2015 Beef Checkoff Annual Report - Page 2

In this annual report, you will learn about some of the specific beef-checkoff programs that help increase consumer preference for beef. First, however, I want to give you a brief overview about how we operate our Beef Checkoff Program and show you some of the resulting trends in how we are investing your hard-earned dollar-per-head assessments. Beef Checkoff Basics The Best of Times, the Worst of Times The Beef Board currently comprises 100 beef, dairy, and veal producers, as well as beef importers, all of whom pay the checkoff assessment and are appointed by the U.S. Secretary of Agriculture. The full Board meets twice per year, during which each member serves on a specific program committee to make recommendations to the Beef Promotion Operating Committee, and the full Board meets to carry out and vote on the business of the Board – financials, committee reports, leadership elections, and the like. The Operating Committee is made up of 10 members of the Cattlemen’s Beef Board and 10 members of the Federation of State Beef Councils and is the body that makes the final decisions about how to invest our budget on an annual basis, based on recommendations from the program committees. Fiscal year 2015 brought us a combination of the best and the worst of times in the cattle industry. We enjoyed record prices early in the year, on the tail of a strong year in 2014. But as we reached the end of the year we began to feel the pressure of our strong dollar in the global marketplace and pangs of rebuilding the domestic herd — something we’ve all been through plenty of times before but never welcome. The unparalleled tight cattle and beef supplies are shifting now as the cow-calf sector expands its breeding herds. The good news? We maintained substantial gains in beef demand throughout the fiscal year, thanks in great part to our Beef Checkoff Program. While we certainly can’t control the marketplace, maintaining strong demand through the roughest times gives us the best possible outcome given the marketplace fluctuations. Beef checkoff efforts are largely designed to address building long-term demand in domestic and foreign markets rather than short-term market volatility. We commission ongoing market research, identifying the latest trends in the industry and listening to consumers’ up-to-the-minute concerns, desires and opinions about our industry and products. We understand that consumers are in the driver’s seat when it comes to selling beef, so we have to know what they want and make it happen. We simply must be transparent about how we raise beef. Jimmy Maxey, California 2015 CBB Chairman In fact, we’ve enjoyed four consecutive years of aggregate beef-demand growth — and 21 consecutive quarters of increased demand, according to Kansas State University ag economist Glynn Tonsor, which is why we enjoyed cattle prices higher than many people ever envisioned in 2014 and much of 2015. Even though we aren’t likely to see those prices again any time soon, Tonsor said, “striving to grow demand is immensely important to industry profitability.” Remember, demand is not the same as consumption, which is a statement of supply. Beef demand takes into account not just how much beef consumers eat, but the price they are willing to pay for our product based on their preference for our beef over competing proteins. We enjoyed the benefits of this strong demand in the form of record-high cattle and beef prices throughout what were our tightest supplies in more than 50 years, very much because consumers are getting what they want from our product. FY15 CBB Actual Expenditures Research 23.3% Promotion 19% Consumer Information 25% Administration Limited to 5% The “administration” budget pie chart shows that we always spend less than 5 percent of our total budget on administration, as required by the Beef Promotion & Research Act. It’s also important to understand what falls under that “administration” cap so that it is not misconstrued to be just salaries for staff. In fact, the administration budget includes items such as: • board member travel • board and committee meeting expenses • staff salaries and benefits • staff travel • equipment purchases, rentals and maintenance • furniture purchases or rentals • depreciation • general office supplies, including paper • printing • office rent and utilities FY15 Administration Expenses • telephone expenses as a Percentage of Projected Revenue • database management • audit fees • insurance All Other Expenses • bank fees • legal fees 96% • postage and shipping • memberships and subscriptions • Internet and website expenses • compliance travel and software Administration USDA Oversight 0.8% 4.6% Administration Program Development 0.7% Evaluation 0.5% Producer Communications 3.6% 18.5% 4% 4% Industry Information Foreign Marketing 5% 2 3