Idle Observations

October 2002

By Candace Krebs (candacejk@aol.com)

Fresh debate brewing over hormone use

More than two years ago now, during my first and only visit to Europe, land of small villages and big churches, I learned to understand more intimately what influences the agriculture there. Arriving in Copenhagen on a travel grant from the American Agricultural Editors Association, the annual conference of the International Federation of Agricultural Journalists was a feast of ethnicity. In particular, I remember a Japanese man (who asked long rambling questions despite his tenuous grasp of English) and his deferential wife, several spirited and passionate men and women from the formerly Soviet-controlled Eastern Block countries, several engaging Irish and Germans and, from Switzerland, a pleasantly aloof young man with the same last name as myself who spoke frequently of "ecology" and an exuberant and friendly gent who danced the polka with both gusto and finesse.

But the spotlight was on our Danish hosts. After hearing from official representatives of the country's agriculture and the newly formed European Union, we spent several days touring Danish farms and factories. Many of the small farms were producing beef and milk simultaneously from the same cattle.

It was no surprise that any use of artificial growth hormones was strictly prohibited, nor that the Europeans, and in particular, the Danish, were fiercely protective about the premium quality nature of their food. Terms like "ecology," "multifunctionality," and "functional foods" are part of the lexicon in European culture and all allude to a social and health ethic somewhat more complex and romantic than our own.

Though the farmers did envy some facets of American agriculture, including the commercial scale of farms and the sophistication of marketing and genetics, they didn't seem to envy our use of artificial growth implants.

In addition to nebulous safety concerns, a liberal respect for animals and the preferences of their expressive public, one farmer in particular had a surprisingly pragmatic reason. "Every time you make bigger production, you have lower prices," he pointed out.

The Danes already market 60 percent of their beef outside their borders, he said. What was the benefit in investing in technology to accelerate growth and boost production when it would only lower prices in the end?

His casual but penetrating remark (which I included later in an article in the February 2000 issue of Beef Today magazine) came back to me in the last several weeks as I encountered similar sentiments expressed in our own domestic industry.

In a column posted earlier this year on Agriculture Online, Oklahoma panhandle cattle feeder Paul Hitch, while trying to unravel the conundrum over fed cattle pricing, suggested aggressive implant use is partially responsible for dumping excessive pounds of beef onto the retail market.

Many industry observers have become increasingly uneasy over the preponderance of heavy carcasses and the motives behind them.

Equally concerning are consumer studies correlating growth implant use directly to tougher steaks and a poorer eating experience. For the most part, industry leadership has played down this information, and with good reason.

This is not a time when cattlemen feel secure eliminating any means they have of boosting performance or achieving profitability, and, so far, the U.S. market for natural beef has failed to compensate less efficient approaches.

Economists and rural development specialists have yet to conclusively define what capital resources and cash-flow levels are necessary to reach consumers with a specialty product through nontraditional channels over an extended time period. Most branded beef programs have failed to obtain an adequate combination of sales volume and/or price to return capital while sustaining their operations in the midst of the exceedingly high levels of market risk and inconsistency.

Still, the beef industry is squirming to debate hormone use more publicly. Like so many challenges the industry faces, restrictive measures will only have an impact if taken unilaterally, and any attempt to regulate them is likely to get hamstrung over the tenets of free-enterprise and innovation.

Placing new restrictions on old freedoms always proves difficult.

Whether formula contracting or implanting, individuals feel compelled to use the available tools just to survive financially, though many of them also wonder if, en-masse, these same practices are destroying the cattle business.

Competitive behavior and independence might disguise an underlying sense of desperation and helplessness that yearns for tighter parameters.

While we like to criticize our European trade competitors, their culture is older and in some ways more mature than our own. Spending time around the Europeans gives you a sense that they understand the limits of both freedom and personal ambition, and, thus, have an easier time simply enjoying life.

American farmers are productive, efficient, and motivated to meet those aims by more than monetary reward. It is inherent in the nature of farming to bring forth abundance. Rather than concentrating on supply side dynamics and restricting or limiting productiveness, perhaps the focus should be on product quality, the fulfillment of rewarding lifestyles and work environments, and good relationships with consumers, other sources of personal fulfillment that involve intangible value.

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Candace Krebs is a free-lance agricultural writer and communications consultant from Enid, Okla. She was raised on a family farm in central Kansas and earned a bachelor's degree in ag journalism from Kansas State University.

*A Comment on Candice's article:

A very interesting perspective. Indeed, the never-ending quest for increased output does evolve into excess supply and lower prices unless the demand curve can be pushed out through new markets or new product development. However, the final approach suggested here: "focus should be on product quality, the fulfillment of rewarding lifestyles and work environments, and good relationships with consumers, other sources of personal fulfillment that involve intangible value" -- only works if you can also limit imports from undercutting the higher value product produced. Otherwise you are priced out of the market and go broke.

Europe has been successful in doing this through high tariffs and effectively banning products they don't want (hormone treated beef). In the U.S. this doesn't appear to be a possibility in the near future. Hence, cheaper product will always be sourced from other countries with lower labor, land, and input costs (with production practices that may be questionable). We would end up with a locally produced premium quality and premium priced product for those who can afford it (and the few who will be producing it), and a market of imported product for the masses, essentially having "exported" most production overseas.

Much of U.S. agriculture is on a treadmill that is difficult to dismount. What works for each producer individually (maximizing outputs) accumulates into a detrimental affect on the whole (referred to by economists as the "fallacy of composition").

Product differentiation, quality, value (or cost competitiveness), or marketing point are the four items that producers can focus on in the U.S. market to improve returns.

This equates to: 1) choosing what to grow/produce (which can be limited by soil, temperature, etc., but may include producing several varieties of potatoes rather than a single variety, or a mix of different vegetables for a particular buyer; it may include branding based on production process like organic/natural or country or origin; or adding value through some level of processing).

2) Quality can bring a price premium for the grower through attention to all phases of his operational processes (developing a superior breeding line, culling, pasture management, handling, transportation, storage, being a reliable supplier of a consistent grade, etc.).

3) Competing based on low cost. All producers must manage costs and try to improve efficiency and ouput, but not at the expense of quality or product differentiation.

4) Marketing directly to consumers is a growing trend across the country with more farmers markets, road-side stands, internet sales, etc. It enables a larger share of the consumer dollar, although it isn't an option for many commodities like bulk grain.

The structural impacts of various markets, depending on what commodity we're talking about, will also impact these four components.

My point in initiating this reply was to note that borrowing from the European production model only works if you can also bring along the entire culture, trade regime/structure, and consumer buying habits. A difficult thing to do.

Brent Searle OR Dept. of Agriculture