Facing a landmark regulatory proposal from GIPSA and record-high grain prices exacerbated by U.S. renewable fuels policies, the animal proteins industries must tell their stories in new, more persuasive ways to gain public support for industry friendly laws and regulations, say leaders from three of the USA’s largest turkey companies.
Public affairs, in fact, have not gone well for the animal protein industries in recent years, with arguments against the federal government’s renewable fuels policies, for instance, falling on deaf ears in both the legislative and executive branches of government. In the food-versus-fuel debate, for example, federal policy has favored the production of biofuels, not food.
In a panel discussion at the National Turkey Federation annual meeting, executives from Butterball, Cargill and Sara Lee outlined the public affairs challenges facing the poultry industry and what may be needed to bolster the industry’s political clout. Failure to answer this challenge, those leaders said, would leave the poultry industry vulnerable as a wave of new regulations are formulated by an administration aiming to bypass a Republican-controlled House of Representatives focused on federal budgetary constraints.
Industry structure, relationships at stake
The poultry industry faces a host of legislative and regulatory issues, ranging from corporate tax rates and the Department of Labor’s interpretation of donning and doffing rules to EPA’s rollout of Chesapeake Bay-style cleanup initiatives across America.
Bob Reinhard, vice president of food safety for Sara Lee Food and Beverage, said, “The reality is that the regulatory environment penetrates more and more every day into what we do in our businesses and is having a greater effect on how we go forward in our businesses.”
At the top of the list of the challenges is the proposed GIPSA regulation. Mike Mullins, vice president of corporate affairs, Cargill Value Added Meats, said, “If you are not yet fully engaged in the proposed GIPSA regulation, I encourage you to get involved with it. I have been working in public affairs and agriculture policy in Washington for 24 years and view it as the most significant challenge the industry has ever faced in the policy arena.
“Not only would the price for implementation of the regulation be very steep,” he said, “but relationships between poultry companies and producers would suffer under the proposed rules. And it would be absolutely devastating to the red-meat industry. It is critically important that the poultry industry be heard on this issue, because changes are needed in the regulation.”
Challenges to profitability, poultry’s affordability
While the proposed GIPSA regulation strikes at the poultry industry’s structure, the existing U.S. renewable fuels policy reduces industry profitability and, perhaps a more serious long-term challenge, makes poultry less affordable to consumers by driving up the price of grains, the industry’s most significant input cost. It is with a mixture of dismay and near disbelief that industry members view rising federal ethanol mandates and blenders’ tax credits. What’s more, there’s a push now to subsidize the ethanol industry’s infrastructure of pipelines and pumping stations.
Unheard on agriculture policies?
Audience members, in questions posed to the panelists, voiced frustration not only with current renewable fuels policy but a seeming lack of connection between the animal protein industries and Obama administration officials. One audience member prefaced a question by saying, “The Secretary of Agriculture doesn’t appear to agree with the turkey industry on anything. His perspective seems to be that large-scale animal production is bad and ethanol is good.”
The national political process, in fact, favors Midwestern farming interests in an important way. Alice Johnson, vice president of food safety, Butterball, LLC, alluded to this by saying, “The road to the presidency goes through Iowa, which has so much corn growing and ties to the ethanol industry. This tends to cause presidential candidates to have at least neutral if not pro-ethanol policies and to join in the push for the renewable fuels movement.”
Balancing food and fuel policies
While federal budget cuts may cause Congress to look carefully at subsidies for ethanol production, that doesn’t mean they won’t continue, Johnson said. With some ethanol facilities experiencing financial troubles, legislators may view ethanol subsidies as a way to protect jobs in rural areas.
“The industry’s message needs to continue to be that balance is needed in our nation’s food and fuel policies. We need to keep reminding people that we’re on a course for food prices to double over the next few years,” she said.
Food security: New way of talking
Mullins said the animal proteins industries need to start talking about renewable fuels in a different way. Speaking of the poultry industry’s efforts to influence renewable fuels policy, he said, “Clearly, what the industry has been doing in the past has not been working. There has not been the kind of progress made on this issue that people in this industry would like to see.
“The debate about food security is starting to heat up in a really big way, and I have coached our team to not make the food security issue only about biofuels.
“Many different conditions are causing inflation in prices of commodities, including wheat, cotton, metals and sugar. A huge amount of Australia’s wheat crop was destroyed in monsoons, for example. It is really important to look at the whole of it,” he said.
Cargill, Mullins said, is engaged on the food security issue, focusing on concerns like export bans and China taking 60% of the world’s soy bean crop.
“The U.S. State Department is concerned about the food security issue and deeply engaged in it. Hunger foments political instability and revolution. So, the State Department, the National Security Council and the National Economic Council are really getting into the issue. It is time to look for some new voices and places of influence,” he said.
Budgetary constraints will bring regulatory change
The federal budget cutting now under way is significant for the poultry industry, according to Bob Reinhard. Budgetary constraints will make change in regulatory approaches necessary, he said, and may mean opportunities for improvements in efficiency and effectiveness in areas of importance to the poultry industry.
Proposed budget cuts at FSIS, for example, could result in a fundamental rethinking of how that agency performs inspection – manpower for inspection being one of the agency’s most significant budgetary expenditures.
“The industry has a real opportunity in the next two years to work with FSIS and Congress to find new, more efficient, more effective ways of achieving food safety that meets the expectations of regulators and consumers.”
Need to tell industry story more convincingly
How can the industry build public support for industry friendly laws and regulations?
“It is important that we tell our story better so that people have insights into our industry that they may not have had before,” Mullins said. “We need to be seen as good corporate citizens and the lifeblood, particularly, of small communities, where most of us have all of our operations. It is really important to talk about where we are investing.
“Secretary Vilsack’s heart is in Iowa, and at Cargill we talk about Iowa investment all the time. A capital expenditure of a million dollars for a new innovation in a plant or feed mill might not seem huge in the grand scheme of things but is important in small communities. It creates jobs and economic activity downstream.
“As an industry, we have to invest more time on public affairs and get out of defense and go on offense. I think that is the type of thing that gets through in an administration that may be very different from all of us,” he concluded.