Biden signing executive order on economic competition
President Biden signs executive order on promoting economic competition
President Biden is expected to sign an executive order today (July 9, 2021) to promote economic competition in many aspects, including the livestock industry.
The official fact sheet says: “Today, the President is building on this economic momentum by signing an Executive Order to promote competition in the American economy, which will lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.”
One part of the 72-piece executive order that could have a big impact on the cattle industry says the President directs USDA to consider issuing new rules under the Packers and Stockyards Act making it easier for farmers to bring and win claims.
In recent years, cattle producers and feeders who have sued packers claiming unfair practices under the Packers and Stockyards Act have in many cases been unsuccessful in their suits. This is in part due to the fact that some meatpackers have succeeded in convincing the courts to interpret that the Packers and Stockyards Act requires the plaintiff to prove “competitive injury” or injury to the entire industry, not just the individual or group who is filing suit.
Sterling Marketing’s John Nalivka, an economist who analyzes the cattle market and red meat market offers a warning to the cattle industry says “fair” can be very difficult to define, and he offers a warning to the industry: be careful what you wish for.
“When we ask for the government to intercede in the markets to differentiate what is fair and what is not fair, that is a very slippery slope,” said Nalivka, a member and consultant to the National Meat Association, and member of the Idaho Cattle Association.
“The problem I’ve had, when you start going into this regulatory stuff and trying to regulate and manage markets, these regulations apply to everyone, not just the big guys,” he said.Nalivka urges cattle producers and feeders to seek value-added programs to realize more profit for the quality of cattle they are producing.
“The industry has gotten to the point where you have to really sit down and get creative. What can you do to add value to your cattle and market those cattle to where you can capture that value,” he said.
He fears that government regulations to encourage more competition will bring with them unintended consequences.
According to the White House fact sheet, The Order also encourages the leading antitrust agencies to focus enforcement efforts on problems in key markets and coordinates other agencies’ ongoing response to corporate consolidation. It also announces a policy that enforcement should focus in particular on labor markets, agricultural markets, healthcare markets (which includes prescription drugs, hospital consolidation, and insurance), and the tech sector.
The packing industry is highly regulated now for food safety reasons, he said. “Let’s say someone builds a small packing plant, and there are quite a few on the plan right now. The trouble is, every packer and processor is always at risk of food safety issues, if they have a food safety issue, it could put them out of business. What will happen when these regulators decide to come back to the ranch and say ‘that was your cow that brought a disease into the plant?’ Everyone shares the risk and the regulation on this food industry isn’t going to get any less.”
He is concerned, not only with over-regulation as it relates to livestock marketing, but also land use issues. “This is going to get ugly. All you have to do is read about the nominee to head the BLM, and if that doesn’t scare the hell out of people out here, you’d better be thinking. She’s an environmental activist.”
J. Dudley Butler, under the Obama administration, served as the Grain Inspection, Packers and Stockyards Act administrator, helping to write the Farmer Fair Practice rules that were intended to beef up GIPSA (but were never enforced). He said the Biden executive order, particularly the point to make it easier for farmers to bring and win claims, should help clarify the fact that competitive injury, or evidence of the entire industry being harmed, is not necessary when claiming a violation of the Packers and Stockyards Act.
“The position of the meat packers that competitive injury has to be proven in all cases under the Packers and Stockyards Act defies common sense. Why would anyone be required to prove competitive injury (harm to the entire industry) when you prove someone has defrauded you or exposed you to deceptive practices?” he asks.
Fraud and deception have no redeeming economic value. This fact is a bedrock of accepted economic principles, said Butler.
The argument that competitive injury has to be proven in some cases might be correct, he said, but not all cases.
“Let’s just say the meatpackers cheated a group of cattlemen on the price of their cattle, let’s say the scale was rigged or something happened that was deceptive. It would defy common sense that the group of cattlemen would have to prove that the sale of their cattle affected the sale of all cattle in the United States. We in this industry are all known to have common sense just to survive and that makes no common sense,” he said.
Butler believes the Biden executive order will clarify this point.
Consolidation itself is a tough issue to tackle, said Nalivka, and the Biden order also seeks to address inappropriate mergers throughout different industry sectors.
“I can assure you that agriculture is very much driven by economies of scale. It just happens that I did my masters on economies of scale in the cow-calf industry. It’s very real, there’s an absolute economic benefit to it.
“How big is too big, and that’s a valid argument,” he said. “The big four have 80 percent of the total packing capacity, is that too much? They are very competitive against each other, they simply do not collude,” he said.
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