NFO-48 (AV10455): US Farm Report: Make Processors Compete

[music] welcome to another program of US farm reports brought to you by members of the national farmers organization in this listening area in the interest of agriculture rural business and the well-being of our nation the historic records of the United States government proved conclusively that farm prices must be in balance with other segments of our economy to ensure and maintain a strong national economy we have as our special guest today Earhart Pfingsten a national vice president of the national farmers organization and Phil Allen will discuss the nfo marketing arrangements and their decided affect unimproved livestock prices hello there we'd like to talk about the importance of these marketing arrangements give you a bit of their history and also mr. Pfingsten who is now the vice president of the nfo but who is the head of the meat commodity department before this are going to describe to you just how this kind of a marketing arrangement introduced into livestock marketing the kind of competition that has sort of fooled the experts before we get to mr. Pfingsten's analysis of this I'd like to describe for you the size and scope of these arrangements we go back more than a year a year ago this past November the nfo believes that the first of the marketing arrangements started it was probably a felt need that farmers have to find a better service in marketing than they had had when they go into a marketplace all alone and submit themselves to that system and sort of act ask in effect what am I going to get farmers have come to realize that they you know pretty well what they're going to get so when they discovered that they could get a better service and the national farmers organization discovered that in a certain area farmers could be dealt with better on terms that they liked better so that they'd be in control of more of the factors that go into a negotiation over livestock then naturally a farm organization that had any sense of responsibility would say to its members all right we think this is a good place for you to market never at any time did the nfo say to its members now don't mark it here but it's completely consistent with a sense of responsibility for a farm organization to say alright it looks as though you'll do well here so market here this meant that farmers were beginning to favor an area over another perhaps well this is this is sort of the history of it but it's become a very sophisticated modernizing of our marketing system in trying to describe where all it operates and to what extent in the key places I thought that I would review for you some conversations I've had on scheduled television programs around the very heartland of the livestock producing areas with nfo marketing administrators not many weeks ago I talked with Val Akerlund who was a member of the NFO National Board from the state of Nebraska he farms about five or six hundred acres at Valley has been in the livestock business all his life and he is the marketing administrator for the nfo in the Big Sioux City Market and the Omaha market two of the very largest in the world when I talked with mr. Akerlund he was describing the nmos gaining experience and how the word was getting around to farmers on both sides of the river and up into South Dakota and Minnesota where livestock moves into these great markets and how part of what was being accomplished in the early days of the marketing arrangements was with just the sort of informing of each other and where nfo members were by their example marketing together showing other farmers who had not belong to the NFO how it could be to the advantage of farmers working together it could be to their advantage in a number of ways but the thing that the people who took part in it first started noticing was that they had a higher or better take-home check now you can hear members of the nfo talking about this they'll say that isn't our objective we like the fact that the take-home check is better and in a few minutes when mr. fingsten talks to you he can describe some of the reasons for this but the objective that the nfo people have for marketing together is to build bargaining power in the hands of farmers that muster åkerlund talked about this at great length a week or so later I had the opportunity to talk with Lester Carr of Rosendale Missouri he is the marketing administrator for 40 counties around the st. Joseph market and he described how farmers from both the Kansas and Missouri sides and up into Nebraska and parts of southern Iowa were working together to bring their livestock together for the purpose of that market the Saint Jo area has been very interesting in the mid summer of this 1965 season for one thing they decided they'd have a demonstration shipment of hogs moving to an Eastern Market over the old Wabash railroad they were working in active cooperation with some folks who while they know their way around those old shipping routes along the Wabash which is now called the Norfolk and Western and they also know their way around markets over across the Mississippi River what they were doing there was inducing and interesting farmers in the st. Joseph area in trying out their luck in an Eastern Market one thing they were doing was kind of bringing back some older methods that had fallen into disuse as far as transportation is concerned ATLA grow Indiana at Griggs Ville Illinois and LaGrone Indiana they reactivated and rebuilt some railroad shipping points that hadn't been used I suppose in a generation and because they discovered you can get farmers to work together and bring their livestock together they sort of reactivated these old shipping points along the wall Bank that's another example of the things that were done by the nfo marketing arrangements collection points collection points were activated in Minnesota in Kandiyohi County at Willmar Minnesota and various places as I move down through Missouri I had another conversation on television with Fred Deardorff of OVAs that's in Central Missouri between Jefferson City and Mexico Missouri and I also talked with David suds berry who lives at Holiday which is near the st. Louis marketing