Alan Guebert, an agricultural columnist based in Illinois, discusses a proposal to limit packer ownership in the U.S.
Watching Big Pork and Big Beef respond to proposed United States Department of Agriculture rules to clarify conduct that violates the Packers and Stockyards Act is like watching Wall Street bankers: they find it impossible to pull their hands out of your pockets long enough to pull themselves out of the mess they’ve made.
That’s a good explanation of recent calls by the National Pork Producers Council and the National Cattlemen’s Beef Association for the Grain Inspection, Packers and Stockyards Administration, or GIPSA, to triple the customary 60-day comment period on new rules that give producers more power in today’s increasingly opaque, packer-dominated poultry and red meat markets.
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What’s up with that?
Simple, say industry watchers. Both NPPC and NCBA made formal calls for the rules to be lost in the bureaucracy because the American Meat Institute, the packers’ powerful lobby, wants time to strangle ’em in their crib, undermine GIPSA’s new administrator and, hopefully, elect a more packer-friendly Congress.
If so, NPPC’s and NCBA’s actions leave little doubt as to who wears the leather in either group. Each echo the packers’ July letter to GIPSA, moaning that “the rules will result in significant changes in how livestock are marketed and procured by meat packers.”
Well, duh.
When the rules were announced June 22, GIPSA fulfilled a 2008 Farm Bill mandate that “instructed the secretary to promulgate regulations” to oversee the new game of fast-growing production contracts between producers and packers.”
Specifically, explained USDA, the new regulations “would clarify when certain conduct in the livestock and poultry industries represents the making or giving of an undue or unreasonable preference or advantage” in livestock markets.
Also, the rules would give producers more rights in packer-linked production contracts when binding arbitration was the packer crowbar to solve problems.
As important as these new rules are to open markets, NPPC and NCBA defended the status quo. The rules, said NPPC, “could limit pork producers’ options in selling pigs to processors.” The NCBA’s line was more circumspect: “(W)e believe that this rule … could have a huge impact on the marketing of cattle in the United States.” Well, double duh.
For proof, look no further than the announcement by JBS SA to buy the 130,000-head McElhaney Feedyard in Arizona. According to reports surrounding the deal, the purchase would give the giant Brazilian meat-packer a yearly cattle feeding capacity of nearly 2.5 million head.
As DTN livestock analyst John Harrington noted in his online commentary, 47 percent of JBS’s annual cattle kill will soon come from its captive supplies.
“While there is significant disagreement over exactly how much such captive sourcing hurts negotiated cash [prices],” Harrington said, “most would agree that the category of packer-owned cattle tends to be the most toxic in poisoning cash market demand.”
In short, if new rules are not forthcoming to limit the massive market-moving capabilities of massive meat-packers, open and transparent markets will vanish and production will be by contract only.
That’s what NPPC and NCBA advocate. The USDA should disregard these toads’ croaking and enact the new rules.
Barry Wilson’s column will return next week.
