. dollar against the Korean won makes U.S. beef approximately 23 percent cheaper to the Korean consumer than it was back in 2003. Adding in Korea's average economic growth rate of nearly 5 percent per year during the past five years suggests unrestricted access to the Korean market could quickly push U.S. beef sales to Korea over $1 billion.

Peru Trade:  At press time, the Senate Finance Committee is reviewing and making recommendations on proposed legislation implementing the U.S.-Peru Trade Promotion Agreement (PTPA).

For U.S. cattlemen, the PTPA is one of the best negotiated free trade agreements to date providing for immediate duty-free access for U.S. prime and choice beef, as well as other beef products.  In addition, all tariff rate quotas will be eliminated within 12 years. 

Last week, the committee held a hearing to review the Peru agreement which is one of many up for consideration by Congress this fall.  NCBA submitted a written statement in support.  NCBA is working with more than 40 other food and agriculture groups as part of an Ag Trade Coalition in support of the Peru, Panama and Colombia Trade Promotion Agreements.  Passage of these agreements is one of the listed priorities outlined in NCBA’s Beef Export Access Five Point Plan.

In 2003, Peru was a $6 million export market for U.S. beef, beef variety meats and beef products. This improved access could amount to roughly $15 million a year, about half the value of Peru's current total beef imports.

Conservation Easement Legislation: Also at press time, it is expected the Senate Finance Committee will consider legislation today that would permanently extend a beneficial tax incentive for donations of conservation easements. 

NCBA, along with 45 other livestock, wildlife and environmental groups sent a letter to the Senate Finance Committee on September 17^th in support of this bill which will amend the Internal Revenue Code of 1986 to make permanent the special rule for contributions of qualified conservation easements.  The bill was originally introduced by Senate Finance Committee Chairman Max Baucus (D-Mont.) on January 31st and currently has 21 cosponsors. 

     “This legislation works hand-in-glove with the Farm Bill's conservation programs to help farmers, ranchers and other landowners enhance long-term conservation of our natural resources,” the letter says.  “This provision has immense potential to help private landowners keep agricultural lands in productive use, protect important fish and wildlife habitats, and conserve our scenic and historic heritage in your state and across America.”

Death Tax:  NCBA attended a Death Tax Summit on Capitol Hill this week.  The Summit, held September 19^th, was coordinated by a coalition of Washington-based industry groups to bring attention to the need to fully and permanently repeal the Death Tax. 

Members of Congress including Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) and Reps. Harry Mitchell (D-Ariz.) and Kenny Hulshof (R-Mo.) spoke to summit attendees about how the Death Tax hurts America’s farmers, ranchers and small businesses.  With rates ranging from 37 to 55 percent, the Death Tax is a leading cause of the break-up of U.S. family farms.  Too often ranches and farms must be sold to pay the tax bill, and the land is often purchased by developers. 

NCBA is supporting efforts in Congress to alleviate the burden of this devastating tax on America’s farming and ranching families.  H.R. 2380 was introduced by Rep. Hulshof on May 17^th, and now has 152 cosponsors.  Currently, a 10-year phase-out of the Death Tax ending in full repeal is scheduled to take effect by 2010.  But the tax is then scheduled to be re-instated in 2011, back to 2001 levels. H.R. 2380 makes the repeal permanent.  Similar legislation, H.R. 1586, was introduced by Rep. Mac Thornberry (R-Texas) on March 20th. That bill currently has 85 co-sponsors.  NCBA continues to urge all cattle producers to contact their members of Congress about this important issue. Download our full-color fact sheet on this issue at www.beefusa.org.

CME Announces Changes in Live Cattle Futures:   The October 2008, December 2008, and February 2009 Live Cattle futures months will be listed for trading beginning September 17, 2007.  Several important changes will apply to the October 2008 and subsequent contract months, the Chicago Mercantile Exchange (CME) announced last week.  NCBA recommended these changes to the CME to better reflect current industry trends as well as increase liquidity and viability of the contract.

For live graded deliveries beginning October 2008, these changes:

- Eliminate the requirement that the average weight of a par delivery unit must be between 1,100 pounds and 1,425 pounds;

- Eliminate the requirement that individual steers at par must weigh no more than 100 pounds above or below the average weight of the delivery unit;

- Eliminate the 3 cent per pound discount on individual steers weighing from 100 to 200 pounds over or under the average weight of the delivery unit; and

- Add the ability to deliver steers weighing 1,475 pounds to 1,550 pounds at the same market-based discount used for 950-1000 pound carcasses in carcass graded deliveries.

