Food & Power: JBS Shortchanges Nebraska Ranchers, Violating the Packers & Stockyards Act

Photo courtesy of iStock by Getty Images

by Claire Kelloway

Last month, the USDA’s Agricultural Marketing Service announced that the world’s largest meatpacker, JBS, made inaccurate and non-transparent payments during early 2018 to ranchers at its Grand Island, Nebraska plant.

For more than three months from December 2017 to March 2018, this processing facility failed to accurately record the weights and grades of beef carcasses or maintain carcass identity. This resulted in over- and underpayments to farmers and violated the rules of the Packers & Stockyards Act.

In a statement sent to Food & Power, the head of corporate affairs for JBS, Cameron Bruett, said the error was due to a software change. “We corrected the issues that led to the errors and entered into an agreement with USDA where we would … make refund payments to underpaid livestock sellers,” he said. “Less than 40 producers were negatively impacted and many have already been reimbursed,” he added. As a part of JBS’s settlement with AMS, the corporation will also pay a $50,000 civil penalty.

Critics argue, however, that this amounts to a mere slap on the wrist and is not sufficient to protect independent ranchers from future malpractice by meatpackers. Packers have amassed such buyer power and regional monopolization that they can pressure ranchers to accept unfair sales terms and opaque pricing schemes without severe consequence. In this case, any farmer that believes JBS underpaid them or they did not receive a sufficient reimbursement must rely on USDA to pursue further action; individual ranchers cannot sue JBS since Secretary Perdue withdrew the final interim Farmer Fair Practices Rules.

“This is an example where the whole system breaks down if the marketplace is not fair and transparent and there’s no incentive for the buyer to make it so,” said Joe Maxwell, Executive Director of the Organization for Competitive Markets.

Historically, ranchers sold their animals at competitive and transparent live auctions. Several bidders competed for a given animal, farmers watched their animals get weighed, and they received a clear price per pound. After the sale, the farmer walked away with money in their pocket and the buyer took all further responsibility for transport and slaughter. If animals shrunk in transit to slaughter or if packers injured or improperly trimmed animals in processing, these losses fell on the packers.

In recent decades the number of auction houses and buyers has shrunk. In 1977, the top four beef packers handled a quarter of all cattle. Today, they slaughter 82 percent of all beef. Packers either directly own feedlots or only purchase live cattle from the largest producers.

Meanwhile, packers use their increased buyer power to impose more risks of the slaughter process onto independent ranchers. Packers refuse to buy live cattle from smaller operations, making ranchers ship their live cattle to their nearest plant or put them on a packer-owned truck before knowing the price they’ll receive for the animal. Packers then process and slaughter the animal, determine its value, and pay the rancher based on the final weight and quality of the finished carcass.

Under this system, the packers have little incentive to care for the animals, and in some instances can benefit from failing to water and feed them. For instance, packers have left cattle in trucks without food or water for several hours, causing shrinkage and lowering farmers’ returns. Farmers do not have any visibility into how their animals were treated and processed, nor how their final price was determined.

“There’s no transparency and [the packers] are the ones who are valuing the carcass … Farmers have no way of knowing whether they are getting a fair price or not, they just have to take the check,” said Maxwell. “The farmer has to sell their livestock somewhere, and if there isn’t anywhere but the one plant within a reasonable distance then you have to meet their terms.”

In the recent case that resulted in the fine, the Grand Island processing plant failed to properly maintain the identity of each seller’s livestock and failed to accurately record the weights, grades and prices of carcasses on final checks to ranchers. Ranchers had no idea if they were actually being paid for their own cattle and they had no record of why they received the price they did.

In addition to this most recent violation, six months ago another AMS investigation revealed that two JBS facilities had faulty scales, resulting in inaccurate cattle weights. Such violations come at a time when farmers’ legal ability to seek recourse is at an all-time low. The Trump administration withdrew reforms that would have given individual farmers greater legal standing to sue corporations for this type of malpractice and unfair treatment.

As a result, farmers must rely on the USDA to pursue action against meatpackers under the Packers & Stockyards Act. However, Secretary Perdue recently dissolved the agency tasked with this enforcement, relegating its duties to a program within the Agricultural Marketing Services. This reorganization gives Packers & Stockyards enforcers less independent power within USDA and also places meatpacker watchdogs within an agency tasked to help packers market their products through controversial checkoff programs.

“We want to ensure farmers and ranchers have an enforcement agency that has the resources and has the stature within a department to go toe to toe with some of the world’s biggest corporations,” Maxwell said.

What We’re Reading

  • Grain trading goliaths Cargill and ADM are seeking regulators’ approval to create a joint digital network designed to let farmers manage their data online, according to Bloomberg. But farmers are wary that these agribusinesses actually seek free access to their data.
  • The Food and Environment Reporting Network revealed that the Trump administration caved to a decades-long push by the livestock industry to exempt large operations from reporting air emissions.
  • Politico’s Morning Ag reported that several chicken plants that increased their processing line speeds from 140 to 175 birds per minute failed salmonella food safety tests, despite industry insistence that “these plants provide the same or better levels of food safety than plants operating” at 140 birds per minute.