Thursday on AgriTalk, Mary Soukup, the managing director of the Beef Alliance, spoke with host Chip Flory about a proposal the group has put together for a “fed cattle set-aside program” to help ease the bottleneck in the packing industry caused by the COVID-19 pandemic.
One of the Beef Alliance’s goals is to be a force for positive change in the beef industry and set a high standard in the cattle feeding segment, Soukup says. It also aims to collaborate on issues of common concern that affect the industry.
“We have a commitment to research and to verifying specific practices to demonstrate continuous improvement, and the COVID-19 pandemic has affected our entire economy and has led to major disruptions in the beef cattle industry. It's affected the individual businesses, but it's an issue that we have watched impact the entire industry. So that's really what led to the group putting our brains together to think about and come forward with a proposal for the fed cattle set aside program,” Soukup says.
The program is modeled after one that was used in Canada in 2003 during the BSE outbreak in the country. Anecdotally, Soukup says, they’d heard from producers and associations in Canada that the program worked well, but there are differences between the Canadian program and the proposed program.
As Flory notes, it’s designed to relieve the bottleneck on slaughter capacity.
“Through the month of April, we're looking at under harvesting by about 600,000 head of fed cattle. And we know it's going to take time to relieve that pressure and work through that,” Soukup says. “The objective of the set aside program is to take some of that pressure off the front end by incentivizing cattle feeders to voluntarily, and I think that's a very important piece of this—this is a totally voluntary tool—to voluntarily take some of those cattle that are nearing market ready weight out of the pipeline for a period of time.”
This will allow the animals space so that the animals that really need to be harvested can be, she says. Cattle feeders will be compensated per head for participation.
“We worked with one of the leading nutritionists in the feeding sector to model a number of different rations. And not just a number of rations, but a number of rations in a number of regions across the country,” Soukup says. “We’re proposing a fixed payment of $2.90 per head, per day. That should account for not only the additional costs incurred for feeding cattle for an additional 75 days, but also operating costs and some other fixed costs that cattle feeders incur.”
How would it be determined which cattle enter the program? It has been designed as a public/private partnership, Soukup says, so it would be administered by the USDA, but a key component would also be an industry advisory committee.
“That advisory committee would look on a weekly basis at the number of cattle that we were not able to harvest. That weekly carryover would be that would be the number of program spots in the following week. It will be a week behind; we understand that but should be pretty current with what’s happening in the marketplace,” Soukup says. “Within that overall national carryover, we looked at cattle on feed across the country, and then also marketing across the country to develop regional allocations that that would be offered on that weekly basis.”
And how about funding, Flory asks. Where would the funding for the program come from?
The Alliance has begun discussion with members of Congress and partners in the cattle industry and trade associations at the state and national level. Congress has just begun to discuss what the next round of stimulus dollars because of COVID-19 will be Soukup says. So, if the group can gain traction, they hope they can get the program put in place.
Once a pen of cattle enters the program there’s two options from there. When the cattle enter the program, it would be with the understanding that they would stay in for 75 days, but if capacity were to start coming back, Soukup says, the advisory committee could let cattle out on that sort of basis.
It’s designed to be a temporary program that would only be used in times of crisis, she says. And then it would go “back on the shelf” unless there was a continued period of packing reduction.
“We have put into the program specific triggers with regard to packing capacity that would take the program off the shelf, if you will, Soukup says. “And then another trigger that's really important, as capacity comes back, that the program would be put back on the shelf.”