Corporate Farming: Reforms Help Restore Competitiveness

I hate to say I told you so, but I did. In June USDA published a draft rule regarding how meatpackers must deal with farmers and ranchers in the procurement of livestock and poultry (see the rule at www.cfra.org/competition).

In August, the packers and their commodity group allies finally pitched their fit, just as I said they would. I wonder why anyone should care about the complaints coming from the likes of the American Meat Institute and National Pork Producers Council.

For 40 years USDA has allowed packers to discriminate against family farm and ranch livestock producers by paying them less than they pay mega-producers for the same quality hogs and cattle. That family farmers and ranchers want the value of their livestock, not the volume, determining price is not only eminently reasonable, it is long overdue.

The Packers and Stockyards Act specifically prohibits price discrimination by meatpackers, making it unlawful for packers to “make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever.” Thirteen years ago, the National Commission on Small Farms recommended that USDA better define an “undue or unreasonable preference,” and that recommendation has been reiterated many times by the Center for Rural Affairs and our allies over the years.

In fact, the Center for Rural Affairs has been the most outspoken proponent of this rulemaking anywhere. And, finally, real victory is in sight. USDA’s draft rule is the most aggressive livestock market reform to come out of Washington since the passage of the Packers and Stockyards Act itself. It should be strengthened, not weakened, and moved forward.

A definition for “unreasonable preference” that ends volume-based price discrimination against family farmers and ranchers and the establishment that independent cattle feeders, hog farmers and cattle ranchers do not have to show harm to competition across the entire beef or pork sector to stop the anticompetitive practices that are driving them out of business – these are the two most crucial provisions in the rule. As you might expect, they are most under fire from the packers and their minions.

The packers don’t want reform. They want the freedom to put the screws to individual producers wherever and whenever they damn well please. They don’t care about farmers and ranchers getting a fair price or a fair contract. They only care about their bottom line.

We Need Your Help!
The USDA needs to hear from you! Please go to www.cfra.org/competition for detailed information about making your own comments to USDA regarding this set of draft rules (and to review our written comments or other writings and publications on this subject).

Comments

Corporate Farming and competitive markets

Fri, 09/03/2010 - 08:48 — gene (not verified)

I hope your stance does not mean that if I want to produce a specialty product for a market (grass fed beef, highly marbled pork, outdoor raised pork) I cannot command a higher price for the specialty product...and make more money because I am quite unique in the market place. Your stance really appears that you will demand that the government gets to review my agreement and the government will be able to tell me if my agreement is fair. The restaurant that I can sell to is NOT told how much they can charge for their unique service...don't tell me how much I can charge for my grass fed beef.

GIPSA

Mon, 09/06/2010 - 16:58 — Kathy (not verified)

I agree with Gene. Why should everyone be paid the same. Looks like the Center for Rural Whiners has just allowed the Packers to pay all of us a lower price. What the Whiners don't understand --- all livestock is not the same. The animals don't cut-out the same; they don't yield the same; or grow the same. If auto-dealers sold a Cadillac or an Impala, would you expect them to be priced the same? Get real people! If you don't want to invest in an expensive bull and cow, don't expect to get paid the same as those of us who do!

Kathy, wake up and smell the coffee

Tue, 10/12/2010 - 21:36 — Crabtree (not verified)

Who said anything about everyone getting paid the same price? Who's been selling you a bill of goods... wait, let me guess, NPPC, NCBA and the American Meat Institute (talk about a bunch of whiners). Of course animals don't all cut-out the same or yield the same, etc. But again, the question is, you're proud of the livestock you raise, which is all well and fine, but do you like the idea of your quality cattle be worth less just because you raise fewer of them than some big operation? Is that what you're advocating for? Appears you think the packers only have the best interests of farmers and ranchers in mind at all times. I'll let you in on a little secret Kathy, I've never whined about anything in my life but I've never been foolish enough to believe in something like the benevolence of the packers either.

no, that isn't the way it appears

Tue, 10/12/2010 - 21:28 — Crabtree (not verified)

Gene, nothing could be further from the truth. And nothing I have written in this newsletter indicates any of what you said in your comment. In fact, the proposed rule specifically protects premiums based on quality, method of production or real and verifiable differences in actual cost of procurement (transportation, etc.). What the rule does do is prohibit purely VOLUME based premiums... read that again, prohibits purely VOLUME based premiums. No one wants to review your contract or tell you what you can charge for your grass-fed beef. If you're fortunate enough to set your own price, more power to you. If, like many farmers and ranchers, you have to "negotiate" with the packers to get a price for the livestock you produce you'd likely feel differently. Frankly, most hog and cattle producers I've ever met are tired of getting screwed by packers and their volume premiums. Consider this, if you were routinely discounted on your grass-fed beef because you raise fewer head than the big grass-fed operation down the road a bit, even if your cattle were the same or better than those from the big operation, would you prefer that kind of pricing system? I'll wager that wouldn't be your preference.

Every producer produces a

Fri, 09/03/2010 - 16:23 — Peggy (not verified)

Every producer produces a different quality product; to say that a high quality product shouldn't command (or deserve) a higher price if that producer & packer can come to such an agreement, is against common business sense. I am a family farmer who happens to co-operatively own a sow unit with 14 other farmers. That sow farm produces pigs for all of us to finish and because all those pigs are high quality and uniform, the packer is willing to pay us a little more. The quality didn't come about by accident, but rather by hard work and money invested in the best genetics. I feel that in the spirit of capitalism it is OK for me to get a small premium. Farming is no different than any other business - there is no way everything is going to be exactly fair and even. Why would anyone strive to be better? Why would anyone work to bring higher quality food to the consumer's table if there is no benefit? Unfortunately we all stand to lose if this rule is passed.

where are you guys getting this stuff?

