May 20, 2011
On Thursday, May 19, Senators Mike Enzi (R-WY), Chuck Grassley (D-IA), Tim Johnson (D-SD), and Jon Tester (D-MT) introduced a bill (S. 1026) with measures to protect independent livestock farmers and ranchers from price manipulation by packers and processors. Senators Enzi, Grassley, and Johnson co-sponsored a similar bill in 2009.
The Livestock Marketing Fairness Act would:
• Require marketing agreements to have a firm base price derived from an external source. This guarantees that local contract prices are not subject to manipulation by packer owned herds.
• Require future forward contracts for livestock (cattle, hogs, and lambs) to be traded in public markets where buyers and sellers can witness bids and make their own offers. This openness ensures market competition through multiple offers.
• Exempt producer-owned cooperatives, packers with low volumes, and packers who own only one processing plant from the above requirements. This exemption targets the source of price manipulation. It ensures that the business practices of small family-owned processors, which are not conducive to manipulating prices, are not impacted by the law.
• Guarantee that trading is done in quantities that provide market access for both small and large livestock producers.
The bill is intended to prevent large packers from setting market prices through contracts with prices that they control. Currently, almost 85 percent of meatpacking capacity in the U.S. is held by four multi-national companies. In addition to controlling meatpacking, these firms also control a large share of livestock production. Without the requirements for independent pricing and open markets, these mega-firms can use sales of their own cattle and private sales in forward contracts to manipulate prices. They can also buy their own cattle when price is high, going to open markets to buy from independent producers when prices are low.
The measures in this bill, if added to the measures in USDA’s proposed rule for strengthening the protections of the Packers & Stockyards Act, will help re-establish open and transparent markets for livestock farmers and ranchers.
Categories: Competition & Anti-trust