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The Beef Angle

Promoting Beef Demand Despite Fewer Checkoff Dollars

Promoting Beef Demand Despite Fewer Checkoff Dollars
The smallest cattle inventory in 60 years is pushing the Beef Checkoff's largest contractor to cut nearly $4.3 million from its budget.

YESTERDAY at Feedstuffs, I reported on some significant news about the nation’s largest cattlemen’s organization: due to projected reductions in Beef Checkoff funding, the National Cattlemen’s Beef Association (NCBA) will cut nearly 10% from its budget for fiscal year 2014, necessitating staffing reductions at the 26,000-member organization. 

NCBA is the largest program contractor of the Cattlemen’s Beef Board (CBB), the organization responsible for administering the federally-mandated Beef Checkoff. As you know, the Checkoff is assessed at a rate of $1 per head on every cattle sale transaction.

With the smallest U.S. cattle inventory since 1952, fewer checkoff dollars collected means fewer dollars to invest in beef marketing, research and promotion.

Checkoff assessments have been on a fairly steady trend downward from a peak in 2000, and will fall roughly 5.6% in FY2014, according to the most recent budget approved by CBB. The Board collected $41.98 million in assessments last year, but is planning for a at least a $4 million reduction in funds available for funding Authorization Requests for marketing, promotion and research activities. 

I spoke last Friday with Kendal Frazier, NCBA’s vice president for planning, governance and leadership development. We discussed the situation, and NCBA’s plans for dealing with it.

“We have to reflect the economic realities of our industry,” he told me, explaining that the multi-year drought gripping many parts of cattle country have led to the most recent reductions in Checkoff assessments. As producers have liquidated herds, fewer head of cattle are changing hands – with an assessment system based on a per-head formula, fewer head selling means fewer dollars for Checkoff programs. 

Beef demand has recovered somewhat over the past three years. Image courtesy of Kansas State University.

In January, the U.S. Department of Agriculture reported that the nation’s cattle inventory was at its smallest since 1952 – an amazing, and sobering fact. It comes as little surprise, then, that Checkoff assessments collected have fallen to their lowest levels since the program’s first year, when CBB collected a mere $35.9 million.

For NCBA, the prospect of cutting $4-4.3 million from its annual budget – a 10% reduction – means fewer hands to do the organization’s work. Frazier confirmed that NCBA offered a voluntary separation incentive to its employees, and that the program is currently underway; prior to its completion, the organization isn’t discussing the totality of cuts that will be necessary, but $4 million isn’t an insignificant amount of staffing to trim. 

Checkoff programming conducted by NCBA’s Federation of State Beef Councils Division represents about 80% of the organization’s budget. Interestingly, NCBA is CBB’s largest contractor – by far – and is currently implementing roughly 80% of the programs CBB authorized for FY2013.

  • Not all bad news

Even faced with the daunting task of trimming 10% from NCBA’s annual budget, Frazier pointed out that good things are happening at NCBA amid the belt-tightening. The organization’s Policy Division is doing quite well, with a growing membership and successful industry conventions and tradeshows supporting the Division’s efforts. 

In fact, the Policy Division will likely contribute revenue to the organization’s financial reserves for FY2013, allowing it to continue its non-Checkoff work on behalf of the organization’s more than 26,000 dues-paying members.

Likewise, despite declining Checkoff assessments, the Beef Checkoff says it has a strong story to tell. CBB Communications Director Diane Henderson talked with me yesterday about the financial implications of the FY2014 budget, and pointed out that despite fewer dollars available for beef marketing and promotion, beef demand remains strong. 

Henderson pointed out that even with relatively strong retail beef prices, consumers continue to demand beef as their prime choice as a center-plate protein. While some trend-watchers will look at measures of per capita consumption and see beef on the decline, while demand has actually been picking up steadily over the past three years (see figure).

For more information on the differences between consumption and demand, check out this backgrounder from the U.N. Food and Agriculture Organization. 

There are several reasons, including relatively high prices, that explain softening per capita consumption rates, but when looking at demand – the quantity of a product purchased at current prices, in a shorthand sort of thinking – consumers aren’t necessarily laying off stiffer-priced steaks, despite the weakness in the economy during the past three years.

Circling back to the assessment situation, the reality of the matter is that with fewer dollars available for beef marketing and promotion, CBB – and its contractors such as NCBA – focusing on projects with the most potential for driving farmers’ and ranchers’ return on investment will be as important as ever.

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