YOUR DUES DOLLARS AT WORK

by CCA Vice President of Government Relations Kirk Wilbur

18 California Cattleman May 2020

AUTHOR’S NOTE: COVID-19 has fundamentally altered every aspect of our society, and agriculture is no exception. Given the rapidly changing nature of COVID-19 responses from the agricultural industry and from state and federal governments, however, we are not detailing CCA’s responses to the crisis in this column— by time this magazine hits mailboxes, that information is unlikely to remain timely. Rather, CCA encourages members to visit www. calcattlemen.org/COVID-19 for up-to-the minute news from CCA on COVID-19, and to track updates in our Legislative Bulletin e-newsletter.

As California remains under a stay-at-home order in response to the COVID-19 emergency, the crisis promises to shape California governance for the rest of this legislative session and beyond.

On March 16, shortly after the onset of the crisis, the California legislature unanimously voted to adjourn two weeks early for Spring recess, recognizing the need for legislators and staff to “socially distance” to prevent the spread of the coronavirus. At that time, legislators expected to return to the Capitol on April 13 to continue the work of the people.

As the COVID-19 crisis raged on, however, it became clear that the legislature could not responsibly reconvene on April 13, and Assembly Speaker Anthony Rendon and Senate President Pro Tempore Toni Atkins announced that lawmakers would not return to Sacramento until May 4. At press time, May 4 remains the scheduled return date for the California legislature, despite recent statements from Governor Newsom that the state is unlikely to be out of the woods even by mid-May.

Prior to adjourning, the Senate passed a rule allowing senators to remotely attend and vote in committee meetings and floor sessions, providing that legislative body some discretion to continue lawmaking even as the state’s stay-at-home order remains in place. The Assembly, however, passed no similar rule, meaning that a quorum of assemblymembers would need to physically appear at the Capitol to at least adopt a similar rule. Legislators worry, though, that remote lawmaking—even when authorized by rule—may be ripe for legal challenge in the courts.

On April 6, Assembly Budget Committee Chairman Phil Ting issued a memo outlining how the remainder of the legislative session might look.

“When we reconvene, we will have less money and less time to adopt a balanced budget,” Ting wrote. “The State will see our revenues decline, even as we must increase spending to protect Californians. We will not be able to assess the full damage to our State’s economy and our revenues until August, at the earliest.”

Echoing prior statements from Governor Newsom’s Department of Finance, Ting outlined that the “May revise” of the California budget is likely to be a “workload” budget, maintaining current service levels (in stark contrast with Newsom’s ambitious $222 billion budget proposal issued January 10). The Budget Committee is unlikely to consider any fiscal bills except for those that address the three most pressing crises facing California: COVID-19, wildfires and homelessness.

As a result, the vast majority of bills introduced in January and February are likely to be shelved this session, or to undergo “gut and amend” to address one of those pressing concerns.

A budget act will be the absolute first priority of legislators when they reconvene, as the California Constitution sets a June 15 deadline to pass the budget. Legislators expect to take a second hard look at state spending in August, when the state will have a clearer picture of income tax receipts (the filing deadline for both state and federal taxes has been extended to July 15). The fiscal focus in August is likely to be on “new issues related to recovery from the COVID-19 pandemic,” Ting wrote, but “it is possible that the State will need to consider sizable ongoing reductions to major programs during this time,” as well.

As a lobbying organization, CCA has had to adapt to the new realities of California governance. CCA staff continues to meet regularly with other lobbyists, legislative staff and administration officials—though those meetings now occur via conference call rather than in the offices of the Capitol. Additionally, CCA staff continues to lobby on bills that were flagged in January and February, knowing full well that the future of those bills is now in question. Should those bills continue to move once the legislature reconvenes, those lobbying efforts will pay dividends. Should any of those bills be shelved this session, CCA is well-prepared when they emerge during a future legislative session.

California’s regulatory agencies have not been spared the headaches of the new COVID-19 reality. Despite Governor Newsom’s March 12 executive order exempting regulatory agencies from certain requirements of the Brown Act and Bagley-Keene Open Meeting Act, agencies have struggled to adapt to remote hearings and other complications of the emergency.

In the days and weeks immediately following the COVID-19 emergency declaration, government agencies not yet well-equipped to facilitate public participation via teleconference and webinar—notably including the California Air Resources Board and State Water Resources Control Board—issued a flurry of cancelation and

postponement notices.

The California Coastal Commission—which similarly canceled its monthly meeting scheduled for April—was one of the hardest-hit agencies. On March 14, Coastal Commission Chair Steve Padilla, also a Chula Vista city councilman, announced that he had tested positive for COVID-19. As Padilla struggled with the virus he was hospitalized in an intensive care unit and placed on a ventilator. Fortunately, Padilla has recovered from the virus.

