1. The State of U.S. Cattle Industry After 26 Years of
Beef Checkoff Program Operations
Presentation to
The 14th Annual Food and Agriculture Conference
by Bill Bullard, CEO, R-CALF USA
August 10, 2012
1

2. Purpose of Beef Checkoff Program
Enacted in 1985
• To enable cattle producers to establish,
finance, and carry out a coordinated
program of research, producer and
consumer information, and promotion to
improve, maintain, and develop markets
for cattle, beef, and beef products.
2

3. Beef Checkoff Program Abuses
Discovered in 2010
• $216,944 in Checkoff Abuse Identified in
2010 Independent Accountants Report
– Charging Checkoff for policy activities
• 50/50 travel expense split for NCBA officers
• Pay for non-Checkoff meetings, travel and speaker
costs
• Pay NCBA employees’ time for non-checkoff
activities
• Pay NCBA employees’ spouse’s travel expenses
• Pay legal fees to maintain NCBA
3

4. 2012 OIG Audit of 18 Producer
Checkoff Programs
• Found evidence of misappropriated producer checkoff dollars. For example, the U.S. Soybean
Export Council, a subcontractor of the United Soybean Board, used soybean checkoff dollars to
pay employees unauthorized bonuses totaling approximately $302,000.
.
• The OIG found that USDA’s oversight over the expenditure of approximately $528 million that is
contributed by commodity producers each year was inadequate to prevent or detect the misuse of
checkoff dollars.
• The OIG found that USDA’s oversight of the various checkoff boards “increases the risk that funds
could be misused by boards.”
– USDA staff did not adequately enforce the agency’s own guidelines;
– USDA’s oversight of checkoff board activities was inadequate, particularly when it came to
enforcing regulatory requirements;
– USDA did not even conduct a management review of the Beef Checkoff Program Board and
other checkoff boards overseen by the USDA’s Livestock and Seed program in at least five
years;
– USDA did not ensure that independent auditor reports of the various checkoff programs
included required statements of assurance that checkoff dollars were not being used for
unauthorized lobbying.
• Alarmingly, the OIG stated that USDA officials viewed the checkoff programs as low risk because,
among other things, they did not involve Federal funding.
4

5. Beef Demand Fell for 18 of 26 Years and
Is Now 28 Index Points Less than in 1985
Annual, Choice Beef Demand Index
1980=100
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
90.00
Source: KSU AgManager.Info
80.00
13-Year Decline
70.00
6-Year Increase 6-Year Decline
Demand Index (1980=100)
60.00
50.00
40.00
30.00
20.00
10.00
0.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
5

6. Per Capita Beef Consumption Fell by
More than 20 Pounds Since 1985
Annual, Per Capita Beef Disappearance (Consumption)
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
90.00
8-Year Decline Source: USDA-ERS Beef Supply and Disappearance
80.00
9-Year Stabelization
10-Year Decline
70.00
Per Person Consumption (Pounds)
60.00
50.00
40.00
30.00
20.00
10.00
0.00
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
t.
Es
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
20
20
12
20
6

7. Consumers’ Beef Prices Increased
More than $2.50 per Pound
Annual, Choice Retail Beef Prices
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
$6.00
Source: USDA ERS Beef Price Spreads
$5.00
Canadian Imports Curtailed
Retail Beef Price (Dollars Per Pound)
$4.00
$3.00
$2.00
$1.00
$0.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
7

8. While Retail Beef Prices Increased Steadily,
Feeder Cattle Prices Were Highly Volatile
Feeder Cattle Prices (500-600 lbs, Kansas)
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
$160.00
Source: KSU AgManager.Info
$140.00
Canadian Imports Curtailed
$120.00
Feeder Cattle Dollars Per CWT
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
8

9. Like Feeder Cattle Prices, Fed Cattle Prices
Were Much More Volatile than Beef Prices
Fed Cattle Prices (1100-1300 lb Steers, Kansas/Nebraska)
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
$140.00
Source: KSU AgManager.Info; USDA-ERS
$120.00
Canadian Imports Curtailed
Fed Cattle Price Dollars Per CWT
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
9

10. A Function of Cattle Price Volatility, the Producers’ Share of
the Consumers’ Beef Dollar Fell to All Time Lows in the
2000s and Was 10% Less in 2011 than in 1990
Producers' Share of Consumer Beef Dollar
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
65%
Source: USDA ERS Beef Price Spreads
Share of Beef Dollar Returned to Producers (Percent)
60%
55%
Canadian Imports Curtailed
50%
45%
40%
35%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
10