area and he's administrator for that they sort of taught me some of the ins and outs of this discussion that's going on these days about whether it's better to market buy great and yield transactions or whether it's better to market on the hoof and they were pointing out that farmers were gaining some very good experience with great and yield transactions and learning that what the processor really buys as a carcass a carcass that he can market and farmers are learning and gaining experience with this kind of transaction through nfo marketing arrangements then as I moved on up through Iowa I talked with an administrator of the as we call it in the NF o the Waterloo marketing area it actually includes Cedar Rapids and the tum WA and some of those northern points in the in the state of Iowa and southern Minnesota around Mason City built Albert as the marketing administrator I talked to there he described to me how some nfo farmers who were called on the telephone by him or by mrs. Talbert had finally gotten so enthusiastic about this system that they were making the calls it was on their initiative that they were bringing their livestock to the attention of our marketing setups within counties and the contact would first be made with the county meath bargaining chairman when I talked with three farmers up at Mason City Iowa and the conversation was broadcast on the station in Mankato Minnesota and kgl Oh Mason City several farmers there Gerald Moss as I remember who lives near Mason City described how he had marketed cattle twice and he felt that he had gained as he said now this is his experience five hundred dollars each shipment more than he would have gained if he had sold as an individual and one of the farmers who was there on the same program I reminded him yes Gary he said but our reason for marketing together is not just the immediate advantage we might gain in a marketing arrangement it's the long-range bargaining power that we're building it seemed to me that those fellows up there by Minnesota I had a very good conversation because they they got at the essence of what this marketing arrangement approach is it isn't just an attempt to market in a in a different way it's an attempt to show farmers that by bringing their production together and being in on transactions that used to be the subject for a farmer to be told about you know all such things as weights and grade and yield and price and shipment and all that when farmers are in on all those negotiations this is bargaining power that's the way these farmers described it to me oh yes one other point before I get to mr. Kingston bein gravis who operates a seven hundred and seventy-five acre farm at Graham which is near st. Joseph was describing one of the newest and latest setups that the nfo has established with the biggest independent packer in the st. Joe market Bain was describing to me how this Packer sort of specializes in fed cattle choice grade and he was describing how the nfo is now supplying this packer and supplying him rather openly and the arrangement is working out to everyone's satisfaction because this is a modern Packer he takes very great pride in his modern methods not only in slaughter and processing of meat but also in marketing he concluded that what we're gaining is a modernizing now the whole marketing system I returned to one of the observations made by Val Ackerman the first conversation I had mr. åkerlund the nfo National Board Member from Nebraska pointed out that nfo is now supplying among the very largest Packers and that our operations extend over 23 States and even though this was quite a number of weeks ago the volume had already reached above the 30,000 mark for hogs of course cattle being a three year cycle that would gain rather more slowly than the NMOS marketing arrangements would involve hog supply well I've tried to describe in this way the size and the scope of these market operations the nfo has no johnny-come-lately with this approach to it as you can now see we've gained a lot of experience I'd like to turn now to the vice president of the NFO Erhart things to me and the reason we're talking about this is that Mr. Pfingsten before he was vice president of the National Farmers Organization was head of the meat commodity department and he had conversations with processors all up and down the line and I suppose he was in on the very first negotiations that set up some of these bargaining committees that have done their bargaining with processors all across the breadth of this country and I think he understands the philosophy of it and just how it is that with this approach to it we've been able to break through that $20 barrier what's that $20 plat sold mr. Pfingsten well I suppose you're referring to the prices that had been predicted by the process and not the processors but the forecasters over the nation who are usually quite accurate yes and this year of course in the last winter early spring they were forecasting or projecting the amount of livestock that would come be coming to market and as usual the prices that they would bring now if you'll recall they pointed out that by April our hog prices should reach 16 dollars that by June we should have prices of 18 dollars per hundred and that we would hit the peak of $20 per hundred in August now these forecasters were correct in their receipts they hit that you might say on the nose but in price they were way off we had already hit the twenty dollar mark in April when they said that the high would be sixteen we had hit the twenty dollar mark in June when the top was supposed to be eighteen in fact we hit twenty-five dollars in June and August isn't over so we don't know at this particular point just how far they do go but very definitely the hog prices have advanced at least five dollars above the predicted price and of course there's it's got to come from someplace I believe the Wallace farmer and one of their recent issues pointed out their farm rider that five dollars of this hog market was unaccountable or what couldn't be accounted for on the basis of the receipts so something had to do it well it was the NFO marketing arrangements because we put competition back into that market