Addressing Producer Concerns About the Beef Checkoff
Andy Bishop and Jason Schmidt answer producer questions about the Beef Checkoff
The Beef Checkoff is a program that impacts all segments of the beef industry. Voted on by cattle producers and established as part of the 1985 Farm Bill, the purpose of the Beef Checkoff is to increase the demand for beef in the United States and abroad through beef research, promotion and education. Because all ranchers are impacted by this program, it is important to understand the history of the program and ask questions about how their dollars are spent. The following questions and responses are the result of a poll on the Casual Cattle Conversations Facebook and Instagram pages as well as a conversation with Andy Bishop – Kentucky cattleman and chair of the Cattlemen’s Beef Board and Jason Schmidt – a North Dakota rancher and Cattlemen’s Beef Board member.
History of the Beef Checkoff
In the late 70s, demand for beef was low and a high-quality product was not being delivered to consumers. Cattle producers and beef industry leaders recognized the need for improvement and started working toward a solution. They started focusing their efforts on creating a national Beef Checkoff program. The Checkoff was voted down twice but passed the third time after producers got it structured to their liking. This vote passed the Act and Order of the Beef Checkoff. The Act is the law and the Order is how the Checkoff exists and operates.
“I think it is important to remember that producers asked for the Checkoff and voted in favor of implementing it,” said Bishop.
Jason Schmidt recalls being a teenager and attending meetings with his father when the Checkoff was being created.
“It was incredible to watch from the outside,” Schmidt said. “We created a self-help program for our industry that was producer driven. There was a lot of excitement around it.”
Today, national Beef Checkoff-funded research, promotion and education demand-driving initiatives garner a $13.41 return on investment for producers and importers who pay into the program.
How are Checkoff Dollars Collected and Distributed?
Every time a cow or calf is sold in the United States, the seller remits $1. Half of that dollar goes to the national Beef Checkoff and the other half goes to the producer’s state beef council. If the state the animal was sold from does not have a state beef council, the entire dollar goes to the national program
Next is the distribution process. Every July, the Cattlemen’s Beef Board and the Federation of State Beef Council listen to contractor proposals, or “Authorization Requests,” offer feedback and vote on which proposals they want to fund to drive beef demand. Their requests are then sent to the Beef Promotion and Operating Committee (BPOC) which consists of ten members of the Cattlemen’s Beef Board and ten members of the Federation of State Beef Councils. The BPOC positions are elected positions. In September, the contractors present their Authorization Requests again to the BPOC and the committee makes the final determination of how dollars will be spent according to the budget set by the Cattlemen’s Beef Board. That budget is based upon how many dollars the Checkoff was able to collect that year.
“The key thing to remember is producers make up the Beef Promotion Operating Committee,” Bishop said. “Producers vote on how these dollars are being spent.”
The people appointed and elected to these boards and committees are producers who pay into the Beef Checkoff. There are also seven importers on the Cattlemen’s Beef Board because they pay a $1-per-head equivalent $1 on boxed beef.
“What I like about the process is producers from all parts of the country get to haggle about how dollars are spent,” said Schmidt. “We all have different perspectives which creates great conversation. We have limited funds, so it is important we use them wisely.”
Producer Questions
Why don’t packers pay into the Checkoff?
There are two main reasons packers don’t pay into the Checkoff. The first is most packers don’t own the cattle for more than 10 days. If they do own cattle for more than 10 days, then they pay in. The second is producers did not want packers to have control of how dollars were being spent. This is one of the changes that was made before producers passed the Checkoff.
“Producers failed that first referendum because they didn't want packers to have control of the Checkoff,” said Bishop. “And basically, the sentiment at that point was if we let the packers pay into the Checkoff, they're going to have the most seats on the board. Producers didn’t want them controlling how those dollars are spent, rather they wanted it to be grassroots, producer-led process.
When do we vote to increase the per head assessment?
Increasing the per head assessment is up to cattle producers. Bishop said, “The way the original Act and Order was written in 1985, the $1-per-head Checkoff doesn't come up for a revote unless the industry decides to vote for a referendum.”
The national Beef Checkoff is federal law, which requires specific processes to change it.
“It’s not up to the Cattlemen’s Beef Board to decide to change the per head assessment,” said Schmidt. “It is the producers and state organizations who would need to initiate the change and sign a petition for a referendum.
Increasing the per-head assessment has been discussed recently because the original Checkoff passed in 1985 now has just 32 cents of buying power, and cattle numbers are significantly lower than they were in the 1980s.
Is there an option to opt out of the Checkoff?
There is no option to opt out of the national Checkoff.
“When the Act and Order were written, there was no option to opt out,” said Bishop. “This ensures people aren’t receiving the benefits of the Checkoff without contributing.
On the state level, there may be options to receive a refund. “There are some states with their own Checkoff programs that allow varying degrees of a refund, but everyone must pay in to the national Beef Checkoff,” said Schmidt.
Are funds being used for policy?
No. Checkoff funds were not intended to be used for policy, and there are firewalls and strict procedures in place to ensure funds are used appropriately.
“I was very skeptical when I first got involved with my state beef council and still approach many new things with skepticism,” said Schmidt. “What I found was it was really refreshing to see how everything is structured and how everyone involved is focused on beef promotion and research.”
When contractors’ Authorization Requests are approved and budgeted, they pay out of pocket for any expenses incurred while doing work for the Checkoff. Then, they request reimbursement from the Cattlemen’s Beef Board after submitting detailed records about their work. If they request reimbursement for activities not previously specified in their approved Authorization Request, they do not get reimbursed for it.
Which investment area offers the best ROI for Checkoff funds?
As mentioned earlier, the most recent ROI study for the national Beef Checkoff showed a $13.41 return on investment for producers and importers who pay into the program. Determining which investment area (i.e., promotion, research and education) contributes most to that return on investment is not something this economic study was designed to measure.
The recent study enables us to inform investors about the performance of their contributions to the program; however, it does not assess the synergies among the different initiatives,” said Bishop. For instance, we understand that research plays a crucial role in providing the factual content that supports promotional efforts aimed at building consumer trust.
The different investment areas support one another, so the return on investment is measured as one unit instead of segmenting across the different initiatives. Schmidt said, “I am confident in the process after seeing it up close that we're boiling it down to the best use of the limited dollars we have.”
This list of questions consists of only a few that were addressed on Season 7 Episode 41 of the Casual Cattle Conversations podcast. Cattle producers can learn more about the Beef Checkoff and how their dollars are being spent by going to DrivingDemandForBeef.com, signing up for The Drive, the Checkoff’s complementary newsletter, and attending national, state and local meetings.
Andy wrapped up the conversation best. “You wouldn’t buy a bull without doing research to see how it contributes to your operation,” he said. “You are paying into the Checkoff. I encourage you to do your research to know what the Checkoff is doing with your dollar.”
