If North Dakota allows corporations to buy up swine and dairy operations, maybe Senator Chuck Grassley can rescue small livestock growers from that corporate takeover. Iowa’s senior senator has introduced S. 2911, the latest of his several attempts to prohibit meatpackers from owning livestock. Senator Grassley says his bill is a response to consolidation in the meatpacking industry, including the sale of Smithfield to Chinese interests in 2013. Senator Grassley says big buyers have consistently told him that big mergers would help consumers and farmers, but those mergers have consistently benefited only the packers by insulating them from competition.
South Dakota Farmers Union supports Grassley’s analysis:
[SDFU President Doug] Sombke explains that because there are so few packers today, packer ownership of livestock can manipulate the livestock markets, reducing demand and driving prices down. He adds that this is not a new issue. In fact, packer ownership of livestock is the issue which motivated Sombke to become more involved in the grassroots organization 30-plus years ago.
“We were losing our buyers right and left. There was a time when my dad was feeding cattle, and he would have 10 to 11 buyers stop by his feed yard each week. By the late 1980s, when I was in the business, we couldn’t get three to stop by,” explained Sombke, who today farms with his three sons [South Dakota Farmers Union, press release, 2016.05.12].
Pro-corporate Farm Bureau naturally resists Grassley’s bill:
Scott Vanderwal is the President of the South Dakota Farm Bureau. He says the relationship between producers and packers is a little more complicated. He says the Farm Bureau’s policy on the issue is mixed.
“First of all, our policy refers to the fact that our members believe that beef packers who process more than a 1,000 head per day should be monitored so they can’t manipulate the market. But then on the other hand, our policy strongly supports the freedom to enter into any contracts or any marketing arrangements that they think would serve their best interests. So the packer ban would basically interfere with that and that concerns us a lot,” says Vanderwal [Levi Gutz, “Meat Packer Bill Reintroduced,” SDPB Radio, 2016.05.16].
Of course, Farm Bureau isn’t concerned that vertical integration and concentrated ownership restrict the freedom that small operators have to enter into competitive contracts in a non-oligopolized market.
Industry fronters North American Meat Institute contends that Grassley’s ban would raise livestock prices and hurt producers, packers, and consumers by hurting a “dynamic and competitive” American livestock market. More independent Ranchers Cattlemen Action Legal Fund says NAMI bases that claim on an outdated 2007 study that fails to reflect the subsequent concentration of livestock ownership:
“The sweeping changes that occurred in our cattle markets since 2007 render the RTI study inapplicable in today’s marketplace,” said [R-CALF CEO Bill] Bullard adding, “The study was done when packers purchased the majority of their cattle (61.7 percent) in the price-discovering cash market and only 38.3 percent through non-cash arrangements, including packer-owned cattle.”
According to the U.S. Department of Agriculture (USDA), the volume of cattle purchased by packers in the price-discovering cash market fell to only 21.3 percent nationally and 2.6 percent in the Texas, Oklahoma and New Mexico fed cattle market by 2015. Conversely, the volume of cattle procured by packer-owned and other non-cash arrangements skyrocketed by 2015, jumping to 78.7 percent nationally and 97.4 percent in the regional market.
“The RTI assumptions regarding how packers procure cattle have literally been turned on their head since 2007 due to the radical changes the packers have caused in our fed cattle market,” Bullard added.
Bullard explained that packers have significantly restricted access to the market since 2007 by closing no fewer than nine packing plants that were located across the United States. He said nearly 70 percent of U.S. cattle feedlots ceased operations between 2007 and 2015, which he said is not surprising given that cattle feeders suffered an average monthly loss of about $51 per head for cattle sold to the packers during that entire period [R-CALF USA, press release, 2016.05.13].
That’s exactly the concentration of ownership Grassley wants to stop:
“An effective and efficient marketplace is one where packers that control all harvest capacity of the industry do not also own a majority of the animals to be processed,” Grassley said in a statement. “The fact of the matter is that the market continues to become less competitive. It’s time to see if ending packer ownership of livestock will reverse that trend” [Ian Kullgren, “Grassley Bill Would Ban Meatpackers from Owning Livestock,” Politico, 2016.05.12].
Senator Grassley worked with Senator Tim Johnson on a packer-ownership ban back in 2002. Then Rep. John Thune initially resisted that ban, then reversed his position as his contest for Senator Johnson’s seat approached. Senator Thune co-sponsored another Grassley packer-owner ban in 2005. Similar measures passed the Senate but were stripped from the Farm Bill in 2008 Senator Thune is now so busy supporting Donald Trump, who knows nothing about farm policy, that he’ll probably forget to sign onto Senator Grassley’s new bill.
Senator Mike Rounds doesn’t know enough about the beef industry to take an intelligent position. We can only hope he’ll take his cues from Grassley, Farmers Union, and farmers like Frank Kloucek and support Grassley’s anti-monopoly, pro-free market ban on meatpacker ownership of livestock.