Diary of a Mad Cow

Diary of a Mad Cow by Lee Pitts

In a recent letter to its members the NCBA explained why ranchers have enjoyed good times the past couple years. “Economists around this country agree that the cattle prices we have experienced for many months now, prices that began to climb before the Canadian border closure, is the result of two things: tremendous growth in consumer demand and the cattle cycle. A trade association can do little if nothing to affect the cattle cycle, but when it comes to beef demand it is clear the checkoff-funded efforts, many of which are managed by NCBA, have contributed considerably to increasing demand, which is defined as consumers´ willingness to pay increasing prices even as supplies increase. Again, through the leadership of cattlemen, NCBA is the association that gets it done for you.”


For posterity´s sake I´d like to review the milestones in mad cow history to prove a point: That the profitability we´ve been enjoying has been the result of an association´s efforts on your behalf. But it wasn´t the NCBA. We´ve had the checkoff for decades now, why during the past two years did their efforts only begun to kick in? And now with prices falling, why can´t they use some of their magic again?

For the record, prior to the time when mad cows started popping up on this continent prices for cattle weren´t all that great. In the year 2000 the average Omaha fat cattle price was 69.65, the average for 700 to 800 pound feeders was 86.17 and the average utility slaughter cow, according to Cattle Fax, was worth 39.87 per pound. In 2001 the average fat cattle price for the year moved up to 72.40, the feeder was worth 88.20 and the slaughter cow was worth 43.01. All in all, not a bad year. The next year prices slipped. The fat steer went back to 67.04, the feeder market fell all the way back to 80.09 and the lowly slaughter cow was worth 38.65. So much for NCBA´s claim that cattle prices were rising prior to BSE.

Keeping those numbers in mind . . . now we can begin our story.

January 31, 2003 — This is when the Mad Cow nightmare for North America began . . . only no one knew it at the time. A crossbred black cow from a herd of 192 belonging to a Canadian fish farmer was killed at a meat plant in Alberta. Later she would be called, not so affectionately, COW ZERO. As a base of reference here are the prices for cattle during the month of January before all the mad cow madness began: Omaha fat cattle: 77.18; Omaha feeder cattle: 78.16; Cattle Fax slaughter cows: 37.29.

May 16, 2003 — Preliminary results were back in Canada and this was the first the public officially heard that there was a mad cow in Canada. Markets drifted lower as cattlemen on both sides of the border waited for confirmation.

May 20, 2003 — She was just one cow out of 5.5 million head of Canadian cattle but she was like none other to come before her . . . a Canadian Mad Cow. Her coming out party became a day that changed the world . . . both yours and Canadian cattlemen. For you it would bring unprecedented good times. For the Canadian cattlemen it would usher in what one Alberta official called, “The single biggest catastrophe to hit rural Canada since the drouth and the depression of the 1930s.”

Canadian cattle prices crashed 70 percent and some Canadian slaughter cows brought two cents per pound. The two million head of Canadian cattle that had been coming south every year were stopped at the border. Omaha fat cattle price for the month: 79.50; Omaha feeder cattle: 82.03; Cattle Fax slaughter cows: 42.00.

August 2003 — The Bush administration and the NCBA were pushing hard for the Canadian border to be reopened. They got part of their wish when the border was partially opened to Canadian muscle cuts. The tonnage of beef from Canada would break all records in the months ahead as Canada tried to solve her mad cow crises by bundling up her beef in boxes and sending it south. Despite the flood of Canadian beef, cattlemen on this side of the border were reaping the benefits of a closed border. Omaha fat cattle: 84.74; Omaha feeder cattle: 93.34; Slaughter cows: 45.99

October 2003 — The fastest growing cattlemen´s group in the country, R-CALF, was founded by Leo McDonnell primarily on one issue: that if we weren´t flooded by imports of both beef and cattle from our northern and southern neighbors that we could have a cattle business in this country that was both profitable and sustainable. It took a Canadian mad cow to prove R-CALF´s thesis correct. Once the border was closed cattlemen on this side received the highest prices in history for their stock. In October of 2003 the price of fat cattle averaged 105.50 for the month!

