The Beef Checkoff: Who Benefits and Who Pays?
By Fred Stokes, Executive Director, Organization for Competitive Markets
April 2011 OCM Newsletter (available on the web)
In response to diminishing market share in the early 80’s, a program to promote beef and beef cattle producers interest was initiated. The program was funded through the assessment of $1 per head each time a bovine animal was sold. Initially, participation was voluntary, but was made mandatory when the program became part of the Farm Bill as The Beef Promotion and Research Act of 1985. The stated objectives were; “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.”
The beef checkoff has been in place for some 25 years, with more than $1.6 billion collected and spent. Just how effective has the program been in “promoting, improving, maintaining and developing markets for cattle, beef, and beef products?” Not very! During this period we have lost market share, downsized the domestic cow herd, drastically reduced the producer’s share of the retail beef dollar and put nearly 500,000 beef cattle operations out of business, including 35,000 cattle feeders just since 1996.
So was the Beef Checkoff a bad idea? I say it was a good idea that simply got hijacked! While producers have been compelled to pay the sum of $80 million per year, the overwhelming benefit has accrued to organizations controlled by opposing big meat packing and retailer interests. The National Cattlemen’s Beef Association (NCBA), guided and backed primarily by one very powerful state group, the Kansas Livestock Association (KLA), have captured the program and the money it generates to build a national political powerhouse, pushing an agenda in direct opposition to the interests of checkoff-paying producers. Cattle producers were fed propaganda, generated with their own money, and betrayed.
For the past fourteen years, NCBA has been the primary contractor for the program. This past summer, the results of a “performance review” of the organization’s handling of the beef checkoff revealed shocking abuses and misappropriation of funds. An auditing firm (Clifton Gunderson) reviewed one percent of the transactions for a period of two years and five months and found significant misuse of funds. After some haggling between the Cattlemen’s Beef Board (CBB), USDA and NCBA, some $216,000 was returned to the fund in connection with these improprieties. However, this is clearly but the tip of the iceberg. It is most disturbing that the contract with NCBA was not summarily suspended pending further investigation.
In light of the above, the Organization for Competitive Markets brought together a significant number of checkoff-paying cattlemen from various states and organizations, forming the “Beef Checkoff Reform Taskforce.” Members of this group pledged an additional $1 per head checkoff to finance reform of the captured program. After initially considering litigation, the group decided to push for an audit by the USDA Office of Inspecto General (Phyllis Fong). In February, an engagement letter between USDA and OIG was signed, initiating the audit.
An examination of NCBA’s form 990 reveals that 80% of its total revenue is derived from the beef checkoff, with only 6% coming from membership dues. These public IRS documents reveal other abuses which will undoubtedly be detailed in the final OIG report.
In addition to examining NCBA’s handling of the cattlemen’s money, indications are that the OIG will also take a look at the State Beef Councils (KLA). Certain state attorneys general are also showing interest in investigating the handling of these funds at their level. A clear picture is rapidly emerging that checkoff programs at both the national and state levels have run amuck and are rife with malpractice. In the meantime, NCBA, representing less than 4% of cattle producers, continues as the primary beef checkoff contractor and has a prominent seat at the table when ag policy is discussed. They have opposed cattle producer’s interests at every turn. They fought against cattle producers that supported country-of-origin labeling; against cattle producers seeking mandatory price reporting; against cattle producers that opposed the National Animal Identification System (NAIS); against cattle producers that supported captive supply reform in a major class-action lawsuit; against cattle producers that tried to prevent the premature reintroduction of imported cattle from disease-affected countries; against cattle producers that attempted to ban packer ownership of livestock in both the 2002 and 2008 Farm Bills; and, against cattle producers that support the pending Grain Inspection, Packers and Stockyards Administration (GIPSA) rules that clarifies and defines how GIPSA will administer and enforce the Packers and Stockyards Act.
Forcing cattle producers to fund their opposition is unfair and must be stopped. For 25 years now, USDA and CBB have given a wink and a nod to NCBA’s transgressions. While there currently seems to be an inclination for reform of the program at both USDA and CBB, a satisfactory outcome is not assured. If there is to be independent cattle production in the future, the Beef Promotion and Research Act of 1985 must either be reformed or terminated. We cannot continue to extract some $80 million per year from cattle producers and have these funds used to hasten their demise.