A conversation with Steve Dittmer

Could the Gadsden flag be Steve Dittmer’s personal insignia? The one he flies on his porch every Fourth of July? One of the earliest American Revolutionary War era banners, the coiled snake around the 'Don't tread on me' message projected a prickly “stay away from me” message to King George. Dittmer’s Agribusiness Freedom Foundation certainly endorses the same kind of message to big government. It’s an organization that preaches the most unreconstructed form of free enterprise - keep the government the hell out of the way and let the industry fend for itself. Given a chance, he says, the natural forces of free enterprise will make things right.

To be sure, it is a modernized version of free enterprise. Here’s a quote from a page on AFF’s web site explaining their goals:

To explain the contributions of free market capitalism and advanced technology to
the world food supply and its importance in increasing food availability not
only to all Americans, but to poor populations in the developing world..

He was an active free marketeer when I first interviewed him just over a year ago. Nothing has changed, of course, even his steadfast refusal to reveal the sources of the Foundation’s funding. He certainly doesn’t count R-CALF among his backers. Maybe some of the old line meat groups might be slipping him a few bucks. He does preach that all segments of the cattle industry be free to “operate in multiple segments of the food chain.”

In other words, it’s OK for a packer to own cattle for a lot longer than a few days. Or for a cattleman to “hire out the herd” all the way to the meat case, anathema to men like R-CALF’s Bill Bullard and Dr. Max Thornsberry. It’s an idea that passes muster with the AMI’s CEO Patrick Boyle, though.

Dittmer highlighted the difference in a sharply worded editorial/press release that hit the Cattlenetwork news desk recently. Using his keyboard as a cudgel, he hammered out this opening sentence: “The war of words between R-CALF's Bill Bullard and the American Meat Institute's J. Patrick Boyle highlights a huge problem for the beef industry. Bullard is telling everyone to not think about the damage R-CALF's mCOOL would inflict. He's creating diversionary word games, blaming Boyle, who's only preparing packers and cattlemen for the possible cataclysm R-CALF & its LAG* allies hatched.”

Firing a salvo like that invites a few follow up questions. I spent five more minutes with Steve Dittmer and tried to find out a little more about the Agribusiness Freedom Foundation.

Q. You were talking with CTV, a Canadian television news service, about the revival of the R-CALF-backed law suit asking that the Canadian border remain closed. You were quoted as saying, "Once again, it puts the industry's fate not in the hands of those who know, nurture and prosper by it, but in the hands of the judicial system. It holds the potential for virtually no good and tremendous harm and destruction on top of that already caused."

On the other side of the argument, R-CALF points to the continuing BSE problems in Canada, and the Canadian courts are currently weighing a case that suggests government officials in Ottawa actively hid the existence of the disease for at least a decade. With at least 10 cases of BSE originating in Canada and the “alpha” case of BSE in the U.S. occurring in a Canadian born animal, doesn’t it make sense to ask the courts to consider protecting the health of the U.S. herd?

A. The protection of U.S. cattle herd health properly belongs with USDA, not the courts. Acting on the knowledge that the world’s scientific community had gathered over nearly two decades and on the recommendations of the OIE, USDA had put a multiple-hurdle protection system in place. The importation of cattle under 30 months that do not carry BSE is one prong. The feed ban prevents the spread of any possible infectious material. The surveillance of older animals making up the at-risk population is another.

The USDA went through a thorough and systematic procedure to put their program together and review it. They used both in-house and outside experts to examine the issue.

The courts add no superior expertise in animal disease. Any time you bring the courts into a complex issue, you risk serious damage and unintended consequences from people with lots more authority than they have knowledge and expertise. It is a step to take only when government has not done its job – which, in this case, we consider a preposterous supposition, given the 15 months of study and preparation. We don’t consider putting a key industry issue in the hands of judges instead of trained industry and government experts – and totally beyond the influence of cattlemen – a wise approach.

By the way, the ten cases in Canada are far fewer than the number the OIE would consider a real problem. R-CALF has been fond of characterizing Canada as an undiscovered UK when it comes to the prevalence of BSE among the cow herd. At this stage, the UK was experiencing many thousands of cases each year, not ten total.

While you refer here to animal herd health, it should be mentioned that a separate issue – food safety for human consumption – is achieved from animal sources of any age by Specified Risk Material (SRM) removal at harvest.

We should also utilize the passage of time, and reflect that the dire predictions R-CALF made in its suit have not come to pass – just as science would have predicted. Canada was not poised for a BSE outbreak of gigantic proportions like the UK, BSE has not spread like wildfire through saliva, and the U.S. was not under dire threat of introduction of BSE into the herd; it was already here, but under control.