Once the agencies began to implement remote regulation, they were met with significant hurdles. An April 9 emergency meeting of the California Fish and Game Commission convened to discuss delaying or restricting recreational fishing in light of the COVID-19 crisis had to be hastily postponed minutes after it began. The Commission’s webinar quickly surpassed its 200-person limit, meaning Commissioners were not able to call in to the meeting to establish a quorum. What’s more, the Commission had no meaningful mechanism to mute participants and organize orderly public comment, and the brief call was marked by outraged outbursts from callers speaking over what appeared to be the voice of Commission president Eric Sklar.

As of press time, it is unclear how agencies such as the Fish and Game Commission plan to rectify these issues while still permitting public participation in the regulatory process. Such obstacles to meaningful public engagement spurred CCA to request a delay in the Commission’s April 16 consideration of a petition to list mountain lions within Southern California and the Central Coast as a threatened species—as of press time, that issue remains on the Commission’s April agenda.

Over the past month, CCA’s first priority has been to work with the Governor’s office, the California Department of Food and Agriculture, the California Congressional delegation and our national affiliates at the Public Lands Council and National Cattlemen’s Beef Association to minimize impacts of the COVID-19 crisis on California’s cattle producers. But in the background of that effort, CCA continues to rapidly adapt to the ‘new normal’ in Sacramento; while COVID-19 is certainly the most immediate threat, CCA continues to work hard to safeguard your livelihood from the ‘everyday’ threats that pre-date this crisis.

20 California Cattleman May 2020

As the COVID-19 emergency deepened in March, live cattle prices fell even as retail beef prices surged. The discrepancy in the markets was enormously concerning to beef producers nationwide and CCA staff and leadership heard from numerous California producers concerned about the disparity between boxed beef prices and cattle prices in the futures and cash markets. CCA—as part of our ongoing efforts alongside our national affiliate the National Cattlemen’s Beef Association (NCBA) to respond to COVID-19— communicated these concerns to NCBA staff.

In early April, NCBA staff communicated these concerns to officials at the United States Department of Agriculture (USDA), asking that USDA expand an existing investigation into market activity after the fire at a Tyson Foods beef processing plant in Holcomb, Kan., last August to include current market volatility.

On April 8, NCBA escalated that call for an investigation all the way to the Oval Office. In a letter to President Donald Trump, NCBA President Marty Smith asked for the President’s “immediate attention in addressing the market volatility and damages experienced in the cattle production sectors of the U.S. beef supply chain.”

Specifically, Smith asked that Trump direct USDA to expand its existing investigation into market activity after the Holcomb fire to include market volatility during the COVID-19 crisis with the aim of “identifying whether inappropriate influence occurred in the markets, and to provide our industry with recommendations on how we can update cattle markets to ensure they are equipped to function within today’s market realities.” Smith added that USDA should work closely with the Department of Justice should the investigation uncover any wrongdoing.

Additionally, NCBA requested that the President direct the Commodity Futures Trading Commission to study the influence of speculators on futures contracts “to determine whether the contracts remain a useful risk-management tool for cattle producers.”

Within hours of NCBA’s request, Secretary of Agriculture Sonny Perdue announced via Twitter that the “USDA’s Packers and Stockyards Division will be extending our oversight to determine the cause of divergence between box and live beef prices, beginning with the Holcomb Fire in KS last summer and now with COVID-19.”

Smith was quick to praise Perdue’s announcement, issuing a press release thanking “President Donald Trump and Agriculture Secretary Sonny Perdue for their quick response to NCBA’s request to expand the agency’s investigation into the cattle markets.”

CCA will keep you apprised of any developments in USDA’s investigation and any results or advisories resulting from the probe. _____________________________________________

The Livestock Marketing Association (LMA) is encouraged to see Secretary Sonny Perdue’s announcement that the U.S. Department of Agriculture (USDA) will be extending its oversight to determine the causes of divergence between boxed and live beef prices, beginning with the Holcomb, Kan., beef processing plant fire and now incorporating the COVID-19 pandemic.

LMA calls for the investigation of beef packers to be comprehensive and expeditious. It should consider all potential anticompetitive and oligopolistic issues. This investigation should also include Department of Justice (DOJ) participation.

From the beginning, LMA has supported USDA’s investigation into beef pricing margins, which was opened in August 2019 following a beef processing plant fire. At that time, LMA wrote to USDA encouraging the agency to conduct a thorough investigation of all facets of this issue and underlying forces. LMA urged that if unfair trade practices, price manipulation, collusion, or other violations of the Packers and Stockyards Act or antitrust laws were found, rapid enforcement actions had to follow.