December 23, 2003 — A day that will not soon be forgotten. It was Christmas week and our present from Santa was our very own mad cow in this country. Albeit by way of Canada. Within three days of the Mabton Mad Cow being found in Washington state the United States lost 90 percent of its beef export market.

In introducing the Mabton Mad Cow at a Friday press conference on December 24 former Ag Secretary Veneman made no mention of the fact that the cow originally came from Canada. When the futures market opened on the following Friday the futures market for all classes of cattle fell. After everyone learned that the Mabton Mad Cow was Canadian the markets recovered as indicated by these average prices for the month of December 2003. Omaha fat cattle: 90.75; Omaha feeder cattle: 101.63; Cattle Fax slaughter cows: 50.32. Note: Our market didn´t crash like Canada´s because ours is mostly a domestic market: we eat what we produce. In Canada they export over half of their production.

May 2004 — R-CALF wins a preliminary injunction against USDA stopping the border from being opened. They won this first injunction because they were able to prove that the USDA was illegally allowing importation of banned Canadian beef products. The injunction was to remain in effect until the USDA would rewrite and release a new set of rules regarding the importation of live Canadian cattle. Omaha fat cattle: 88.22 Omaha feeder cattle: 104.74 Cattle Fax slaughter cows: 52.34

June 25, 2004 — This was to be the first of several frustrating days for cattleman as USDA, using their newly formatted testing program, would announce a preliminary positive test result for mad cow, only to later to reveal that the cow in question was free of the disease. The announcement in this, and subsequent episodes always had the effect of driving futures prices significantly lower.

The USDA had discovered a way to lower live cattle prices and used it often but it had no effect whatsoever on the prices packers and retailers were receiving for the beef they sold. As their share of the beef dollar reached the highest point in history, lower cattle prices for ranchers and feeders just meant the profit grew for packers and retailers. This at the same time that Canadian beef packers, which is to say American packers operating on Canadian soil, were buying Canadian cattle at fire sale prices and selling the beef on this side of the border for full markup.

Meanwhile, in spite of the false mad cow alerts Omaha fat cattle were worth 89.19; Omaha feeder cattle: 113.31 and Cattle Fax slaughter cows: 53.92. Note: A month later prices for 700-800 pound feeders steers in this country were quoted at 117.10. Another record. Gee, golly gosh. Thanks NCBA.

December, 2004 — The USDA released 500 pages of new rules regarding imports from Canada and officially proclaimed the border would reopen to live cattle on March 7, 2005. The market had been working lower in anticipation of this announcement: Omaha fat cattle: 86.60; Omaha feeder cattle: 101.63; Slaughter cows: 51.22

January 2, 2005 — This reporter was sitting on an auction block in Caldwell, Idaho in the middle of a video sale when I was handed a piece of paper that said Canada had just announced it´s third mad cow. Prices at the video sale immediately spiked. Two weeks later Canada announced their fourth mad cow. Despite what we thought was to be the opening of the border on March 7 prices still remained high. Omaha fat cattle: 88.50; Omaha feeder cattle: 105.00; Cattle Fax slaughter cows: 52.37

March 2, 2005 — With just five days to go before the USDA was to open the border R-CALF once again won a preliminary injunction to stop the upcoming opening. A Montana judge said that there were food safety and health issues that the USDA had not fully addressed and he did not feel it was prudent to open the border until those issues had a full hearing in his courtroom. Later the judge would set a court date of July 27, 2005 to hear all sides. Judging by Judge Cebull´s language in the injunction R-CALF felt that there was a 50/50 chance that when R-CALF did get their day in court they might also be able to stop the flood of Canadian beef that was coming across the border in boxes. Because slaughter cattle, cow and bull beef were no longer coming across the border the average cow price for the month, according to Cattle Fax, was an amazing 58.25! The year prior to mad cow the average was 37.29.

