NSAC's Blog

Bill to Ban Packer Ownership of Livestock Introduced

March 1, 2012

On Wednesday, February 29, Senators Chuck Grassley (R-IA) and Kent Conrad (D-ND) introduced a bill (S. 2141) that would ban most meatpackers from owning livestock.  Also signing on as original co-sponsors were Tim Johnson (D-SD) and Tom Harkin (D-IA).

The Senate passed versions of this legislation in 2002 and 2008, but each time the measure was removed in the farm bill House-Senate conference.

The bill excludes single pack entities and packers that are too small to participate in USDA’s Mandatory Price Reporting program.  The bill also exempts farmer cooperatives where the members own, feed, or control the livestock themselves.

In his remarks introducing the bill, Senator Grassley gave a straight forward reason for the need for this legislation.  As explained by a meatpacking executive, meatpackers own livestock so that when prices are high, they slaughter their own livestock.  When prices are low, they buy from farmers.

Moreover, the ability of meatpackers to manipulate livestock markets is further increased by the concentration of meat processing in the hands of a few large corporations.  In the cattle sector, meatpackers are buying up feedlots in order to vertically integrate the sector and gain even more control over producers and profits.  Over the past 15 years, the number of beef feedlots has decreased by 35,000.  Currently, four mega-companies – Tyson, Cargill, National Beef, and Brazil-based JBS – control more than 80 percent of the U.S. beef market.

A good overview of the history of the U.S. cattle sector and the current struggles of cattle producers in this increasingly concentrated market was provided in an article by Stephanie Page Ogburn published in High Country News in 2011.

The large companies control much of the cattle in feedlots, through direct ownership or advance contracts with the feedlots.  An open cash market for cattle, with price discovery through offers made by numerous buyers, is disappearing.  This gives the large companies the power to set lower prices for cattle, lower prices that are passed from the feedlots through to cattle producers.  The price ranchers get for beef, controlled for inflation, decreased from $1.97 to 93 cents per pound between 1980 and 2009.  In addition, the mega-companies can benefit from market concentration and control on the consumer side, keeping consumer prices high even when producers are getting lower prices.

Other measures are also needed to ensure fair and open livestock markets.  The Obama administration did issue a proposed rule, under the authority of the Packers and Stockyards Act and the 2008 Farm Bill, that included some of these measures — a ban on packer-to-packer sales and the use of a single buyer for multiple companies at livestock auctions, as well as requirements for packers to retain records about the basis for pricing.

But after a lengthy comment period and administrative delays, the Administration announced in November 2011 that it was dropping rather than revising and perfecting these provisions.  The meatpacking mega-companies then followed with a lobbying campaign to block all of the provisions of the proposed rule, even those called for by the 2008 Farm Bill, by getting a legislative rider added to the appropriations bill for 2012 that effectively negates the law as enacted in the farm bill for the rest of this fiscal year.

Senators Grassley, Conrad, Johnson and Harkin are to be commended for introducing the packer ban bill as the congressional Agriculture Committees take up the hearings for the next Farm Bill.  Without an expanded and effective Livestock Title in the Farm Bill, the number of farmers and ranchers will continue to shrink and the wealth generated from rural land and our food and farming system will continue to be concentrated in a few corporate hands.

Categories: Budget and Appropriations, Competition & Anti-trust, Farm Bill

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