LMA went on to point out that the market volatility following the Holcomb plant fire was “only one illustration of long-standing concerns regarding pricing and competition.” The LMA letter urged USDA’s investigation to analyze issues related to competition in a larger context than the fire, including looking at issues experienced due to lack of competition in the entire live cattle marketing complex.

Unfortunately, less than a year later, we still await the results of the initial investigation and the structural concerns are proving true once again. The cattle market in the wake of COVID-19 has responded similarly to how it did after the Holcomb plant fire. Once federal, state, and local authorities began instituting recommended and mandatory economic shutdowns in early March 2020, the cattle industry experienced a sharp decline in fed cattle and feeder cattle prices. At the same time, boxed beef prices skyrocketed. Consumers spoke volumes as evidenced by empty meat cases and high prices paid because they view our beef as essential for survival in this pandemic.

The combination of these factors resulted in significant packer profit margins. All the while, livestock producers continue to receive a shrinking portion of the retail beef dollar paid by the American consumer. Additionally, a dramatically depressed futures market only worsens the pain by removing opportunities to manage price risk.

LMA is the national trade organization representing more than 75 percent of the regularly selling fixed facility livestock auction markets in the U.S. LMA also represents online and video marketing entities, and professional buyers: livestock dealers and order buyers.

Our more than 800 livestock marketing business members each work with hundreds and even thousands of producers to utilize competitive markets to bring them the best prices for their animals. This adds up to hundreds of thousands of cattle producers served by markets.

Our industry needs producers, feeders, markets, and packers. It is critical that each of these sectors have a reasonable opportunity to make a profit during the business cycle, ensuring a healthy and sustainable industry. However, if anti-competitive practices are at play in one segment, it risks pushing participants in other segments out of business.

The cattle industry needs answers regarding what is behind the dramatic spread between live cattle and boxed beef prices and if there is any illegal activity involved. LMA believes that coordination between the USDA and DOJ in conducting an investigation is one step closer to market transparency and participant confidence. USDA to Investigate Cattle Markets at Request of NCBA, LMA Supports Packer PROBE by USDA

EXPECTING LARGE RUNS OF TOP QUALITY FEEDERS!

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ESTABLISHED 1950

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Visit us online at www.dpyauction.com 16575 S. HWY 33 • DOS PALOS, CA 93620 located 1/8 mile south of Hwy. 152 on Hwy 33 WEEKLY SALE SCHEDULE MONDAYS: DAIRY, FEEDERS, SLAUGHTER BULLS & COWS

THURSDAYS: SLAUGHTER BULLS & COWS SALE INFORMATION OFFICE..............................209 387-4113 JOEL E. COZZI.................209 769-4660 JAROD COZZI..................209 587-6082 JOEL A. (JOEY) COZZI ...209 769-4662 FIELD REPRESENTATIVES GARRETT JONES ..........209 710-7904 DOUG GALLAWAY..........209 617-5435 MIKE VIEIRA.....................209 761-6267 BILL ENOS .......................209 761-1322 Find and follow us on facebook!

Beef Sales 3:30 p.m. Tuesday & Thursday yearlings, calves, cull cows & bulls replaement female

CALL FOR DETAILS ON UPCOMING SPECIAL SALES OR TO CONSIGN TO THE NEXT WESTERN VIDEO MARKET SALE JOHN MCGILL: (209) 631-0845

OFFICE: (209) 862-4500

FAX: (209) 862-4700

by CCA Director of Communications Katie Roberti

Stemple Creek Ranch in Marin County.

22 California Cattleman May 2020

Amid the outbreak of the coronavirus, many questions surrounding our nation’s food supply have risen. What started with consumers rushing to grocery stores and hoarding essentials in the middle of March—leaving store aisles empty and products out of stock—led to many, including U.S. Secretary of Agriculture Sonny Perdue having to continuously assure consumers there is no shortage of food in the United States and no need for stockpiling.

However, a month after the initial surge, it is not uncommon to see toilet paper, canned goods and other essentials still out of stock at stores or purchase limits per customer on some products in high demand. While it’s clear this is a demand problem, not a supply problem, questions remain as to what impacts COVID-19 will have on the future of the food supply chain.

For Loren Poncia, Tomales, owner of Stemple Creek Ranch and other producers who sell meat direct to consumers, he says the million-dollar question coming out of this pandemic is “are people going to change their buying habits?”

“In my opinion, it’s a start of a new way of purchasing,” Poncia said.

Established 15 years ago, Poncia and his wife Lisa have created a direct to consumer marketing program for Stemple Creek Ranch. Their beef, lamb and pork products are sold in grocery stores, butcher shops, through restaurant orders, online shipping orders and at farmers markets.

What started as Poncia being the single employee ten years ago, the ranch now has a team of 15 employees. Their demand has also grown from selling 10-12 beef directly to consumers in 2010, to selling over 1,000 head of beef directly to consumers this past year.