June 9, 2005 — Ag Secretary Mike Johanns suggested in a speech about BSE that beef prices were too high. The next day and throughout the weeks to follow he did something about those high prices. At least the prices cattlemen were receiving for their cattle. About the packer´s and retailers profits he did nothing.

June 10, 2005 — Johanns announced that a cow that had been killed seven months prior had shown weakly reactive results at the time. Samples of tissue were sent to England and it was official. America had its first mad cow. Prices trended a bit lower but the roof did not cave in and within a few days prices had recovered.

July 14, 2005 — A three judge panel in Seattle issued a 56-page decision explaining its reasoning in overturning the temporary injunction granted by Judge Cebull. The panel said that Judge Cebull had erred in issuing the preliminary injunction that kept the border closed. What was very interesting was that the panel of judges admitted that there were weaknesses in some USDA procedures but still they took it upon themselves to lift the injunction and reopen the border. The USDA had not even asked the panel to do this.

July 18, 2005 — Trucks loaded with Canadian cattle were already rolling into the U.S. On the same day, October feeder cattle closed $2/cwt lower. On this day packers were bidding $77 and $78 and some weren´t bidding at all. The negative effect of this decision was already apparent. Limiting the exodus somewhat was the permit process and the fact that many Canadian truckers had either parked their trucks, quit or are hauling something else. But it did not take long to gear up as 123 permits for export were written up in the first few days.

Meanwhile we learned that Judge Cebull had postponed R-CALF´s date in his courtroom to hear the entire case against the USDA. Some observers said it was postponed because Cebull saw that now that America had its very own mad cow that much of R-CALF´s case was now meaningless. Some predicted that Cebull would just dismiss the case and let the border remain open. R-CALF maintained that the Cebull was just waiting to see if the panel of judges in Seattle would grant intervener status to the National Meat Association, Canadian Cattlemen´s Association and the Alberta Beef producers. (The panel of judges did not grant them such status.)

Both sides have filed for summary judgment and the Judge could rule on the case without a trial or the postponed trial may go on after all.

Unfortunately for Canadian cattleman, the border opened just in time for them to participate in a price wreck in live cattle caused by the border reopening. Which is probably what the packers had in mind the entire time.

So here´s where we stand: America is now accepting live cattle no other country in the world will accept and our Asian export markets remain closed. The meat packers Union in Canada is threatening to strike Tyson, which kills 40 percent of Canada´s fed cattle. Cattle on-feed numbers in Alberta and Saskatchewan are up 15 percent over year ago levels and in September many cattle will come out of a Canadian government set-aside program and will be for sale. American ranchers selling on the Fall market will then have their prices lowered by a glut of Canadian cattle that were subsidized. Fat cattle are now back down to 78 (near where they were before the mad cow madness began), feeder cattle that were fetching 1.13 before the border reopened are bringing 1.02 to 1.04 and trending lower. And all these lower prices brought to you by President Bush, three liberal judges, meat packers, the NCBA, American Farm Bureau Federation, National Pork Producers Council and 29 State Cattlemen´s Associations.

Meanwhile slaughter cows are still at record prices. As I write this they are 52 percent higher than they were when Canada announced their first mad cow. There is a very simple explanation for this and it has absolutely nothing to do with the NCBA´s beef promotion efforts: The border is closed to Canadian cow beef. Canada can´t send slaughter cows down here, nor their meat. End of argument. (In the coming year look for the USDA to try to lift the ban on dairy springers and then slaughter cows.)

We apologize for all the numbers in this story but they were necessary to show you the possibilities of the good times we could enjoy if President Bush and the NCBA weren´t busy signing away your future with more “free trade” agreements. (As I write this CAFTA just passed with NCBA´s ringing endorsement.) We also wanted to prove that you really do owe the last couple good years to a real cattlemen´s organization: R-CALF. If you´ll recall, it was founded on the idea that we could be profitable if imports could be controlled. The R-CALF founders were prophets. Or maybe we should spell that PROFITS . . . because you may have just seen your last of those for awhile.