Q. I found this statement on your AFF web site: “We oppose efforts to put limits on businesses to ally or cooperate with each other. We oppose limits on the abilities of agricultural operators or other food chain participants to utilize the business structures they choose. We oppose limits on individuals or businesses to operate in multiple segments of the food chain. We oppose efforts to undermine the abilities of government agencies to serve and protect the public and agriculture by removing industry expertise and scientific tools from the process. We oppose destructive attacks on consumer confidence in the food supply. We oppose the isolationist, protectionist views of world trade that would condemn American agriculture to a dead-end, no growth future in a world with staggering food needs.” It reads like you’ve taken chapter and verse from Adam Smith’s “Wealth of Nations.” Let’s discuss those positions. One of the reasons limits are placed on businesses’ abilities to ally or cooperate with each other is to insure fair competition. Do you see any reason to impose limits or do you think the market is self-corrective?

A. Sometimes efforts to examine this question lack perspective. Overall, the competition level in this industry is fierce at the foodservice, retail, packing and certainly, at all production levels. People tend to evaluate the level of competition based on how many competitors there are and that is not valid. Is there no competition in the auto industry because we only have a handful of competitors? Is one packer who harvests 1,000 head per day more competitive than another who needs 20,000 head per day? Numerous studies by all kinds of economists have failed to find evidence of a lack of competition or properly functioning price discovery for the beef industry.

That is not to say that individual operators, especially where distance from an auction market or a packer enters in, may not suffer from less than optimal competition for their cattle. Given the far-flung geographic nature of the cow-calf and stocker business, we need to work a lot harder to get these sources of cattle together with the packers that need quality cattle. And this simple problem of geography is not going to go away.

Unfortunately, many of the suggestions the radical groups have been making would only make this situation worse. Taking away tools like contracting, alliances and branded programs that make it easier for cattlemen and packers to find each other and fulfill each other’s needs is not a positive step. Trying to place unnecessary cost burdens (mCOOL) or damaging packers financially (attacking trade) or damaging their capital base and efficiency (breaking up the big packers) would only further reduce the number and strength of packing plants, guaranteeing longer hauls and shrinking markets for cattle. Such moves also give up revenue sources and pile additional costs on cattlemen.

Rather than enhancing competition, many of the proposed “solutions” would reduce competition by slapping down successful businesses trying to expand or family companies trying to accommodate additional family members. They would forbid the U.S. from profitably taking advantage of our superiority in some areas and utilize needed inputs in other areas (trade).

We have more than enough antitrust legislation on the books presently. In fact, discussion in the general business community more often revolves around the obsolescence of antitrust laws at all. The laws are seldom used because the level of competition globally and the ease of raising capital if a real opportunity arises makes it unnecessary for governments to take such drastic action very often.

Our dedication as a nation to freedom – individual private property rights and limited government interference – is Constitutional in nature and is the basis of our free-market economy. AFF’s concern for the long term is protecting our ability to respond to economic challenges, innovate and serve the consumer in the best ways possible. We must be allowed to harness and foster our American ingenuity. We can’t do that by trying to protect the existence of every individual cattleman, regardless of his abilities, his capital resources or his natural resources. As the Declaration says, we must protect our rights to life, liberty and the pursuit of happiness. We can’t – and shouldn’t -- guarantee the outcome.

Q. Consumer confidence in the food supply has been shaken by the recent spate of E.coli-related recalls and the quality control problems of imported foods and feedstuffs, especially from China. Wasn’t much of the damage self-inflicted? And what steps would be necessary to regain consumer confidence?

A. For the most part, the E. coli recalls are not “self-inflicted,” but they are very much a part of the biological nature of our product. While both public and private research – including checkoff-funded research – has brought us significant tools to use in delivering a safer product to consumers, more needs to be done. We need to better understand seasonal cycles, learn better management techniques in all industry segments and develop even better intervention techniques at the harvest level. The millions of private, association and government dollars and attention spent on lawsuits or defending lawsuits would much better have been spent on projects like these.

That said, trade is no more a zero-risk proposition than is domestic production. We still have one of the best interlocking systems of protection for consumers, while still allowing a pretty free flow of commerce for our economy. The consumer knows this and puts a lot of faith in the USDA and the FDA – far more than some of the radical consumer activist and producer groups do.

It is important to note that any beef in other countries intended for export to this country is harvested under the eye of a USDA inspector, just as happens in domestic packinghouses.

Q. Your position on limiting agricultural operators from utilizing the “business structures they choose” could lead the cattle industry to a point where it closely resembles the poultry industry with front to back vertical integration. It’s a concept that creates fear and loathing among most ranchers. If ownership restrictions are removed, do you agree that the change I’ve just outlined could happen and do you think it would be a good thing for the industry?