Poncia says people want to put a face with the product, and Stemple Creek Ranch has been doing this for 15 years — it’s just intensified during this time.

“We have to adapt and change with the market as consumers adapt and change to stay in business,” Poncia said.

During the COVID-19 pandemic, Poncia says the ranch’s online orders have been hard to keep up with— as he thinks it probably has been for anyone with the ability to sell meat in an online space right now— leading him to believe more people will continue to do their shopping online moving forward.

“What’s happened is the reshuffling of the deck for the food distribution system,” Poncia said. “It is going to be different when we come out of this.”

Although online sales are up for Stemple Creek Ranch and it seems there may be opportunities for more direct to consumer sales on the horizon, Poncia cautions it has not been easy for anyone during this time of uncertainty. Morris Grassfed’s dry-aged skirt steaks was shared on social media promoting customers to get their orders in for 2020.

May 2020 California Cattleman 23

“Basically, in one day, our restaurant orders went to zero,” Poncia said.

In addition to taking a hit from restaurants closing during this time of social distancing, Poncia says getting animals harvested and cut during this time continues to be a problem for most operations. He stressed the system is not prepared to harvest the number of animals it is seeing.

Julie Morris, owner of Morris Grassfed, San Juan Bautista, echoes Poncia’s concerns about processing limitations — a concern that other producers are voicing as well.

“I think our biggest challenge is processing,” Morris said. “I have the utmost confidence in the processors we do deal with. The system is just not big enough for producers trying to process their own meat.”

Morris added that for many of the small to mid-sized producers who follow their livestock through processing, there are concerns about capacity during the pandemic. If one packing facility shuts down due to an outbreak of COVID-19 among workers, it will only intensify the bottlenecked situation producers are facing when it comes to processing their products.

In addition to concerns over processing, Morris shares Poncia’s hopeful thinking that this situation will change the way people buy food.

“I’ve talked to several people who have invested in second freezers,” Morris said.

A holdback for many consumers when it comes to buying a quarter or half a cow is a limited amount of storage space for the meat.

“If people are buying second freezers, that may be an indication that people are changing their buying habits,” Morris said.

While Stemple Creek Ranch’s method of taking orders is year-round, Morris Grassfed takes orders January through June, with deliveries starting in June and going through September or until they sell out.

“We are confident once we start harvesting, we will be able to fill all of those orders,” Morris said.

Until deliveries start this summer, Morris says it has been great to sell surplus inventory and get it out to customers now.

Having been direct marketing Morris Grassfed Beef in Central California for decades, Julie, and her husband Joe are still implementing new business methods to reach customers directly.

“We are shipping for the first time in 29 years,” Morris said. “We are realizing that it is another way to meet demand.”

Knowing people want less contact with others, as well as products that are convenient and delivered, shipping accomplishes all of these consumer demands. It also helps Morris Grassfed reach consumers outside of their delivery area for the first time.

“In January, I fortunately set up our shipping program.” Morris said. “We ordered a palette of boxes with lining to keep the beef frozen. Then [the coronavirus pandemic] hit. Thankfully, our order has arrived, but I think it would be hard to get boxes now.”

For Martin Emigh, owner of Emigh Lamb, Dixon, having the ability to fill online orders has also been important for selling lamb during this time.

“Our online sales have definitely picked up,” Emigh said.

Emigh Lamb has been direct marketing their lamb to customers since 2011. The Emigh family also raises cattle and sells a few head direct to consumers each year.

In addition to online sales picking up, sales to butcher shops have been steady to higher for Emigh Lamb during the coronavirus crisis. This is an increase Emigh says he thinks comes as more people are going to butcher shops during these times to avoid the larger crowds at supermarkets and grocery stores.

As far as what Emigh Lamb has experienced throughout the pandemic, Emigh says when people started stocking up at the beginning of the outbreak, their business saw a good surge of demand. The two weeks that followed were slightly above average for sales, and since then sales have been back to normal for a week or two. Demand during Easter week, a time they usually see high demand for lamb, was not as large as normal.

Additionally, though some of their sales have been up, Emigh Lamb also lost all of their restaurant customers during this time as they primarily sell to higherend restaurants who don’t have the setup for delivery or curbside pickup.

Still, Emigh is optimistic about the future of consumers buying meat differently coming out of this crisis.

“I think it is going to establish a new way to buy meat,” Emigh said. “For a lot of people, they were kind of forced into it.”

Emigh believes once consumers have tried buying online or directly from a producer and have a successful experience with it, they will do it again.

“We will see if it holds steady,” Emigh said.

And for now, that may be the answer to the milliondollar question of: Are people going to change the way they buy food?

We will see.

In 2011, Emigh Lamb started direct marketing their products to customers though the family has been in the livestock business for five generations.