AUDIO: Hank Klosterman discusses why redistributing leverage in market is vital to cattle producers

by | Aug 31, 2020 | 0 comments

Image courtesy Hank Klosterman


Q: What do you think are the major issues standing in the way of fair cattle markets? 

As time has passed, the cattle industry has lost packing capacity, and this has led to a lack of leverage. As an industry, we should’ve been more aware of the market manipulation overcoming our industry. Lack of leverage in packing capacity caused the cash trade to be drained and the cash trade was our big leverage point. 


Q: What are your thoughts on Senator Grassley’s 50/14 legislation? 

My big concern with the 50/14 legislation is that it seems to be a bit of a knee jerk reaction. It needs to be tuned to what the future could be. When government intervention or regulation is put on an industry and a mandate is set in place, I become fearful that we’ll have to go back and reverse that at some point. A change needs to be made soon while the iron is hot, but it needs to be something that we can tweak, instead of being set in stone. 


Q: What are your thoughts on NCBA’s recent voluntary policy to increase negotiated cash trade? 

There have been a lot of good ideas like this one to increase cash trade, but there isn’t enough incentive to make the packer follow through.  

We’ve grown the cattle herd over capacity, and everyone is scrambling for a slot to get cattle killed. Because of this, the packers obviously want to go away from cash trade. Packers have used a scare tactic on feeders telling them if they don’t commit their cattle with them to be killed, they’ll get left behind. The packers have used this and all their other tools to manipulate price outside of the five state average. 


Q: What are your thoughts on the current DOJ investigation into the big four beef processors? 

The DOJ and the USDA are going to delay this next report until the market changes and then publish the same objectionable report. I was on a phone call with Sonny Perdue back in the spring; he made a valid point that there must be factual and an indisputable argument, but he had a lack of conviction in his message. This investigation will most likely produce another mundane report that just kicks the can down the road. 


Q: What are your thoughts concerning cattle and beef imports? 

The safest and the best product for consumers is domestic beef. Imported beef and cattle don’t have the same food safety standards that we do here in the U.S. We produce a superior product, but the problem with that product is that it’s high choice and we aren’t able to produce enough lean trim to meet consumer demand. The imports we do have need to be a safe product; measuring up to the same standards we have for our own domestic beef. 


Q: What are your thoughts on the petition circulating to bring about a beef checkoff referendum? 

Our product needs to be researched and promoted, and if this goes away, the voluntary contributions won’t cover the cost to do that. With that being said, there are obvious flaws within the program. We’re at a pivotal point within the industry, and if change is going to happen, it needs to happen now.  


Q: Do you think the cattle industry is in danger of becoming vertically integrated? 

Yes, we’re literally at a historic point in the cattle industry given the market fluctuation and circumstances. If packer concentration isn’t addressed and the futures contract isn’t fixed to regain some leverage, our industry will lose the vital players that make the market. 


Q: Any closing statements? 

The one thing the industry needs is leverage. The industry has shown incredible fight over the past few months and kept up its character through this pandemic.  


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How did we get here?

From the Holcomb Tyson fire to COVID-19;
Click to see a timeline of events that have brought to light the profit and pricing disparity in cattle markets.


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