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Proposal Would Change How Packers Purchase Livestock

posted on August 2, 2002


Left from the farm bill were provisions than would have banned meatpackers from owning livestock for longer than two weeks before slaughter. Given the concentration of ownership of packing plants, proponents of the ban argued it was needed to keep packers from squeezing farmers out of the market.

Proponents of the ban continue to work on legislation to reduce the market influence of so-called captive supplies. But, rather than seeking an outright ban, proponents are taking a different tact.

 

Proposal Would Change How Packers Purchase Livestock

Senator Chuck Grassley, Republican from Iowa, has proposed legislation he thinks will improve the competitive position of independent livestock producers. The bill would require large meatpackers to buy up to 25% of their daily livestock kill on the spot market, not less than seven days before slaughter.

The measure would tie into the USDA's current mandatory price reporting system, which, Senator Grassley says would result in the USDA being able to post consistent and reliable numbers … thus improving the accuracy of daily livestock prices.

The proposal would be implemented in three phases:

-Packers would be required to purchase 5% of their daily kill on the spot market by January 1, 2004

-Expand the purchases to 15% by January 1, 2006.

-And expand to the full 25% by January 1, 2008.

Some packers say the proposed legislation will hurt their ability to offer contracts to producers. But Grassley says the majority of livestock contracts pay out on a calculation incorporating mandatory price reporting data … and if the data are not accurate, contracts are not beneficial for producers trying to manage their risk.

 


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