Farmers leery of U.S. packers
While Oprah Winfrey might have had all the beef-related headlines in the United States recently, another important issue – beef packer concentration – has garnered little attention.
But complaints by cattle producers, coupled with low cattle prices, have prompted U.S. agriculture secretary Dan Glickman to act.
First, he recently announced that to support cattle prices the government will buy $30 million (U.S.) of beef for federal programs.
Then he announced he intends to investigate the meat packing industry to see if its concentrated nature has led to price manipulation.
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The deputy chief economist of Farm Credit Canada says 92 per cent of Canada’s total exports to the U.S. went into the country duty-free in June.
“You can’t let three or four very large packers run roughshod over family farmers,” he told reporters.
Four firms – IBP Inc., Monfort Inc. (owned by ConAgra Inc.), Excel Corp. (owned by Cargill), and National Beef Packing Co. – now control 82 percent of the beef processed in the United States. In 1980, those firms controlled just over a third of beef packing.
Glickman said his department is asking Congress to approve $3.8 million for its investigation into whether the beef packing giants are manipulating the markets.
Such investigations in the past have not turned up price-fixing.
But many farmers and feedlot owners are convinced the move to formula pricing and packer feeding programs have hurt producers.
They argue that through contract feeding, packers have insulated themselves from the market’s fluctuations. With captive supplies, packers can wait out high fed cattle price spikes.
Many farmers believe the packers have so many cattle tied up through contracts that auction prices are becoming less reflective of the market price.
At the American National Cattlemen’s Beef Association meeting in early February in Denver, there was a resolution on making it mandatory to post all prices paid for fed cattle. After a series of votes, the resolution was voted down.
But the matter didn’t die and a lobbying effort has convinced the U.S. agriculture department to propose rules requiring that all prices of cattle and other livestock be publicly disclosed. Prices are now reported voluntarily.
Packers will fight price disclosure, arguing they can’t operate if their competitors know their financial dealings.
But for a market to function, the players in it need to have equitable access to information. The balance now is weighted heavily in favor of the packers.
To balance the scales, price reporting seems a fair requirement.
