USDA, DOJ workshop focuses on antitrust issues in livestock industry

Livestock industry debates antitrust issues

FORT COLLINS, Colo. — Meatpackers, feeders and hundreds of ranchers from around the country are attending a workshop Friday on proposed federal rules that would place the sharpest limits on meat companies since the Great Depression.

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

The Obama administration has proposed new antitrust rules for meat companies that reflect a willingness by the USDA to shift the balance of power between farmers and processors and to regulate an industry long dominated by a handful of corporate giants.

The rules 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.

They are also aimed at keeping markets fair and competitive for livestock producers dealing with meatpacking giants.

Secretary of Agriculture Tom Vilsack has said increasing consolidation has strengthened the bargaining power that big companies have over farmers, giving producers an ever decreasing share of the money consumers spend at the grocery store. As a result, farms are failing, with the number of hog farms dropping from 660,000 in 1980 to 71,000 now. The number of cattle farms has fallen from 1.6 million in 1980 to 950,000.

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

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

The National Cattlemen’s Beef Association says the contracts, also 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.

Other provisions of the proposed rule have also drawn objections.

The USDA says the 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 they 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 the Friday 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 proposed 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.