Packer concentration and contract production are threatening cow-calf producers, a Colorado analyst told the National Farmers Union Saskatchewan convention recently.
And Kathleen Kelley, vice-president of the Rocky Mountain Farmers Union in Colorado, said free enterprise in U.S. beef production could be destroyed.
“I think contracting is contrary to free market principles,” she said. American packers are using contract selling to manipulate the cash market and their contract suppliers at the same time, she said.
Not only can they use contract specifications to discount cattle delivered to them, but packers can also drive down the cash market price by jumping out of the market for a few weeks.
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When the cash price drops, the base price in the contract drops, so both types of producers are cheated, Kelley said.
“They (the packers) want to be able to manipulate the cash market to pull down the formula contract price and still get the best cattle for the cheapest prices.”
Four major packers control 87 percent of U.S. slaughter cattle, Kelley said, and that gives them unprecedented opportunity to manipulate prices.
Kelley said the American government has investigated the beef packing industry a number of times since 1988, “showing the agricultural industry as a particular target for concentration and monopoly.”
The government has attacked monopolistic industries for decades, Kelley added, but “in the last 15 years we have abandoned these principles, choosing instead to celebrate what many market researchers and economists call efficiency through consolidation.”
The danger is that “this has only placed the packing industry in a much better position rather than to compete, to connive.”
As a result, beef producers’ share of the American consumer dollar has dropped from 64 to 44 percent. At the same time, she said, big American packing companies have reported record profits.
