Is Anybody Happy

Is Anybody Happy?
— by Lee Pitts

This can´t be what industry elders envisioned when they arranged the merger of the NCA and the Beef Board four years ago. When the NCBA gathers this month in the Phoenix desert for their annual convention they will do so under a big thundercloud of doubt that this marriage of new money and old tradition was maybe not such a good idea after all. With two states recently calling for the removal of NCBA´s head lobbyist in Washington and at least one former NCA President and Beef Board Chairman going public in the past year with their displeasure with the merger, the NCBA “shareholders” confab is more apt to resemble a dysfunctional family reunion.

By forcing through the merger in San Antonio the NCBA and CBB are now in danger of losing the goose that lays all those golden eggs: The checkoff. For it to survive it must first pass a gauntlet of no less than four serious challenges that may or may not have been thrown down had the merger never occurred.

Two of those confrontations we´ve told you about in detail previously. Jeanne and Steve Charter would surely NOT have risked considerable time and money in forcing the USDA to sue them over $250 in checkoff fees they purposely didn´t pay. The merger and subsequent NCBA actions provoked the Charter´s defiance and they based their case on the merger being illegal. The judges ruling is expected soon. Then there is LMA´s apparently successful petition drive to call for a vote on the beef checkoff. (We say “apparently” because the names on the petitions still have to be verified that they are from bonafide cattle producers.) It´s inconceivable that the LMA´s petition drive would have been initiated, or successful, if the NCBA had not created so much ill will in the country. Now when NCBA and Beef Board staffers gather in Phoenix they will have two other new clouds hanging over their collective careers. Either one should be enough to have them dusting off their resumes.

Vote Is A Four Letter Word

The Livestock Marketing Association said from the beginning that their goal was a vote by the ranchers paying the checkoff on whether or not they wanted it to continue. The LMA wasn´t after more seats at the table or a big fat contract from the Beef Board. LMA President, Jim Schaben, has said time after time that the LMA “supports a beef checkoff that has a provision for a mandatory reconfirmation vote by producers every three to five years.” Well before the LMA handed in their boxes of petitions to the USDA, they offered the NCBA a compromise. Last March the LMA indicated they would stop their petition drive if the NCBA would make provisions for a periodic vote on the beef checkoff. They declined the offer.

Despite how their press releases read, the NCBA and the Beef Board have been against a producer vote from the beginning. Which is puzzling in a way because they repeatedly say their polling data indicates that 60-70% of all producers support the current program. If so, why not vote and get it over with? Go forth with a strong mandate. Instead, with hopes of heading off a referendum, they followed the advice of their paid consultants and spent millions of checkoff dollars on a reenergized effort to “educate the producer about the checkoff.” One high ranking NCBA official publicly scoffed at LMA´s compromise saying, “They´ll never acquire the required signatures.”

When asked if a vote wasn´t the only way to bring about a change in the program, listen to how Chairman of the Beef Board, Lyle Gray, responded: “First, a vote isn´t the only way to change the checkoff. Second, the vote LMA is calling for will either continue or terminate, not change the program. Third, as a society, we vote on our representatives; we don´t vote on our system of government. The vote LMA is asking for is akin to voting on our system of government and, if rejected, then trying to figure out what we should do next. Every cattleman can have an impact on the checkoff by supporting, nominating or even volunteering to serve as a representative on a state beef council or the Beef Board. In a democracy, we accomplish change through our representatives. The same thing applies to the checkoff.”

Civics lesson aside, it now looks like the NCBA should have taken the LMA up on its offer. In November the LMA handed in the signatures of 146,000 people who signed petitions demanding a vote on the beef checkoff.

Those Who Pay Should Say

The LMA has repeatedly stated their position that all commodity checkoffs should have a periodic vote and guess what? The USDA now agrees with them. On December 15 the USDA´s Research and Promotion Task Force came up with 21 recommendations on how checkoffs should be changed. Those proposals have subsequently been endorsed by Agriculture Secretary Glickman. One of the recommendations is that mandatory producer referendums should be held on all commodity checkoff programs at least every five years.

The USDA Task Force also called for greater government oversight of the 12 existing commodity research and promotion campaigns. The Task Force felt that commodity boards should be required to use competitive bidding for contracts whenever possible. This is a crucial issue and one raised by Richard Atkinson, Chairman of the Meat importers Council of America, when earlier this year he voiced his displeasure with the NCBA/CBB relationship. “What has happened is that NCBA has control of the CBB budget and sets its goals to spend all the funds available.” Continued Atkinson, “They do this by controlling Authorization Requests (AR´s) through the CBB Committee Structure. These committees, guided by NCBA staff, are then rubber stamping the AR´s. In order to get a concept for an Authorization Request to the attention of the Cattlemen´s Beef Board, one must present it to the NCBA staff. There is no competition for the CBB funding; therefore there is less and less input from industry and what you are left with is a group of people at NCBA dreaming up ways to spend the money.”

In response to the USDA Task Force Report, Secretary Glickman said he would seek legislation calling for periodic votes on all checkoffs. But as the Task Force report notes, he doesn´t have to wait for that legislation: He can demand a vote at any time for any program. LMA President, Schaben, says that´s precisely the action that is called for now. “Those who want a referendum on the pork checkoff turned in 19,000 signatures seven months ago and USDA still hasn´t finished verifying them,” said Schaben. “And the USDA has had our petitions since November and has yet to announce how they´ll verify them. These are perfect examples of where the Secretary should use his authority and call for an immediate vote.”