For carcass graded deliveries beginning October 2008, these changes:

- Clarify the procedures used by USDA for re-grading carcasses in carcass graded deliveries so that carcasses in the top third of any quality grade except Prime are eligible for regrade;

- Eliminate the ability to purchase replacement carcasses in the event that the total delivered live weight falls below 38,000 pounds;

- Make the language and penalties for failure to deliver in carcass graded deliveries consistent with those used in live graded deliveries; and

- Clarify the deadlines for the receiving long in a carcass graded delivery to accept or reject Large Lot Delivery, and for the Clearing House to notify the delivering short.

In addition, several instances of obsolete and/or inconsistent rule language have been eliminated, and all interpretations have been incorporated into the corresponding Rules.

NCBA’s Western Regions Joint Meeting Next Week: Cattlemen from across the western United States will gather next week in Jackson Hole, Wyo., for a joint meeting of NCBA’s western regions, September 28-29. NCBA Region V includes the states of Colorado, Idaho, Oregon, Montana, Washington and Wyoming, while Region VI is made up of Arizona, California, Hawaii, Nevada, New Mexico and Utah. Cevin Jones, Region V policy vice president from Eden, Idaho, and Greg Moore, Region VI policy vice president from Wagon Mound, N.M., will chair the meeting.

The NCBA Region V and VI meeting is being held in conjunction with the annual meeting of the Public Lands Council (PLC). The PLC is an organization of public lands ranchers throughout the West, formed by NCBA, American Sheep Industry and Association of National Grasslands. A meeting agenda and other information is posted at www.beefusa.org, under the “NCBA Events” section.  For more details on the PLC Annual Meeting, please visit: www.thepubliclandscouncil.org/plc2/Website.pdf. More information is also available by calling NCBA at 866-BEEFUSA or NCBA Western Field Representative Dan McCarty at (406) 855-2815.

Mark Your Calendars For Annual Convention!:  The 2008 Cattle Industry Annual Convention and Trade Show will be held February 6-9 in Reno, Nevada.  The meeting will feature joint and individual meetings by NCBA, Cattlemen's Beef Promotion & Research Board, American National CattleWomen, Inc., Cattle-Fax and National Cattlemen's Foundation.

At the NCBA Trade Show, more than 250 companies will offer attendees a chance to see the latest products and services while networking with other cattle producers. In addition, many booths will feature giveaways, games and prize drawings. Whether you are looking for farm vehicles, fencing, feed supplies, animal health products or the latest in technology, you'll find it right here under one roof.

Education, information and networking are the cornerstones of Convention.  But it's not all business, there will be lots of time to kick back, relax and enjoy your mini-vacation in Reno. Bring your family along!  Additional details and schedule updates are posted at http://www.beefusa.org/convcattleindustryannualconventionandncbatradeshow.aspx.

Don't Miss NCBA’s Cattlemen to Cattlemen: On this week’s edition of NCBA’s Cattlemen to Cattlemen airing September, 18-22, Tim Biela, a founding member of the Beef Industry Food Safety Council (BIFSCo), discusses the many advances made by the beef industry in preventing E. coli and other pathogens from entering the beef supply; we’ll head to the Alexander Ranch in Kansas to meet the Region VII Environmental Stewardship Award winners; and some Chicago-area kids sample new beef products at the Beef and Veal Culinary Center, and provide important consumer feedback. Also, the Cattle Learning Center travels to Minnesota for a look at prevention and treatment of calf scours.     

In the new episode airing September 25-29, Cattlemen to Cattlemen examines the USDA rule expanding cattle and beef trade with Canada. NCBA Policy Division Vice Chair Bill Donald of Montana offers his perspective on the rule’s impact on global beef trade. John Maday of Drovers Magazine shares his outlook for the fall cattle markets, and we’ll visit the Dee River Ranch in Alabama to meet another Environmental Stewardship Award winner. The Cattle Learning Center discusses treatment and management of bovine respiratory disease, and we’ll announce the results of the 2007 National Beef Cook-off.

NCBA’s Cattlemen to Cattlemen on RFD-TV provides weekly news and features for cattle producers across the country. The show airs Tuesdays at 8:30 p.m. and is rebroadcast Wednesdays at 4:30 a.m. and 12:30 p.m., and Saturdays at 10 a.m. All times are Eastern. Make sure YOU tune into NCBA’s Cattlemen to Cattlemen on channel RFD-TV. For more information or to check out past episodes, visit www.cattlementocattlemen.org.

Media Contact:  Karen Batra at 202-347-0228 or kbatra@beef.org.

This publication is funded by cattle producers and other industry supporters through their voluntary membership contributions to NCBA. To join the tens of thousands of cattle producers from across the U.S. in working to preserve our legacy, contact NCBA Member Services at 1-866-BEEF-USA or Membership@beef.org.