11. Increased Retail Prices and Cattle Price Volatility Allowed Packers
to Charge Consumers More and Pay Producers Less
Ranch-to-Retail Choice Beef Price Spread
(Cost of Converting Live Cattle to Beef)
Prepared by R-CALF USA
$3.00
Source: USDA-ERS Beef Price Spreads
$2.50
Beef Price Spread (Dollars Per Pound)
$2.00
$1.50
Canadian Imports Curtailed
$1.00
$0.50
$0.00
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
11

12. A Long-Run Lack of Profitability for Cattle Producers
Resulted in an Unprecedented Herd Liquidation
Declining U.S. Cattle Herd
Prepared by R-CALF USA
Source: USDA-NASS
105
95
Total Cattle Inventory: Beef Cows and Bulls, Dairy Cows and Bulls, Steers, Heifers and Calves
85
Cattle Herd Size (Millions)
75
65
Canadian Imports Curtailed
55
45
Beef Cow Mother Herd
35
25
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
12

13. Running a Close Second Only to the Horrendous Exodus of U.S.
Hog Producers, 488,000 Cattle Producers Ceased Their
Operations Since 1985
Declining Number of Beef Cattle Operations
Prepared by R-CALF USA
1,300,000
Source: USDA-NASS
1,200,000
Number of Beef Cattle Operations
1,100,000
1,000,000
900,000
800,000
700,000
600,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
13

14. Margin Operating Feedlots Continually Face Fatal Cost/Price Squeezes
that Already Forced the Exodus of 35,000 Feedlots Just Since 1996
Declining Number of Feedlot Operations
Prepared by R-CALF USA
120,000
Source: USDA-NASS
Data Unavailable for Period 1985-1995
110,000
100,000
Number of Feedlots
90,000
80,000
70,000
60,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
14

15. Independent Farmer-Feeders and Mid-Sized Feedlots
Decline While the Largest Feedlots Continually Expand,
thus Shrinking the Number of Feeder Cattle Buyers
Changed Structure of Feeding Industry
Small- and Mid-Size Feedlots Marketing Fewer Cattle
Prepared by R-CALF USA
18,000,000
16,000,000
14,000,000
Number of Cattle Marketed
12,000,000
Data Unavailable for Period 1985-1995
10,000,000
8,000,000
6,000,000
4,000,000
Source: USDA-NASS Various Cattle on Feed Reports
2,000,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capacity Less than 1,000 Capacity 50,000 and More Capacity 1,000 to 49,999
15

16. As Feedlots Consolidate Unabated, and as Packers
Own or Control More and More Cattle, the Price
Discovery Market Is Vanishing
Vanishing Price Discovery Market
Prepared by R-CALF USA
55%
Data Unavailable for Period 1985-2004
50%
Cattle Sold in Cash Market (Percent)
45%
40%
35%
30%
25%
Source: USDA Market News
20%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
16

17. Falling Production Post Beef Checkoff Program Reversed when the U.S.
Cattle Industry Began It’s Unprecedented Herd Liquidation in the Mid-90s
Domestic Beef Production From U.S.-Origin Cattle
With 2-Year Moving Average Trendline
Prepared by R-CALF USA
26
Source: USDA-ERS (Note: Does not Include Beef Equivalent of Imported Cattle
Domestic Production (Billions of Pounds)
24
22
20
18
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
17

18. After 26 Years of the Beef
Checkoff Program, the U.S.
Cattle Industry Is in a “CODE
RED” State of Emergency
The Beef Checkoff Program Is the Principal Funding
Source for the NCBA – an Industry Trade Association
Not Only Oblivious to the Vanishing Opportunities for
Independent Cattle Producers, but also, the Principal
Catalyst for Eliminating those Opportunities
18

19. Disconnect Between Retail Beef Prices
and Live Cattle Prices
C. Robert Taylor, Auburn University
19

20. How Consumers Are Impacted
CONSUMERS' RETAIL BEEF PRICES COMPARED TO CATTLE PRICES
JAN. 1980 - APRIL 2012
600
500
In just the past 10 years - 2002 to 2012,
spread has increased $2.46 per pound
(from $1.85 to $2.48 Jan. to Jan.)
400
Cents Per Pound
300
200
100
0
Jan/80
Jan/81
Jan/82
Jan/83
Jan/84
Jan/85
Jan/86
Jan/87
Jan/88
Jan/89
Jan/90
Jan/91
Jan/92
Jan/93
Jan/94
Jan/95
Jan/96
Jan/97
Jan/98
Jan/99
Jan/00
Jan/01
Jan/02
Jan/03
Jan/04
Jan/05
Jan/06
Jan/07
Jan/08
Jan/09
Jan/10
Jan/11
Jan/12
Source: USDA-ERS Net Farm Value (Cattle Price) Retail Beef Prices R-CALF USA
20

21. The End
21