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USDA Moves to Outlaw Unfair Trade Practices

September 15, 2010

by Margaret Krome (reprinted from The Capital Times, Madison, WI)

When our daughter was little, she loved our drives to southwest Wisconsin, kicking her feet up and down in excitement as we neared one particular farm, where we always saw hogs wallowing in the mud in the low spots.  At some times of the year, piglets would come pouring out the barn.  “Piggies!” she would cry, satisfied that all was right in the world.

But all was not right in the world of hog farmers.  There came a time when that farm ceased raising hogs.  I never asked the farmer why, but his reasons probably boiled down to what most farmers have told me: “There’s just not much money in hogs these days.” Like beef and poultry, hog production has become increasingly concentrated, with only four corporations controlling 66 percent of the marketed hogs in the nation, according to research by University of Missouri researchers Mary Hendrickson and William Heffernan.  Mary points out that, “In standard antitrust theory, a market stops being competitive when this number reaches 40 percent.”  It’s even worse for beef, where four companies control over 83 percent of the nation’s animals marketed.

Such concentration has occurred largely because the rules governing livestock production have unfairly favored large livestock producers and livestock packers, at the expense of small to medium sized farmers.  The federal Packers and Stockyards Act,  passed in 1921, was intended to curb abuses, but there have been major gaps in enforcement, and packers have engaged in discriminatory pricing and other practices that have increased their profits at the expense of small and medium-sized livestock farmers.  For example, packers have given better prices to larger producers.  They have created their own livestock supplies to better force prices down for small farmers selling to them.  They have insisted on contract provisions impeding farmers from bringing legal actions for discriminatory practices.  For decades, these and and other unfair practices have resulted in losses of farms across the nation, which in turn have undercut the fabric of rural communities, as farmers have been forced to find other livelihoods.

The 2008 Farm Bill instructed the US Department of Agriculture to create rules to address these and other injustices in the livestock industry. It is not uncommon for Congress to instruct an agency to act but then fail to follow up to make sure it happens.  However, on June 22, the U.S. Department of Agriculture surprised many by proposing rules to correct many of these decades-old unfair trade practices.  The rules define and hold firm against some of the worst of these practices.

Needless to say, the multinational meat packers are protesting these common sense rules, challenging the authority of the Grain Inspection, Packers and Stockyards Administration  to implement the Packers and Stockyards Act as Congress instructed in 2008.  Happily, a bipartisan group of senators, including both Wisconsin Senators Feingold and Kohl, signed a letter last month, clearly affirming the statutory authority for these rules.

Certainly, there is a need for them.  Aggressive enforcement of the Packers and Stockyards Act over the ninety years since it was enacted would have prevented countless farmers from being forced out of business through unfair pricing and trade practices.  But until now, the U.S.D.A. never issued the specific regulations needed to give the Act the teeth that farmers deserve.  For the agency to have finally stood up to the powerful livestock industry and insisted on genuine reform is historic, and Congress must not allow the proposed regulations to be weakened.  It is heartening to see Senators Feingold and Kohl join others in Congress to hold firm against interests that have for so long undermined the very regulatory framework designed to curb their abuses.

(NSAC Editor’s note:  Other Sentators on the letter included Tom Harkin (D-IA), Tim Johnson (D-SD), Patrick Leahy (D-VT), Kent Conrad (D-ND), Mary Landrieu (D-LA), Chuck Grassley (R-IA), Ron Wyden (D-OR),  Jon Tester (D-MT), Claire McCaskill (D-MO), Byron Dorgan (D-ND), Ted Kaufman (D-DE), Herb Kohl (D-WI), Max Baucus (D-MT), Jay Rockefeller (D-WV), Tom Udall (D-NM), Bernie Sanders (I-VT), Al Franken (D-MN), Sherrod Brown (D-OH), Michael Bennet (D-CO), Roland Burris (D-IL), Russ Feingold (D-WI).  You can tell USDA that you support the rules by clicking here.)

Margaret Krome is the the Policy Program Director for the Michael Fields Agriculture Institute, an NSAC member.

Categories: Competition & Anti-trust

One response to “USDA Moves to Outlaw Unfair Trade Practices”

  1. Renee Hunt says:

    Great column, Margaret!