It has been nearly two decades since Sen. Chuck Grassley (R., Iowa) started championing a ban on packer ownership of livestock. It was even included in the Senate's 2001 and 2007 farm bill versions, although it eventually was removed before final farm bill passage. This week, Grassley introduced the legislation again based onwhat he sees as continued consolidation within the livestock industry.
“An effective and efficient marketplace is one where packers that control all harvest capacity of the industry do not also own a majority of the animals to be processed,” Grassley said. “The fact of the matter is that the market continues to become less competitive. It’s time to see if ending packer ownership of livestock will reverse that trend.”
Grassley said over the last several years, he has seen large companies join forces to create new business giants in every sector of the economy, including agriculture. Tyson purchased Hillshire Brands. JBS purchased Cargill's pork business. Smithfield, by far the largest pork producer in the world, was sold to a Chinese company. In the beef industry, packing plants have closed in West Texas and Denison, Iowa, which further concentrated power in that industry.
Grassley said this means independent producers have fewer choices regarding who to buy from and who to sell to. More and more family farmers and independent producers are feeling the pressure and impact of concentration in agriculture.
North American Meat Institute president and chief executive officer Barry Carpenter said the organization shares the desire for an “effective and efficient marketplace,” and that’s exactly what dozen of studies affirm, but a government-instituted ban isn’t the right answer.
“Dismantling our dynamic livestock and meat production and marketing system will only turn the clock back on progress and hurt producers, packers and the consuming public in the process,” Carpenter said.
A 2013 analysis of the totality of studies on meat packing structure by North Carolina State University agricultural economist Dr. Michael Wohlgenant found that the studies on market power in meat packing indicate that concentration in the procurement of livestock (cattle or hogs) has not adversely affected prices received by producers or prices paid by consumers.
“Indeed, there is evidence that producers may be better off because of lower processing costs due to the concentration and introduction of new technical innovations. Policies to restrict alternative marketing arrangements such as those proposed by GIPSA (the Grain Inspection, Packers & Stockyards Administration) would make producers and consumers worse off,” he said.
Wohlgenant explained that the beef and pork industries are quite complex and contain both spatial and temporal dimensions that can affect the level of competition. “Fringe producers, because of locational shift of industry and thin markets, may be worse off. Establishment of niche enterprises may benefit these producers,” he stated. “In the future, incentives are to maintain steady long-run supplies of livestock to fully operate slaughtering and processing facilities.”
GIPSA had received money to conduct a study on marketing practices and the impact on the entire food change. Results, released in 2007, showed that packer ownership was estimated at 38% of the fed beef cattle volume, 89% of the finish hog volume and 44% of the fed lamb volume sold to packers. Packer-owned livestock accounted for a small percentage of transactions for beef and lamb (5% or less), even when the small percentage of partial ownership arrangements was included, but accounted for a large percentage of transactions for pork (20-30%, depending on assumptions).
Colin Woodall, vice president of government affairs at the National Cattlemen’s Beef Assn. (NCBA), said the Senate measure is just dusting off an old bad idea. “It’s concerning that, once again, people jump onto ideas that have already been disproven to fix a problem,” he said, adding that NCBA advocates for more industry-driven initiatives rather than getting the government involved.
“Our experience is that rarely do laws and the resulting results do what you expect them to do but, rather, end up introducing more government regulation into the marketplace,” he said.
NCBA has opposed the ban in the past because it doesn't want the government telling producers how cattle can and cannot be marketed.
The National Pork Producers Council feels similarly, with president Neil Dierks saying the group "supports the right of all producers of any size or type of production system to market access and opposes legislation and regulation that hinders that access."
There are no strong contenders for must-pass legislation to attach Grassley’s bill to this year, but it shows the continued mistrust of larger corporations and changing shape of today’s agricultural livestock marketplace.