Gilles Stockton: On the Road to Contract Serfdom
Grass Range, Montana
According to the Merriam Webster Dictionary, sophistry “… is reasoning that seems plausible on a superficial level but is actually unsound, or is used to deceive.” Sophistry is a fancy word for a certain type of lying. Wes Ishmael, Contributing Editor of Beef Magazine, is engaged in sophistry in a December editorial, “Focus On Consumer-Based Value, Quality Differences.”
What Mr. Ishmael is applauding in this editorial is the demise of the Farmer Fair Practice Rule at the hands of Secretary of Agriculture Sonny Purdue. According to Mr. Ishmael “…these rules would have eliminated the need for someone to prove competitive injury in order to win a GIPSA lawsuit. … the rules could have unhinged the alternative marketing arrangements that enable producers to receive more than an average price for more than average value.”
These arguments were originally concocted by the National Cattlemen’s Beef Association (NCBA) which along with Ishmael are attempting to link a rule that would have clarified the right of livestock producers to be treated fairly in the market place with the future of branded beef programs. Two things that have nearly nothing to do with each other. Mr. Ishmael and the NCBA believe that livestock producers should NOT have the right to receive fair treatment from beef packers. To prove their case, they make exaggerated claims about the benefits and virtues of branded beef programs. This is sophistry.
What is conveniently glossed over, is that under the current Federal Court interpretation of the Packers and Stockyards Act (P&SA), a cattle producer who has been cheated on weights, grade, or price by one of the dominate beef packers must prove that not only was he cheated but that all other cattle producers were harmed by that action. I kid you not!
The P&SA was specifically passed to protect livestock producers from just these kinds of discriminatory practices and says so in very plain language: i.e. “It shall be unlawful for any packer …. to engage in or use any unfair, unjustly discriminatory, or deceptive practice… “ It could take only a person meticulously trained in law, and apparently as in Mr. Ismael’s case – economics, to conclude that in order for this law to be applied, one must prove that the harm you personally received at the hands of a meat packer, adversely affected the entire industry.
Within NCBA’s and Ishmael’s nightmare scenario, should livestock producers be granted the right to sue packers for breach of contract, the packers would retaliate by no longer offering bonuses for quality. Just the fact that they feel that this is plausible, reveals the very telling reality that packers are in fact in a position to collude to set market prices. What is tacitly being admitted is that the market for fat cattle is not based on verifiable competitive price discovery. The packers strategic use of captive supplies has thinned the spot market to such a degree that it no longer reflects the actual state of supply and demand.
In this article, Ishmael places great importance on his assertion that marketing arrangements has resulted in higher quality beef and that bonuses for exceeding standards are an important incentive. Maybe so, but even an economist should be able to understand that a bonus premised on a base price that is fundamentally fraudulent is also fraudulent.
Then too we must understand that the definition of quality is in the eye of the beholder. Certified Angus Beef (CAB) is perhaps the most successful of the Branded Beef Marketing Arrangements and it is based on black hided cattle that have a high potential to grade choice and prime. There are perhaps people who would assert that grass-fed beef is an inferior, less than average product. However, there are also many consumers who willingly pay a premium for grass-fed beef.
Why should any of us begrudge a producer who has a grass-fed branded product and is able to profit from that. Of what earthly matter is it that the grass-fed cattle do not have the same percentage of prime as do the CAB cattle. As long as the grass-fed producers and the CAB producers are satisfying their respective customers, we should be grateful.
What should worry us more is how Branded Beef Marketing Arrangements are driving vertical integration of the beef industry. Market Arrangements based on non-competitive market pricing will ultimately result in contract serfdom. On the other hand, Market Arrangements based on public, open, and competitive markets will foster independence and insure the future vitality of the livestock industry.
The issue, therefore, is whether both the grass-fed and the CAB producers are receiving fair market value for their product. If they are not, and by all indications they are not, then correcting that market dysfunction should be the primary concern of livestock economists, magazines like BEEF, organizations like the National Cattlemen’s Beef Association, and all conscientious cattle producers. The Farmer Fair Practice Rule was a good start in the difficult process of restoring integrity to the cattle market. We should not be celebrating its demise – we should be plotting its restoration. F
— Gilles Stockton
Grass Range, Montana
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I had many lasting impressions of our year in Australia but the fellow on the phone wasn’t one of them.