Tuesday, January 13, 2009

EPA's Emission Tax on Cattle & Pigs

....Emission Tax on Cattle & Pigs. As Larry says, "If they tax cow crap, they'll tax anything!" LOL, I happen to agree with the stupidity of the individuals who run the EPA.

The EPA has collected data on cattle and pigs to justify this tax in order to meet emission requirements per law. The EPA has declared cows alone produce more emissions then the total number of cars in the US in the form of methane. My response is, "SO WHAT IS THE POINT!" If your going to tax ruminants lets tax sheep, goats, prong horn antelope, big horn sheep, elk, and deer. Lets tax the states based on their wildlife populations. If your going to tax pigs which are mono gastric animals lets tax horses, humans, dogs and cats. Well in some states like North Carolina you already pay a pet tax on your State Income Tax.

So what does this really mean to Dairy, Beef and Pork producers? Then finally what does this mean to the consumer of these products? Lower prices to the producer and higher prices to the consumer. For those of you who do not understand Agriculture Economics, I'll explain why this tax is so
detrimental to both the consumer and producer.

We'll start with the producer. I am a seed stock producer of cattle. This means I produce cattle that will eventually be sold to the producer who produces calves which will eventually go to someone who eats beef. So there is the two tier system in the beef industry. One who produces registered cattle or F1 cross (two breeds bred for first cross giving hybrid vigor) is the first tier. Second tier is the commerical producer, one who produces calves to sell to a specified market. There are a lot of options to this second tier. Some direct market their cattle and others sell their calves via the local sale barn. There are various other types of cattle operations that fit within both tiers, but that is another story. Now I move on to the final product, the beef you find in the grocery store. If you choose to buy ribeye steaks today at the store do you know the color of the calf or the breed of the calf that steak came from. No! Even in the Certified Angus Beef (CAB) Program you don't know the true breeds represented of the steak your eating. See the CAB website for the definition of CAB.

Specifications of Certified Angus Beef

What I'm trying to explain is every Agriculture product you buy is a homozygous product. Every steak in the grocery store looks the same as the next store and the same in every store across the US. Every ear of corn grown in my state looks the same as every ear of corn grown in every other state, etc. As such this causes a standard pricing for the end product to the consumer. Of course you just said, "But, I pay more for Certified Angus Beef!" Yes, you do, you have bought into the best marketing program in the US by the American Angus Association. If you really want a superior steak, ask your butcher for "Elite Tender Beef." These programs are considered "Branded Programs," an attempt to bring higher prices to the producers and they have succeeded. Through DNA testing we now have markers which allow producers to select for Tenderness and Marbling giving the consumer a higher quality product.

Yet, after all this cattle prices to the producers are less today then in 1980 based on inflation. Remember I produce a homozygous product. Unless I develop a market directly to the consumer and many producers have, providing quality grain fed, grass fed, natural, or organic beef directly to the consumer. Of course these four areas can be a combination. These producers by pass the middle man. Yeah, I got to the middle man. In the beef industry there can be more then one middle man. The list may or may not include the local sale barn, the feedlot, the slaughter house, then the grocery store. They all want to make a profit. No one wants to be in business and not make a profit. I'm included.

So what happens if the EPA enacts this tax. Well I get taxed and the feedlot gets taxed. It is the middle man who knows just how much the consumer will stand on a price hike before they stop buying beef and choose chicken over beef or pork simply because of cost. So who suffers, the producer. The middle man will offer less to the producer for their product. Why? It's a homozygous product. An example in point.... As grain prices went up last year on the Future's Market the amount offered to beef producers went down. This caused a huge number of producers to dump cattle on the market. These production cows and bulls were sold to make hamburger meat. The prices haven't risen even though a large number of production animals were sold. Today on the Chicago Mercantile Exchange the price of cattle is 84.00 cwt. It will be slightly higher depending on how close you live to Chicago. The reason is a whole new discussion which I won't go into. In Texas cattle are running 87.00 per cwt.

Let's look at what 87.00 per cwt brings to the producer. If I have 100 cows I will produce 95 calves based on the average of 95% conception rate. I'll sell these calves at an average of 500 lbs at sale time at the local sale barn. This equates to 95 x 5 cwt x $87 = $41,325 gross income. It takes about $250.00-350.00 for each mama beef cow. I'm down to $11,325 dollars profit. Now the EPA wants me to pay $87.50 for each beef cow I own. Now I've just made a profit of $2,575.00. Why in the world would I now want to raise cattle.

Let's look at the AVERAGE PRODUCER! The average cattle herd in this country is 30-50 head and the EPA very intelligently decided this tax is only for the producer with 50 head or more. Still stupid. What makes me with just under 100 head on my farm any different then two producers with the same number I have. Their cattle have the same emissions as me. Most producers have cattle to supplement income from their other job. I promise no one can live on the current $11,325 per year. The amount of labor the producer puts in doesn't even pay minimum wage. The small producer raises cattle for one simple reason....THEY LIKE CATTLE. As I said not only will the producer have to pay this tax, so will the feedlots. Double taxing by the government. They will offer less to the producer for their calves so they can absorb the tax and keep the price of beef the same to you. Remember I said the feedlots know exactly what you as the consumer will pay for beef before you switch to chicken or pork. Eventually with this type of tax, the rise in pork and beef will go up to you the consumer.

Let's look briefly at dairy cattle. I'm going to use California Dairies. You like the California Cheese Cows on TV. I can't help but laugh each time I see those cows on TV. The marketing for California Cheese is great....you have this picture of happy cows in the pasture. This so far from the truth it is mind boggling. The large dairies in Southern California keep their dairy cows in a huge feedlot situation. They are milked three times a day. The dairy operates around the clock. These dairies can have 10,000 and some more cows in them. The EPA's wise decision is to tax dairies above 50 head at a rate of $179.00 per head. So those large dairies milking 10,000 head a day equates to $1,790,000 dollars a year. What do you think will happen to the price of milk. Yep, you got it...GO UP!

Are you willing to pay this tax, while producers make less.....think! You need to eat, tell your senators and representatives in Washington the EPA is STUPID!


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