A. Comparing the beef industry with the poultry industry is like comparing apples to oranges. The poultry industry is actually more highly integrated, from feed supplies, to contracts with growers to harvest and branded retail programs than any other major livestock specie. True integration of that type does not exist to any significant degree in the beef industry. And unless beef becomes far more lucrative than we can imagine, it never will. A key reason innovative cattlemen, packers and retailers are using contracts and marketing agreements to accomplish predictability is that no one has the kind of capital necessary to own really significant parts of all the segments necessary for beef production from start to finish.

On top of that, the return ranges from stingy (1.8 percent at retail and 2.5-3 percent at harvest) to unpredictable and variable in the production segments. To ever be as integrated as poultry with four big companies, a company would have to amass enough capital annually to rent or own about 200 million acres of grass, lease or own over eight million cows, feed eight million head of feedlot cattle, have the harvest capacity for that many cattle and retail distribution for the resulting beef. We’re talking literally trillions of dollars. And, for just one example, with Swift for sale for years and billions of dollars being raised and spent by hedge funds and private equity firms to take companies private and make money, not a single one viewed a major packing company as a good investment. So much for attracting the trillions necessary for really integrating the beef industry.

There is more than enough existing infrastructure in the ranching and feeding segment of the beef industry that there is little need for contracts with packers to anchor production loans like is done with much smaller poultry raisers in that industry. As for “ownership restrictions,” there are none now and while concentration has occurred (as it has in nearly every business on the globe to achieve profitability and efficiency) integration of the industry has not happened. Ownership limitations now being discussed in the industry, would not help the overall financial health of the industry, but would instead force higher costs and lowered efficiency and a lower competitive situation on the industry, so that more and more participants in all segments of the industry would be forced out of business. Fettering the economic abilities of an industry guarantees a stagnant and declining situation that would remove the beef industry as a competitive protein source.

Q. In the increasingly worldwide scope of agriculture, the phrase “American agriculture” might be as outmoded as my old ’56 Buick or a mule-drawn wooden plow. The big beef processors are all International with businesses like Friboi/Swift a major player in North and South America, Europe, Asia and the Pacific basin. The big agriculture commodity firms have operated on that scale for decades. What’s left of a purely American agriculture and where does that put your worldview vs that of organizations like R-CALF?

A. While the segments of the business that require very large amounts of capital are more likely to have international divisions, that makes them more able to market our products overseas, as well as weather the downturns that see them losing tens of millions of dollars a quarter for multiple years. While large amounts of capital are necessary to farm or ranch today, the amounts are proportionately tiny compared to the billions necessary to harvest, distribute or retail perishable beef. It takes large companies to have the capital to develop and test new products and strategies and weather a food safety crash.

Mandating hundreds of smaller packers or retailers to replace our present players would immediately plunge us into a high-cost, inefficient, non-responsive, slow, non-competitive situation that would hand much of our market share to other proteins and guarantee the eventual trivialization of the beef industry.

Production is still primarily held in the hands of American farmers and ranchers of all sizes and it is likely to remain so for many decades. We have a wide variation in season, terrain and climate. There are significant differences in community and societal fabrics around the country. The resulting wide variation in farming and ranching operations, as well as large capital requirements, make it difficult for very many large operations to amass production capacity in very many regions. The limited potential financial returns for processing and retailing as well as for producing segments limit the flow of capital into food production at all levels. These difficulties plus the independent nature of America’s farmers and ranchers mean that voluntary marketing agreements, alliances and contracts to achieve coordination to improve the product will remain the primary tools of business improvement for a long time.

Q. Again from the AFF website: “The Agribusiness Freedom Foundation is an independent, nonprofit, educational corporation. We are applying for tax exempt status as a 501(C)4 non-profit corporation. Contributions may be a business deduction, but you must consult your tax professional. Contributions are not deductible as a charitable contribution. The names of contributors are kept confidential.” First, have you obtained tax exempt status? And, as a reporter, I’m always wary of the intentions of organizations that won’t reveal the names of the people, companies and groups that fund them. Can you reveal who’s backing AFF? If not, what are the reasons behind keeping the list secret?

A. Yes, we have received approval of our tax-exempt status. And we do promise our contributors confidentiality. The reasons for confidentiality revolve around the business needs of our contributors. Most of our funding so far has come from the production segments of the industry, businesses that depend on neighbors and regional business for their livelihood. The partisan and sometimes vindictive reaction of some people to positions staked out in the industry made it prudent to support freedom and liberty in our industry but through quiet, non-public means. No one can afford to lose customers. We also keep in mind that some of the fringe animal welfare groups pose a very real threat to the safety of animals kept in open pastures and feedlot pens and we wish to invite no retaliation from them.