Tue, 10/12/2010 - 21:42 — Crabtree (not verified)

Peggy, that's the reason why this rulemaking process is good for ranchers and farmers with livestock. Producers should be paid based on the VALUE of their livestock, not the VOLUME of their livestock. That is exactly what this rule would help ensure by prohibiting purely volume based premiums that completely ignore. No matter how many times the NPPC lies about it, the rule does not prohibit you from getting a premium for raising the hogs that the packers want. It prevents you from getting discounted because you lack the volume that some very large producer has.

I think some are misinformed.

Sat, 09/04/2010 - 19:26 — Tom (not verified)

I think some are misinformed. There is no interpretation of the new GIPSA rules that disallows premiums for premium products. There is a problem with not allowing all producers the same premiums. I have grass fed beef myself. Here is a letter from RCALF that adequately describes this misconception but you might want to get the real facts from GIPSA themselves as they have written on this very subject. Meat packers are trying to scare people plain and simple. Of course that is exactly where some people want to be. Perhaps they are not really scared of not getting justified premiums--perhaps they are scared of not being on top of a giant market manipulation scheme. I hope everyone can get more value out of raising a premium product. That shouldn't be an excuse for cheating the cash market, of which is the basis for many premiums. "Billings, Mont. – Today, R-CALF USA President/Region VI Direct Max Thornsberry, DVM, and R-CALF USA CEO Bill Bullard sent an open letter to members of the U.S. cattle industry and Rural America regarding the Aug. 27, 2010, competition workshop in Fort Collins, Colo., hosted by both the U.S. Department of Justice and the U.S. Department of Agriculture. The letter follows in its entirety… “Dear U.S. Cattle Producers and Other Rural Americans, Thank you to all of you who expended your own funds and who took time from your cattle operations and other businesses to participate in the historic August 27 joint competition workshop held in Fort Collins, Colo., by the U.S. Department of Justice (Justice) and the U.S. Department of Agriculture (USDA). With a turnout estimated at over 2,000 (three separate overflow rooms had to be opened to accommodate the huge audience), farmers, ranchers, and rural business owners came from all across the United States. This was the largest turnout of cattle producers at a public meeting in memory, if not in all of history. The overriding concern expressed at the workshop was clear: If we maintain the status quo, competition will continually erode in our cattle markets and economic opportunities in Rural America will continually deteriorate. On the other hand, if we work to address the unprecedented consolidation and concentration in the U.S. beef packing and cattle feeding sectors, and if we require packers to fully comply with the Packers and Stockyards Act (PSA), we can stop the erosion of competition, stop the contraction of the U.S. cattle industry, and restore economic opportunities in Rural America for cattle industry participants. It really does boil down to this: Do we want the cattle industry to stay its present course or do we want to break away from the packers’ dominance and strike off in a new direction? The hog industry chose to stay the course and watched silently as 90 percent of all U.S. hog producers (over 600,000) exited the industry just since 1980. The first real opportunity to strike off in a new direction is the proposed rule issued by the Grain Inspection, Packers and Stockyards Administration (GIPSA). Those who support the status quo understand this and are doing everything possible to kill the proposed GIPSA rule. Their rallying cry is that the proposed GIPSA rule will destroy opportunities for producers to earn premiums for their high quality cattle and all cattle will sell for an average price. This is absurd. The proposed GIPSA rule will not do this. R-CALF USA has many members participating in value-based, branded beef programs including Certified Angus Beef and U.S. Premium Beef, and many of our producers are either feeders themselves or are involved in retained ownership programs and export-based programs. Our members recognize that while these programs presently are returning premiums over the cash price, all of these programs continue to use the fast-shrinking cash market to discover the base-price for their cattle, which accounts for about 90 percent of their animals’ total value. In other words, they understand that unless we take immediate steps to preserve competition in the cash market, everyone in the industry is harmed when the cash market becomes so thin that it discovers a less-than-competitive price. The proposed GIPSA rule will preserve what remains of our cash market and none too soon, for our cash cattle market is shrinking fast, following the very same path previously followed by the hog industry. Our opponents – the packers and the livestock associations with packers seated on their governing boards – are well-organized. They have guided our industry to where it is today and they want it to stay the course. We need your help to reverse our industry’s present course and your letters to both USDA and to your members of Congress explaining to them that we must aggressively enforce our antitrust laws and the nearly 90-year-old Packers and Stockyards Act if we are to halt the erosion of competition in our U.S. cattle markets and restore economic opportunities in Rural America. Below are addresses for contacting USDA and Congress. As part and parcel to our efforts to halt any further erosion of competition in our U.S. cattle markets, we have urged the Justice Department to block the proposed acquisition of one of the nation’s largest feedlots – McElhaney Cattle Company – by the world’s largest beef packer – Brazilian-owned JBS. As a result of our request, the Justice Department has opened an antitrust investigation, and we are now urging each state attorney general to do the same. For more information about the state of competition in your U.S. cattle industry, please visit our website at www.r-calfusa.com and click on ‘Competition Issues.’ Finally, if you were not able to attend the historic August 27 Fort Collins event but you have neighbors who did, consider giving them a call to thank them for making the sacrifice to help mark a new beginning for our U.S. cattle industry. This is our industry, let’s not give it up.” # # # R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA represents thousands of U.S. cattle producers on trade and marketing issues. Members are located across 47 states and are primarily cow/calf operators, cattle backgrounders, and/or feedlot owners. R-CALF USA directors and committee chairs are extremely active unpaid volunteers. R-CALF USA has dozens of affiliate organizations and various main-street businesses are associate members. For more information, visit www.r-calfusa.com or, call 406-252-2516."