now to go back a little to the earlier days that Phil was referring to when I was hitting the meat commodity department we of course had to know of the problems of the processors of the market in general and a very thorough study was made and one of the very obvious things right at the outset was that the marketing pattern was set it was in a static condition each processor got his supply let's say 70% of it from the interior from buying stations and so forth and then went to the reservoir were they filled the rest of their needs the central public markets who handle probably a little bit less than 30% of the total supply so it was obvious that this was set there was no competition there they didn't have to bid against each other each processor had his buying station or his source of supply scattered about the country they took what came in automatically filled a balance at the yards now one thing that'll bear this out I'm going to tell you little incidents that took place I think will probably bring it out as clearly as anything in the 1962 holding action I was holding a meeting at Columbus Ohio in a sale barn and of course our holding action meetings are usually a little longer than others are because of the interest at the time and of course more questions and a packer a packer from the East Coast came into that meeting I didn't know he was there but he had to catch a plane out of Columbus at 10 o'clock and of course by 10 o'clock I had done a little more than just finished the general explanation the question period had landed but this Packer wanted to talk to me so he left word with the boys in charge of the meeting that he would like to see me at the earliest possible date well since he was from the East Coast and since I was better than halfway across the nation I decided I'd go there on Sunday and I'd be there on Monday morning his office faced the street and this is where I met the gentlemen for the first time I asked him how did he come out buying cattle in Ohio his needs were 2,500 a week as he had indicated on the note that he left with our boys well he says if you look across the street you can see all that I got and across the street were three semi-trailer loads of cattle so this of course wasn't very much of the 2500 that they need it for a week so ask him why he didn't go to one of the central public markets that had been so highly publicizing that they had all the cattle that they need it almost indicating that didn't know what to do with him why don't you go there and buy some of your cattle he said mister I was there for three days and I didn't even get to look at a pen of cattle as I understood his explanation the cattle and the hogs for that matter on that market were being let's say prorate it out to the people who had been buying them in in the period before and since he had not been a buyer on that market he couldn't buy any so he was scared and I mean really scared because he was on the East Coast away from the big supply and he figured that he was going to have to start dealing with the people who had the cattle if he were going to get any because he believed that if this would go the central public I mean the central Packers would get the total supply so this further substantiate it that there was no real competition in the market at all that it's pretty much a set pattern then on the basis of figures available to us and figures supplied to a great extent by our government indicate it that even at the central public markets the Packers buying on that market will buy within a half a percentage point of the total supply year after year in other words there is no great variation which would further indicate to me at any rate that the pattern is set that it is more or less goes out according to the percentage that they've been buying even in the cases of where a packer moved off of a major market he still seems to get about the same supply of livestock so what we needed to do was bring more competition back into the market we had to break up this set pattern of them automatically getting their supply without bidding for it or paying the farmers for it so this is where the marketing arrangement idea was established we started at two points before the 19th sixty-four holding action and with those two points we had an unusual situation they were processors who believed that the chain stores were going to take over the packing industry as well as agriculture if this situation weren't corrected but they were under the thumb of these chain stores and that they would either be destroyed or be taken over or become let's say hired hands of theirs so they were interested in bringing competition back so here started our marketing arrangements we started supplying those to Packers but we couldn't gain much hold elsewhere we didn't seem to be able to get more Packers interested until after the holding action of 1964 this holding action was the one thing that made the Packers realize what a big influence the NFL was out here in the mound of livestock that they did control while maybe all of them were kidding the public in the newspapers and the news media in general saying that they couldn't see any change they couldn't lie to themselves they knew that they were in trouble and that the situation was going to have to be reckoned with and so of course here one by one they started getting ready to do business with the nfo through our marketing arrangement now I'm pointed out earlier that in the cattle market we had the price went about three dollars above what had been expected and in the hog market fully five dollars beyond the expected tops that were indicated for the various period now of course a lot of people have been led to believe that a lot of this is due to a shortage a shortage of meat so before I go any further I want to nail this point down first just how severe this shortage is and I have here before me the Iowa Cooperative crop and livestock report for the month of June this points out well I'll read it commercial meat production beef veal pork mutton in Iowa during June totaled 370 million eight hundred and nine thousand pounds according to the Iowa crop and livestock reporting services this now get this here's your