Packer ban bill introduced

Two years ago this spring, 900 people (many of them farmers) crowded into an auditorium in Des Moines for one of several public hearings across the country addressing competition and antitrust issues in agriculture. The hearings were held by USDA and the U.S. Department of Justice.

The historic collaboration between the two departments promised action and hope for farmers concerned about the growing power of an increasingly consolidated agribusiness industry. Fewer firms are selling seed and control the pricing of crop genetics and related technology, and there are fewer firms buying livestock. Those were the two main concerns expressed. As Sen. Chuck Grassley, R-Iowa, noted at the hearing: “Bigger isn’t per se bad, but it can lead to predatory business practices and behavior. And that’s what we’ve got to be concerned about.”

Various speakers worried out loud about more meatpackers merging and more seed and chemical companies merging. The hearings produced a lot of speeches, ideas and opinions from those testifying, but there’s been little action. The lack of competition in agriculture today is especially acute in livestock markets, where a few companies control the national marketplace. About four out of five cattle and two out of three hogs are slaughtered by four companies in each sector. With few national buyers, farmers rarely get a competitive bid for their livestock. On the local level, often only one or two beef or hog packers buy farmers’ livestock. Frequently, the available packers won’t buy from independent producers.

Ban on ownership proposed

Although farmers have seen few results from the 2010 hearings, Iowa’s senators continue to push for fair livestock markets. Last month Grassley and Sen. Kent Conrad, D-N.D., introduced legislation to level the playing field between livestock producers and meatpackers. The bill would ban packer ownership of livestock for more than a week before they are slaughtered. Sen. Tom Harkin, D-Iowa, was a co-sponsor.

The packer ban legislation (S. 2141) is widely supported by independent livestock producers. During the hearings, many farmers and ranchers demanded that policymakers prohibit packers from owning livestock. They say a packer ban would promote fairer, more open and competitive livestock markets, strengthening the marketing options and prices for producers. Studies have found packer ownership of livestock can artificially lower prices farmers receive and still increase consumer food prices.

Referring to the legislation he introduced last month, Grassley says, “I’ve proposed the bill banning packers from owning livestock because I want to protect the family farmer. Packers owning livestock is very unfair.” He says the CEO of a major slaughterhouse once told a group of farmers, “Packers own livestock so when prices are high they can butcher their own animals, and when prices are low, they can buy from farmers.” The bill excludes packers that are too small to participate in USDA’s Mandatory Price Reporting program. It also exempts farmer cooperatives where members own, feed or control the livestock themselves.

Grassley describes the 2012 Farm Bill as a great opportunity to deal with vertical integration before it’s too late. He says outlawing packer ownership of livestock makes sure the marketplace works for the farmer just as much as it does for the packer. Farmers and ranchers have long expressed concern that allowing meat packers to own the animals they slaughter reduces competition for livestock raised by independent producers.

Grassley adds, “I think all segments of animal agriculture will be helped by this legislation. It’s going to send a clear signal to packers of the inordinate impact they have on the free market system.”

The Senate passed versions of the Packer Ban legislation in the 2002 and 2008 farm bills. However, each time, the provision was removed in conference committees. Grassley and Harkin have long records of promoting competition and fairness in ag markets, and both are on the Senate Agriculture Committee. As Congress begins taking up the 2012 Farm Bill, competition issues such as a packer ban and other reforms should be part of the discussion.

This article published in the April, 2012 edition of WALLACES FARMER.

All rights reserved. Copyright Farm Progress Cos. 2012.