October 30, 2014
Most consumers are familiar with the advertising campaigns promoting specific diet choices—for example, “Beef: It’s What’s for Dinner,” featuring the baritone voice of Hollywood actor Sam Elliott, or “Got Milk?” or “Pork, the Other White Meat.” All these campaigns seek to influence consumer choices and increase demand for the specific promoted commodity, often at the expense of the other choices. But do you know how these multimillion dollar advertising campaigns are funded? Few people do.
These campaigns are funded by a mandatory tax on producers. In the case of beef cattle, there is a United States Department of Agriculture (USDA)–sanctioned $1 fee levied on every head of cattle sold in the U.S., with a comparable amount levied on imported beef. This tax is charged at the time of sale and generates about $80 million annually from domestic cattle sold and another $8.7 million from imports. This dollar-per-head tax is a government-levied tax, and while it was once ruled unconstitutional, the Supreme Court ruled that it represented “government sponsored speech,” cementing is as government-sanctioned.
This beef tax is often referred to as the “beef checkoff,” perhaps a less controversial phrase than “beef tax.” The $88 million generated annually by the beef checkoff is overseen by the 108-member Cattlemen’s Beef Promotion and Research Board, also known as the Cattlemen’s Beef Board, or CBB, and it shares collected funds with State Beef Councils. (The 108 members of the Cattlemen’s Beef Board are appointed by the U.S. Secretary of Agriculture, who chooses them from a list of nominees that’s put together by a group of cattle producers and importers.) The Cattlemen’s Beef Board decides how to spend the money: it can be used for research or promotion, but absolutely never for influencing policy through lobbying or political action. This research and promotion program, funded by the beef checkoff, is overseen by USDA’s Agriculture Marketing Service.
Since the Cattlemen’s Beef Board does not implement programs, it seeks to fund programs undertaken by other groups. The primary recipient of beef checkoff funds is the National Cattlemen’s Beef Association (NCBA), an industry trade group with two main functions: to promote consumer demand for beef, and to lobby for legislation and regulation that will help the beef industry. The NCBA takes the beef checkoff dollars and contracts with advertising agencies to develop the promotion program. And here’s where the problems begin.
The NCBA not only is the primary recipient of beef checkoff tax dollars, it receives virtually all of its operating money from that source. It likes to promote itself as a membership group advocating for beef producers. In fact, though, its membership has fallen from 40,000 in 1994 to 26,000 today, with only about seven percent of its revenue coming from membership dues. The rest of the revenue comes from beef checkoff funds. It has been estimated that only four percent of NCBA members are independent livestock producers and that the remainder of its members are processors, feedlot operators and importers.
Because the beef checkoff explicitly prohibits the tax money from being used on lobbying, it’s imperative that the NCBA keeps the beef tax dollars spent on advertising separate from the members’ dues that fund lobbying activities. The problem is, the NCBA hasn’t been doing that. Auditors have found improper use of beef checkoff dollars funding travel and activities of the NCBA officers, spouses and staff, not related to advertising campaigns. Investigations have uncovered that NCBA staff were inappropriately, anonymously listening in on conversations of the Cattlemen’s Beef Board, which is another no-no.
The inappropriately close relationship between the NCBA and its majority funder, the Cattlemen’s Beef Board, begs the issue surrounding the use of beef tax dollars. This issue has been a source of conflict between the NCBA and organizations representing truly independent livestock producers such as R-CALF, the National Farmers Union, and the Organization for Competitive Markets. Over the years, the NCBA has lobbied for positions that independent beef producers oppose. Some of those issues include:
- Fighting against country-of-origin labeling
- Opposing mandatory price reporting
- Opposing class action law suit by independent producers on captive supply issue
- Supporting early re-introduction of cattle from disease-affected countries
- Opposing banning packer ownership of cattle until 2 weeks before slaughter
- Opposing increased enforcement of anti-trust laws
You can see why Fred Stokes, a cattleman from Mississippi, one of the founders of the Organization for Competitive Markets, and a former NCBA member said, “In being forced to pay the beef checkoff, cattlemen are funding their own demise.”
The problems of the Cattlemen’s Beef Board and NCBA have led these same organizations to push to reform the selection process of Cattlemen’s Beef Board membership, tighten oversight of beef tax funds, and to make the Cattlemen’s Beef Board and NCBA more accountable. A Beef Checkoff Enhancement Working Group composed of the different stakeholders presented a reform proposal that ended up being primarily cosmetic, but also recommended a doubling of the tax levied per animal sold by producers. As a result, 36 organizations supporting independent cattle producers and rural communities have written to USDA Secretary Tom Vilsack urging him to reject the proposal of the Working Group and to implement reforms to eliminate the conflict of interest represented in the current situation.
Establishing the beef checkoff was not an easy process. In the late 1970s and early 1980s, promoters of the tax attempted to make it happen through producer referendums. The theory was that if producers would vote for it, then USDA would endorse and manage it. The problem is, producers DIDN’T vote for it. In fact, Congress ended up establishing the beef tax and setting up the structure.
I was part of an effort in one of the referendums in the 1970s when I worked at the Kansas Farmers Union. I participated in 40 debates in counties across Kansas urging a “no” vote in the “beeferendum,” as it was called at the time, with the President of the Kansas Livestock Association urging a “yes” vote. Concerns I expressed during that effort by Big Beef to tax independent producers to promote Big Beef’s agenda have been borne out by these current events. A tax on the independent producers has been used by the large meat processors and feedlots to promote their business interests, whether or not it was good for producers OR consumers.
As changes are contemplated this go ‘round, I would recommend one simple, basic reform. Make the beef tax voluntary at the time of sale. That way, those producers who really support the program can continue to do so and those that don’t won’t be compelled to through a mandatory tax that promotes issues that will drive them out of business. That is the only step that will rein in the arrogance and sense of entitlement pervasive in the current structure.
Read Bob Martin’s follow-up blogpost, Beef Tax, Take Two.