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041210 Beef Checkoffs Up For Arguments

December 4, 2004

Omaha, NB Those beef ads featuring the drawl of actor Sam Elliott, peppy background music and footage of grilling steaks are some of the most recognized commercials in American advertising.

The ads are acknowledged as partly responsible for recharging consumer demand in beef and ushering in some of the best times in the cattle industry.

But the millions of dollars that pay for those ads and similar ones for the pork industry could go away. Last summer, the Eighth Circuit Court of Appeals ruled that the beef checkoff - a $1 per-animal fee that producers pay for every animal sold - was unconstitutional.

The U.S. Supreme Court will hear arguments on the constitutionality of the beef and pork checkoffs.

"This is a really close call for the legal people we've talked to," said Jim Robb, director of the Colorado-based Livestock Marketing Information Center. "I would give it a 50-50 chance of holding or not holding at this time."

At the forefront of supporters is the Nebraska Cattlemen, which lent its name and financial backing early in the litigation.

"We've got a real interest in seeing it not only in Nebraska but also nationwide, because that's where our customer base is," said Allen Bright, 2004 president of the Nebraska Cattlemen. "Everybody that I'm working with wants the checkoff declared constitutional."

Opponents have hired Harvard law professor Laurence Tribe, a veteran of several high-profile cases who successfully argued against the federal mushroom checkoff in 2001.

The Solicitor General's Office is handling the case for supporters because the U.S. Department of Agriculture is a defendant in the case. Gregory Garre, who formerly worked for the Solicitor General's Office, will represent the Nebraska Cattlemen.

Supporters say the checkoff finances research to enhance value for the livestock industry and funds marketing strategies that have led to a marketing identity. About 88% of consumers recognize the "Beef . . . It's what's for dinner" slogan.

Since 1986, cattle producers have been paying $1 for every animal sold. Pork producers have been paying 40 cents for every 100 pounds a hog weighs when sold.

The beef checkoff will generate about $94.6 million this year; the pork checkoff, about $50 million. The money is divided between national and state organizations.

Opponents contend the mandatory checkoffs amount to producer subsidies of the meatpacking industry. The argument that the program has helped boost meat prices is questionable, opponents say, because the lawsuits against the checkoffs were launched in the late '90s when cattle and pork prices were low.

"The Beef Board will say the checkoffs aren't meant to influence prices, but they always note when prices go up or demand increases," said John McBride, a spokesman for the Kansas City-based Livestock Marketing Association. "They will take the credit on the plus side, but they take no responsibility on the down side."

Another major criticism of the checkoff is its close ties to the National Cattlemen's Beef Association, which received 86% of its funds - $50 million - from the checkoff in 2002, the latest year for which figures are available.

"NCBA looks at it as their cash cow, so it's a crisis as far as they are concerned," Hansen said. The Livestock Marketing Association, which represents livestock auctions, has fought the checkoffs since their inception. The group started a petition drive in 1998 to bring the beef checkoff to a vote. At the same time, grass-roots organizations launched a parallel petition drive to have a similar vote on the pork checkoff.

By 2000, the Livestock Marketing Association sued the U.S. Department of Agriculture to force a vote, which the cattle and pork promotion boards had resisted. Then-Secretary of Agriculture Dan Glickman threw out the petition, which bore 146,000 signatures, saying it was insufficient for a vote.

Pork producers, however, got their vote and of the 30,000 who voted, 53% opposed the checkoff. In one of the first acts of her administration, Agriculture Secretary Ann Veneman threw out the election results, prompting family-farm organizations to sue.

"She did not get off on the right foot with our guys when she walked in the door and set aside the will of the producers," said John Hansen, president of the Nebraska Farmers Union, which supports voluntary checkoffs.

Several livestock states are creating contingency plans in case the court throws out the checkoffs. In Nebraska, legislation was drafted last year and will probably come to debate this year that would create a state beef checkoff if the national one is dissolved. Such a program probably could not be mandatory.

Bright said a state checkoff probably would collect money at the time an animal is sold but then refund it later to those producers who didn't want to participate.

However, McBride, of the Livestock Marketing Association, said any program that collects money and then offers a refund would probably risk a legal challenge.

According to the USDA, there are 15 federal checkoff programs used to promote agricultural products with fees from producers. The outcome of the beef case could call into question the legality of each of them.

Rob Robertson, vice president of government affairs for the Nebraska Farm Bureau, said there is concern throughout agriculture about other commodity programs threatened.

National advertising campaigns aren't the only issue at stake. The checkoffs also spend millions of dollars on industry research, largely funding work and collaborations with major universities. The University of Nebraska, for instance, has received millions for its work on various livestock and meat studies.

"If we lose that funding, it would have a profound effect on the amount of work we can do and the number of students we can train and educate," said Chris Calkins, a professor of animal science at the University of Nebraska-Lincoln.

Calkins was part of a team of researchers from UNL, the University of Florida and the National Cattlemen's Beef Association whose work to add value to inferior beef cuts resulted in new items such as the popular "flatiron steak." As many as 10 million pounds of that cut are expected to be sold next year. The researchers' work is estimated to have added as much as $70 of value to a single head of cattle.

"I think we just scratched the surface on the potential of that," said Sallie Atkins, executive director of the Nebraska Beef Council, which administers the state's checkoff funds.

An Oklahoma State University study on the checkoffs estimates that cattle producers would lose $3.29 a head if it is eliminated. Pork producers would lose 58 cents a hog, the study indicated.

The same study also showed that the mushroom, beef and pork checkoffs operated similarly, which should concern supporters of the meat programs. The Supreme Court voted 6-3 in 2001 that the mushroom checkoff was unconstitutional. In a brief filed with the court in that case, the beef board cautioned against throwing out the mushroom checkoff because several other checkoffs were "virtually identical."

"That has come back to haunt them, to say the very least," McBride said.

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