Another recommendation by the USDA Task Force is that the USDA should more closely monitor so called “producer communications,” especially during periods when petitions calling for a referendum are being collected. “We have repeatedly expressed our concern to USDA about the millions of checkoff dollars the Cattlemen´s Beef Board has spent, in a transparent attempt to discourage producers from signing referendum petitions,” Schaben said. The Task force report takes note of these concerns when it recommends giving USDA´s Agricultural Marketing Service the right to review all such communications before they are disseminated to producers.

“It´s obvious USDA has recognized the basic democratic right of producers to be able to vote regularly on programs they are funding,” says Schaben. “We hope at long last, the Beef Board, along with all other affected commodity groups, will join us in saying, “It´s time for those who pay to have the final say with an immediate vote.”

Also included in the Task Force report is a strong recommendation that in future a “super majority” be required to establish any new commodity checkoff. That point may be made mute by a recent court decision that must have anyone who works for a commodity checkoff feeling a little insecure about their future.

A Mushrooming Problem

When the NCBA and Beef Board repeatedly said that an up or down vote on the checkoff would end collection of beef promotion funds this reporter consistently responded that this would NOT be the case. It was our contention that state checkoffs that were operational before the national one would still be in place. Lyle Gray, cow calf producer from Kansas and Chairman of the Cattlemen´s Beef Board acknowledged as much when he said, “It´s estimated that these laws might generate $12 – $15 million, about one sixth of what the $1 checkoff generates.”

What makes this next new development so important is that if the court´s decision stands there would not even be mandatory statewide checkoffs. When the Supreme Court ruled 5 to 4 in a 1997 court case brought by California tree fruit growers that checkoffs were NOT unconstitutional that seemingly was the last we´d hear of that argument. But in December a federal appeals court struck down the mushroom promotion program as a violation of the First Amendment. It was a complete surprise because if the ruling prevails it could imply an end to all other promotion programs as well. (There are currently 12 checkoff programs including beef, cotton, dairy, eggs, fluid milk, honey, mushrooms, popcorn, pork, potatoes, soybeans and watermelons. A peanut program is about to become operational and several others are on the drawing board.)

In its ruling a three judge panel of the Sixth Court of Appeals distinguished the difference in the mushroom case and the California fruit case involving Wileman Bros and Elliott, Inc. The judge´s decision makes for complicated reading but basically what they said was the First Amendment is violated when an advertising program for a commodity operates in a free market, but not when the ad program is done for a regulated commodity, such as under a marketing order. “We find that the context of the mushroom business is entirely different from the collectivized California tree fruit business,” wrote the judges. “Mushrooms are unregulated. Hence the compelled commercial speech is not a price the members must pay.” Further, the three judges ruled, “In the absence of extensive regulation, the effort by the USDA to force payment from plaintiff for advertising is invalid under the First Amendment.” The Appeals Court basically said that producers in an unregulated commodity, such as beef, could not be forced to pay for generic advertising and that “any such advertising had to be germane to a valid, comprehensive regulatory scheme, and the content of the advertising must be non-ideological.”

In summary the judges ruled that “The portions of the Mushroom Act of 1990 which authorize such coerced payments for advertising are likewise unconstitutional. Mushroom growers are free to do as they please in the cases of supply and quality and therefore, cannot be constrained to support one industry-wide position.”

By the way, this is essentially the point made by Jeanne and Steve Charter in refusing to pay the beef checkoff. The mushroom case will, no doubt, be reviewed and could go all the way to the Supreme Court where, if the arguments sway at least one member from their previous stance, the end of the beef checkoff could be mandated. Whether or not that happens before the USDA gets around to holding a referendum is anybody´s guess.

Did You Know What You Were Doing?

Faced with such challenges you´d think that a good dose of humble pie would be in order for the the folks at the NCBA and CBB. But that hardly seems to be the case. Listen to the response from the leaders at the NCBA and CBB when the LMA handed in their petitions. Lyle Gray, Chairman of the Beef Board said, “First, and most important I don´t know that many valid signatures actually exist. I´ve had producers all over the country tell me they considered LMA tactics less than honest, its web site and news release contain misinformation and USDA even warned LMA several months ago to discontinue “deceptive” petition activities.” Gray further stated, “Producers have been misled for months on these and other issues which make our job of communicating more difficult and more critical.” (One would have thought with the millions the CBB and NCBA spent on their “educational” campaign they could have straightened out any such misinformation.)

George Swan, NCBA President responded to the LMA petitions this way in a press release: “We respect the right of cattlemen to ask for a referendum. We expect the USDA to verify the names of people who may or may not be cattle producers who have signed petitions and who may or may not have known what they were signing. USDA must do this to protect the integrity of the process and the overwhelmingly majority of cattlemen who support the process.” Didn´t Swan just insult every person who signed a petition? This reporter finds it interesting that the NCBA is so concerned that everyone who signed a petition be a cattleman when the NCBA was willing to sell a seat on their Board to anyone who put up enough cash. Be it a firm that sells pharmaceuticals or a car company. Frankly, considering how the merger has NOT worked thus far, one could make the case that those 700 or so folks who voted in San Antonio for the merger also did not know what they were doing.