Iowa Public Television

 

Ranchers Differ on Benefit of New Antitrust Rules

posted on August 27, 2010


FORT COLLINS, CO (AP)— Meatpackers, feeders and hundreds of ranchers from around the country packed a workshop Friday to voice concerns about a proposed federal rule that aims to preserve competition in an industry increasingly dominated by a handful of corporate giants.

Attorney General Eric Holder and Agriculture Secretary Tom Vilsack opened the daylong workshop at Colorado State University, one of five the administration set this year to hear about competition in a consolidating agriculture industry.

Since the workshops began, the Obama administration has proposed new antitrust measures for meat companies that reflect a willingness by the USDA to shift the balance of power between farmers and processors.

Vilsack said he is "deeply concerned" about consolidation's impacts on rural America as the number of processors, feedlots and producers shrinks.

"At that point, consumers will suffer as well," Vilsack said.

The proposed rule would make it easier to file suits under the Depression-era Packers and Stockyards Act by stating that farmers don't need to prove industrywide anticompetitive behavior to file a lawsuit under the act.

Other provisions are aimed at keeping markets fair and competitive for livestock producers dealing with meatpacking giants that, ranchers say, have increased their bargaining power over them through consolidation.

Since 1980, the number of hog farms has dropped from 660,000 to 71,000, according to the Department of Agriculture. The number of cattle farms has fallen from 1.6 million to 950,000. While hog farmers got 50 percent of the retail value of a hog in 1980, their share was 24.5 percent in 2009, the USDA says.

Per-capita incomes in rural areas largely lag those in more urban areas, the average age of ranchers is rising, and young people aren't sure if they can make a living producing raising animals and crops, Vilsack said.

"Producers are worried whether there is a future for them and their children in farming," he said.

Meanwhile, companies like U.S. meatpacking giants Cargill Inc., Tyson Foods Inc. and National Beef Inc., and Brazil's JBS SA, have been growing.

Cattlemen, though, heatedly disagree on whether the rule would help or hurt them.

In the past few decades, processors have consolidated and many operations are signing contracts to sell their livestock to certain buyers rather than sell through the cash market.

The National Cattlemen's Beef Association says the contracts, known as alternative marketing agreements, allow ranchers to manage risk. Plus, they can earn lucrative premiums for high-quality cattle, even if they have to accept steep discounts for inferior beef.

Other ranchers represented by Montana-based R-Calf USA contend the contracts thin the cash markets, which help determine prices for those contracts, thereby depressing prices for everyone.

The USDA says the proposed rule finally offers a clearer definition under the law of what practices are considered unfair, discriminatory or deceptive. It would prevent packer-to-packer sales, which could potentially tip packers off to what prices competitors offer producers, and it would require packers to make sample contracts available online, so markets are more transparent. Buyers would have to keep records justifying any differential pricing to producers.

The National Cattlemen's Beef Association and the National Pork Producers Council say the rule could lead to unintended consequences, including more lawsuits, damage to producers who process some of their own meat, and the public release of information that should be a confidential part of business contracts.

"Claims by the rules proponents that somehow this proposal will help rural America simply don't stand up to scrutiny," said Mark Dopp, general counsel for the American Meat Institute, a trade association for processors.

R-Calf USA President Max Thornsberry wasn't surprised processors oppose the rule. "It's a whammy on the packers because they won't be able to buy as cheaply as they have," he said.

The night before Friday's workshop, a couple hundred supporters of the beef association and pork producers council held a meeting in a hotel ballroom to rail against the proposed rule.

Later, a few hundred producers with R-Calf USA filled a ballroom at another hotel for a gathering that was part pep talk, part revival meeting, to support the rule. A crowd dotted with cowboy hats and checked shirts gave standing ovations and hearty applause.

"We don't want to put anyone out of business. We just want a fair price for our product," Thornsberry said.


Tags: agriculture industry meat news