Big meatpackers must compete for all their cattle.
June 11, 2021
By Gilles Stockton
In a June third article of the Western Ag Reporter, the author likened the effort to reform the cattle market to that of a basketball game in the last twenty-one seconds of the fourth quarter with the score tied. The Packers versus the Producers; or the Cowboys might be more apt, as there are not enough independent feeders left to put a full team on the floor.
To continue to use this basketball analogy, the Cowboy’s team is unfortunately playing with a half-deflated ball. The solution that the Cowboys are looking to restore market competition, nick-named the 50/14 bill, introduced by Senators Grassley and Tester would amend the Agricultural Marketing Act by requiring that packers buy half of their cattle on the spot market.
The trouble is that the Agricultural Marketing Act of 1947, only gives the government the authority to require the reporting of prices. There is no provision within this Act that allows government to mandate how buyers can buy or sellers sell. That is the realm of anti-trust laws such as the Packers and Stockyards Act.
The first two questions a Federal Judge will ask, when the legality of the 50/14 is questioned by the Packers, are: “where is the evidence that mandating spot market purchases is necessary and why is this not being addressed within the Packers and Stockyards Act?”
Both R-Calf and US Cattlemen’s Association are in favor of this 50/14 approach and make the argument that although it may not be the full solution, we need to solve this problem in an incremental manner. The trouble with this line of thinking is that the inevitable litigation will require all of the same economic and legal analysis that a more direct and comprehensive solution to the cattle market dysfunction would also require.
Litigation takes time, and should the 50/14 approach prevail, we still would have only half of the market competitively priced while the other half would in essence be legal “captive supply.”
However, should the 50/14 lose in Federal Court, this will be another court precedence against restoring market competition to the livestock industry. Would it not make more sense to fix the market dysfunction once and for all, just like they did in 1921. The solution at that time was to require packers to buy all of their cattle in a public competitive market.
Senators Grassley and Tester proposed just that in their 2007 Captive Supply Reform Act. At that time, our cattle organizations were engaged in their habitual bickering and would not come together to actually fix the cattle market. As a result, Captive Supply Reform did not get traction and was not incorporated into the Farm Bill.
Speaking of bickering between cattle organizations, I am sure we all are heartened by the recent summit meeting in Phoenix. I for one hope that they shall continue those discussions. However, beware of the National Cattlemen’s Beef Association (NCBA) bearing gifts. They pulled that trick in 1999 when they first came up with the idea of mandatory livestock price reporting. At that time, USDA was considering requiring that packers actually bid for all of their cattle purchases, just as the later Grassley and Tester 2007 Captive Supply Reform Act would have required.
To prevent USDA from following through on actual market reform, NCBA proposed mandatory livestock price reporting instead, promising that this would provide sufficient market transparency to level the playing field. We all know that this did not happen. Even back then, spot market purchases were not large enough to provide actual price discovery. Besides, the discrepancy of economic power between the numerous small feeders and the four dominant packers made true competition a joke.
The old adage is “fool me once – shame on you: fool me twice – shame on me! Apparently, the only issues that NCBA pushed, coming out of the summit meeting, are some enhancements to mandatory livestock price reporting (but not the 50/14 plan) and more studies. Those that oppose market reform always call for more studies because studies waste time. Are the NCBA and their Packer puppet masters worried that there is enough anger out in cattle country that something might actually happen to rein in the packer monopoly unless they channel this movement into another dead end?
Gilles Stockton
Grass Range, Montana
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See Gilles article from 2017 – There is a Solution
Posted on February 11, 2017
by Gilles Stockton
Grass Range, Montana January, 2017
By now, the disaster that is the cattle market has been factored into the coming year’s budget. For some it means the end of a dream to own a ranch, for the remaining, it means a hard assessment about what will be affordable. The disaster is trickling down through the economy, to the businesses that supply goods and services to agriculture, and to the legislators and county commissioners, who are scrambling to fund schools, maintain roads, pay for social services, and law enforcement with less tax revenues. It is a depressing situation but there is a solution. MORE
The 1996 WORC Rule would restore market transparency and competition without breaking up the big meatpackers, although there are plenty of reasons to break them up.
“Cow/calf producers clearly receive the residual prices after everyone else’s margins and profits have been subtracted.” https://nobull.mikecallicrate.com/2017/02/11/there-is-a-solution/