Iowa Public Television

 

Packers and CAFOs could face more regulation

posted on March 17, 2000


GREATER REGULATION OF LARGE-SCALE CONFINEMENT LIVESTOCK OPERATIONS IS BECOMING A SIGNIFICANT TREND AT BOTH LOCAL AND STATE LEVELS.

IN NORTH CAROLINA, ONCE THE EPICENTER FOR MEGA-SIZED PORK PRODUCTION, AN AGGRESSIVE CAMPAIGN TO ENFORCE MORE STRINGENT STATE ENVIRONMENTAL REGULATIONS IS ENCOURAGING SOME PRODUCERS TO LEAVE THE BUSINESS. NEARLY 80 HOG FARMS IN THE EASTERN PART OF NORTH CAROLINA HAVE OFFERED TO SELL THEIR OPERATIONS TO THE STATE. THAT'S MORE THAN DOUBLE THE NUMBER STATE OFFICIALS ANTICIPATED WOULD TAKE ADVANTAGE OF A PROGRAM DESIGNED TO BUYOUT OPERATIONS THAT LIE IN FLOOD PRONE AREAS.

IN ADDITION TO THE NATIONAL TREND TO STIFFEN THE ENVIRONMENTAL RULES THAT GOVERN SUCH OPERATIONS, THERE IS ALSO A PUSH TOWARD MORE REGULATION OF THE CONDUCT OF MARKETS. DRIVING THE TREND IS THE QUEST FOR A CONCEPT KNOWN AS "PRICE TRANSPARENCY."

HERE'S THE ARGUMENT: IF PRODUCERS KNEW WHAT MEATPACKERS PAID FOR THE LIVESTOCK THEY SLAUGHTER, THEN FARMERS WOULD HAVE MORE LEVERAGE IN BARGAINING WITH THE PROCESSORS.

UNDER RULES PROPOSED THIS WEEK BY USDA, THAT'S EXACTLY WHAT WILL HAPPEN. CONGRESS LAST YEAR AUTHORIZED A PROGRAM THAT REQUIRES PACKERS TO DISCLOSE THE PRICES THEY PAY FOR CATTLE, HOGS AND SHEEP. PROPONENTS SAY THE NEW RULES ARE NEEDED TO ENSURE THAT SMALL PRODUCERS HAVE A CHANCE TO COMPETE IN AN INCREASINGLY CONCENTRATED FARM ECONOMY.

CONCENTRATION IN THE MEATPACKING INDUSTRY IS AN ONGOING REGULATORY CONCERN. JUST FOUR COMPANIES CONTROL 70 PERCENT OF THE CATTLE SLAUGHTER IN THE U.S. JUST FOUR PACKERS HANDLED ROUGHLY 60 PERCENT OF THE HOG KILL.

IN ADDITION, SOME 62 PERCENT OF THE HOGS MARKETED THIS YEAR WILL COME FROM FARMS THAT HOUSE 5,000 HEAD OR MORE. IN FACT, THE AVERAGE INVENTORY ON HOG FARMS HAS MORE THAN DOUBLED IN THE PAST 10 YEARS.

THE INTENSE CONSOLIDATION HAS LEFT FEWER COMMODITY BUYERS IN THE CASH MARKETS, ON WHICH SMALL PRODUCERS DEPEND. FEWER BUYERS MEANS LESS COMPETITION IN THE CASH MARKET AND, THEREFORE, LOWER PRICES.

TO GUARANTEE A STEADY SUPPLY OF PRODUCT, THE ECONOMICS OF SCALE DICTATE THE LARGEST PACKERS USE FORWARD-CONTRACTING, TYPICALLY WITH THE LARGEST PRODUCERS. IT'S ESTIMATED THAT 70 PERCENT OF ALL HOGS ARE NOW RAISED ON CONTRACT, COMPARED TO 10 PERCENT IN 1990. SMALLER PRODUCERS ARGUE THEY ARE SQUEEZED BY THESE CAPTIVE SUPPLIES OF UNKNOWN PRICE.

AS THE CASH MARKET DIMINISHES, ANALYSTS SAY SMALLER PRODUCERS HAVE BUT TWO OPTIONS: TO BECOME CONTRACT GROWERS FOR PACKERS IN THEIR OWN RIGHT, OR TO FORM PRODUCTION AND MARKETING COOPERATIVES TO GAIN LEVERAGE.

UNDER THE NEW RULES, PRICING DATA COLLECTED FROM THE PACKERS WILL BE REPORTED TO USDA, WHICH HAS YET TO DECIDE HOW TO GET THE INFORMATION BACK TO THE LIVESTOCK INDUSTRY. THE REPORTING SYSTEM WILL BE UP AND RUNNING BY THIS SUMMER.

Tags: agriculture animals livestock meat news