Don Schiefelbein is a seedstock and cow calf man. He knows a thing or two about working on a multigenerational operation, having done so alongside his eight brothers, his father, and five nephews in central Minnesota. He has felt the sting of terrible cattle prices himself, feeding 10 to 15,000 head of cattle and engaging in daily discussion with industry leadership. Serving as the NCBA vice president and the American Angus Association president, he’s also a keen observer of politics.
“There’s a rule of politics that says things have to get bad enough for action to occur,” he said. “This COVID crisis spun these markets out of control as bad as they’ve become for people to realize there needs to be cooperation and we need to work together to get this thing figured out and moving in the right direction.”
Schiefelbein said he spoke to Joe Goggins, a Montana cattleman recently, and Goggins pointed out the opportunity before the industry this moment is to work together to ensure that action taken in the fed cattle procurement phases is done in a fair and equitable manner.
“Specifically, he asked if there was a willingness with NCBA to involve the Department of Justice in the ongoing investigation that USDA has started with the Holcomb fire and has expanded with the COVID crisis.”
When he recently met with USDA Secretary of Agriculture Sonny Perdue, the amount of information available was limited as is common during investigations. He said it was made clear to Purdue that NCBA is anxious to uncover what he calls the fundamental truth regarding any wrongdoing. During the discovery phase, he said he’s hoping the investigation might point to a more equitable way for price discovery.
In regard to a mandate for increased cash trade, Schiefelbein said it’s not hard to agree that trade is too thin.
“Right now, if your trade gets so thin that you start to reduce harvest levels by 15 or 20 percent, that means virtually no cattle are making the price determination for the rest of the cattle being traded. It’s an unhealthy period so what this crisis has really focused us on is there has to be a better way of price discovery and whether that is more cash trade, I like to call it negotiated trade, but we have to have some rules within the trade that allow the cattle industry to have an equitable amount of negotiated trade that we can be comfortable that that trade really reflects the supply and demand matrix that currently exists.”
Right now, he said, especially during trying times, marketing and price discovery is failing us. On his own operation, six loads of cattle scheduled at the packer that now won’t be accepted because of the plant closings. For a small producer, he said, that’s a tremendous amount of capital in limbo.
“At some point you become so concerned that you become a price taker regardless of the supply and demand situation so it really highlights the point that we’re at a very vulnerable situation and a situation no cow-calf producer or feeder should ever be put into.”
Watching skyrocketing boxed beef prices and empty grocery meat case shelves is a sickening feeling, he said, knowing full well we have barns of fed cattle ready to be processed that could provide high quality beef to consumers but the supply chain is broken and won’t allow producers to do so.
With a pushed back supply of fed cattle, Schiefelbein said there is a theory developing to manage the back-up that could add up to as many as one million head. It’s vital, he said, to thoughtfully and logically process cattle through the system without financially hurting anyone as much as they could potentially be hurt with such a huge supply.
Incentivizing some producers to move feeder cattle to a maintenance ration and to hold them for an additional 75 days to delay their marketing could spread the million head backlog logically.
“The devil’s in the details though, right,” he said. “We’re working through the mechanics of finding an equitable way of paying people to put them on a slower ration, who gets to decide, and how we’re going to ration that million cattle through the system becomes the details that are important to figure out.”
The beef packers, he said, could be online at near full capacity within a week depending upon what happens with Trump’s executive order to keep plants open and the unknown factor of the large groups of employees unwilling to work for fear of becoming ill or those who are ill.
Currently, the NCBA’s Live Cattle Taskforce, comprised of 20 experts, are working through scenarios to determine a means to put together a logical program to present to the USDA for funding to get producers through what he calls potentially disastrous period coming up. On a recent call with an R-CALF board member from South Dakota, he said the discussion turned to common ground.
“What really became obvious, as we discussed for 15 or 20 minutes is, we’re still all cow calf producers and we’re all still in this mess together,” he said. “Both of us want solutions to get us out of this problem, right?”
The most critical step is getting the packing plants open and harvesting at full capacity. Second, preventing this from occurring again is a priority.
It is, he said, going to take some cooperation from people in various trade groups to identify the weaknesses and vulnerabilities in the price discovery system and shore up methods so future supply disruptions don’t leave cattle producers as vulnerable as today.
“Something we’re acutely aware of is everybody is a margin operator from the packer to the feeder to the stocker, except when you get to the cow calf guy,” he said. “So if we have any of these disruptions, any problems, any losses, eventually that problem gets pushed down to the cow calf guy and right now he’s the one taking the brunt of the pain for the foreseeable future. He’s been fighting these bad markets for a couple of years now and, just when we thought we were going to come out of this market low for cow calf producers, COVID comes on top of it. Fundamentally, we need to make sure our supply situation stays in tact for the sake of the cow calf producers, which really are at the heart of the organization.”
The trade organizations, he said, need producers to get behind broad solutions and what is best for the industry collectively. Rather than focusing on a single segment at the sake of all the other segments of the industry, the reality is the industry must work together all the way to the packer to be successful.
“We have to be very careful in this emotional time,” he said. “There are some people who like to amp up the emotions and make it all about anti somebody or against somebody. Guys, regardless of what you believe, we’re all on this boat together and if you start shooting at the floor of the boat, we’re all going to sink together. We better figure out some common sense solutions that allow us to move forward in a healthful manner for a long time to come.”