Livestock markets a delicate balance
September 2, 2010
FORT COLLINS, CO (DTN) – Producers at Friday’s USDA-Department of Justice hearing who testified about the proposed USDA livestock competition rule will have their comments put into the record for the rule-making process.
Some groups leading up to the meeting had questioned whether comments made about the Grain Inspection, Packers and Stockyards Administration rule would be part of the public record for the public-comment period. Secretary of Agriculture Tom Vilsack made it clear that was the case.
“We will assume that all of the comments made to GIPSA are part of the official record, and included as part of the comment, which I think will further instruct us as we make our final determination about the GIPSA rules,” Vilsack said in a news conference.
Besides the 1,100 people in the main ballroom, Friday’s livestock competition meeting filled two overflow rooms at the student center on the Colorado State University campus to put the total attendance at more than 1,300 people.
The makeup of the panels Friday did not reflect some of the division in the cattle and hog industry over a livestock competition rule proposed by GIPSA. During public testimony, more criticism of the GIPSA rule was heard. Public officials stressed that there must be a balance on the role of government in the market.
“I think what we heard, artfully said by virtually every panelist, is this is a delicate balance and what we’re going to do is make sure if there is a rebalance that we recalibrate, and if we recalibrate, that we do it in a way that doesn’t necessarily result in harming a market that we want to function,” Vilsack said. “The Congress directed us to do this. The act has not been looked at in quite some time, and it’s fairly clear that the world has changed since the act was enacted.”
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Assistant Attorney General Christine Varney reiterated what she has said in each of the previous agricultural competition hearings, that there is no agenda to these meetings and the direction in agricultural competition. But Varney added, “There is something wrong with the system when the farmers can’t make a living.”
The United Food and Commercial Workers has attended each meeting, and the union has argued that USDA and Department of Justice should push on the retail sector, in particular the role of Wal-Mart, the nation’s largest grocer.
Vilsack and Holder said they are not out to “take on” any one entity or that large is necessarily bad.
“We think about our role as enforcers of the law,” Holder said. “And in that regard, we will be firm. We will be aggressive, but we will be also be realistic in understanding what the impact is of our actions.”
Vilsack said he would not talk about specifics of the GIPSA rule to allow the public comment period to work, but he did say that more than 200 groups during the 2008 farm-bill process wanted changes in the Packers & Stockyards Act regarding what involves unfair practices and undue preferences. Vilsack said he doesn’t think industry debate on the GIPSA rule would overshadow the overall conversation on competition.
“This is going to better inform the ultimate decisions we have to make in this area,” Vilsack said. “We have an act that was passed (in 1921) that really has not been looked at in great detail in quite some time.”
Vilsack said officials have concerns about the overall livestock system when there were 1.6 million cattle producers in 1980 with the number declining to 950,000 now. The same problems have happened in hogs and dairy, he said. The losses dovetail into problems of an aging farmer population, loss of youth in rural America and lower overall incomes.
“I can’t tell you today that I know precisely what the solution is, but I know we can’t continue these trends,” Vilsack said. “Because, if we do, we’re going to end up with a handful of farmers, a handful of packers, a handful of processors and a handful of grocery stores. And at that point, I think the consumers will suffer as well.”
Taylor Haynes, a physician and founding member of R-CALF USA in Wyoming, who was part of a producer panel that spoke later at Friday’s meeting, said there has been a contraction of cattle buyers partially because of retail consolidation. Wyoming also doesn’t have a slaughter facility in the state, he said. Wholesalers will actually threaten retailers to not sell local meat or the wholesaler will stop delivering other boxed meats to the store.
Haynes said federal inspection rules partially hurt smaller producers.
“If we can bring the small- to medium-sized meatpackers back, then that brings the small-to-medium feeders back,” Haynes said.
Harry Livermont, a South Dakota rancher, said one of the problems selling live cattle is that it is hard for people to get into the cattle-buyer business for the packers. “It’s pretty well taken care of by one or two people that buy for several different places, and that’s how it is,” Livermont said.
Jerry Bohn, general manager of Pratt Feeders in Kansas and a board member for U.S. Premium Beef, was one of several who spoke in defense of alternative marketing agreements and expressed concern that the GIPSA rule would hurt those contracts. Bohn said small producers largely make up the bulk of U.S. Premium’s feeders. Some of the smallest producers in the group have gotten premiums averaging more than $79 a head.
“So there are opportunities today existing in the market system for small producers to participate,” Bohn said.
Chris Petersen, president of the Iowa Farmers Union, said Iowa has lost tens of thousands of hog producers in what is now a vertically-integrated industry with the cash market now down to less than 5 percent of total hog sales.
“One thing we’ve been trying to do for years, if we want to solve this problem, ban the packers from owning the livestock,” Petersen said.
Petersen said one of the problems is that bankers are unwilling to loan to independent producers, adding more risk for those producers.
Later, Mark Greenwald, vice president of commercial lending for AgStar Financial Services, said there are a lot of successful young producers in the Midwest, and AgStar works with them on understanding hedging and credit. But Greenwald said if a young producer wants to remain independent, then the banker needs to know how that producer is going to manage risk.
Steve Bullock, attorney general for Montana, said his state is losing 150 ranchers a year. The federal government can’t regulate every problem, he said, but the Packers & Stockyards Act needs to be updated. Using his own consumer-protection laws, a consumer doesn’t have to show harm to all consumers when taking an action against a company, referring to the provision that producers have to show “harm to competition” for a successful P&S case. Bullock said he supports the GIPSA rule.
“Being from the Big Sky country, I’m not willing to concede the sky is falling just yet,” Bullock said.
Later, Bullock added that it will be a long-term process to change the aging farmer and rancher population and bring more young people into the industry. He said it may depend on producers getting a bigger share of the retail food dollar again. “What you need to do is offer some sort of promise or hope that trend will reverse, that the rancher share of the food dollar will actually start going back to where it was 20 or 30 years ago.”
That point was reiterated by Mark Lauritsen, international vice president of the United Food and Commercial Workers, who partially defended packers in saying that if the government “busted up” the big packers, it still wouldn’t address large retailers such as Wal-Mart putting pressure on those packers.
“You would still have this big component out there to deal with,” Lauritsen said.