percentage figures this is three percent less than June of 1964 production but 20% more than 1959 to 1963 average of three hundred and nine million six hundred and eighty nine thousand pounds meat production during June was six percent more than in May estimated meat production includes slaughter in federal inspected plants and in other wholesale and retail plants but excludes farmer slaughter then it goes on down talks about the another percentage of in the live weights it points out that the number of calves slaughtered was 31 percent more than June 1964 and total live weight increased now get this total live weight increased fifteen percent the total live weight of hog slaughter and number slaughtered was about the same as a year earlier sheep and lamb slaughter was three percent less than in June of 1964 now the reason I went over this is to point out who there is not a shortage as a lot of people like to make believe have brought about a higher price so something else had to do it well it was the competition in the market now how did we reach competition that had completely left in the mark let's say that I am in the center of an area there's a packing plant to the right of me I am a packer myself and there's another pack plant to this side now normally we've been getting our supplies perhaps through the same area different buying points but now the nfo through it's a marketing arrangement and by making arrangements with individual Packers to make sure that they would remain competitive and give the farmers a break and save them some of the costs in marketing that they were paying and getting them nothing we started to supply these mat and plants by pointing out to our membership that they had an advantage in marketing there so let's say that I am well let's say the plant to the right of me here is the plant that the NF o is supplying so now he's getting the production that he got through his normal channels but he's also getting the production from NF o members out of this area here now this this makes a change the packing industry pretty much operates at a sixty five percent of capacity basis and below this they lose money but here's the Packer on this side now who's getting the additional production his capacity goes beyond the sixty five first re-spread amaldi receives goes beyond the sixty five percent so he has become more efficient and is in a better position to pay a price a fair price for the livestock but how about this packer now in this position that I'm sitting his supply has dwindled he's now down below the sixty five percent so he's losing he's losing money he isn't using his plant to the extent that it must be used to run a profitable business so what's he gonna do keep operating at a higher at a loss or is he gonna shut down well chances are he can't do either one if he asked stockholder so he's got to see to it he gets more supply now how is he gonna do it he has to go into other areas perhaps the area to my left perhaps the area to my right and yet supply that he's no longer getting within his own area now when he goes into this area over here he's not going to get the supply of the same price that the Packer in that area has been getting it because after all this Packers has been dealt with by these farmers for years so if this fella in the center wants a bigger supply he's gonna have to go into that area bid a higher price than that Packer is bidding so he starts getting a few hugs now what's that fella gonna do over there and let's say the fellow on my left over here that he's also gone into his area and taking the supply out of there if either one of these two stay in business they're going to have to meet that race so the next day they meet this 25 or 50 cent raise that this fella in the center is offered to increase his supply so he's back at the same place that he was the day before he's still not going to get any so he's going to have to raise the price once more and these fellows are not going to let him have it they're going to meet that competition so for the first time we have competition back into the market and this is what gave the American farmer the additional five dollars on hogs and the additional three dollars on cattle now there's only one reason why it's been more effective on hogs than it has cattle first of all the nfo didn't start as early with the cattle as they did with hug in the second place we haven't had the cooperation or haven't worked it as hard as we have the hogs to see to it that the competition was brought and this is what we're developing at this point getting the American farmer to realize that he is going to have to start in this orderly marketing procedure supplying Packers that will remain competitive supplying them with a good grade where they get paid well on the quality that they produce and the more farmers do join in in the nfo marketing operation the more sure they are that they're going to keep the advance that the nfo has has received for them now if these marketing arrangements should break down and every effort is being made it's going to cost the American farmer no less than $5 per hundred on hogs it's going to cost him no less than three dollars on on cattle so it's up to the farmers themselves do you want a price if you do get with it and start cooperating with the one group that is really working for the American farmer Phil do you have any more comments to make just one little story this came about in the conversation that Fred Dierdorf from Missouri was having with the representative of one of the biggest Packers he told Fred that he felt that the NFO was responsible for at least $4 of the gain in hog prices and he also said the thing that you just now mentioned that if farmers fellow apart and didn't mark it together as they'd been doing under nfo they were gonna lose it I would say just this to you if your city Cousins say is the NFO causing some of this raise and livestock prices I'd say be modest but admit it that for today is something to think about our special guests today have been Erhart Pfingsten and Phil Allen for more information on how to strengthen our nation's economy contact this station or the nfo in Corning Iowa receiving a videotape production