Farm News, IA
12-14-07
Tension increases as issues raised about packer ban
By Kristin Danley-Greiner, Farm News staff writer
The farm bill proposal has had yet another red flag raised as promoters of the
packer ban try to get it incorporated into the next farm bill, drawing scrutiny upon
this issue.
Proponents of the packer ban say that the meatpackers are benefiting doubly
and unfairly controlling the marketplace, while opponents of the packer ban say
that contract farming offers producers stability. A provision inserted into the
Senate’s farm bill would prohibit processors from owning or controlling livestock
supplies within 14 days of slaughter.
More than a century ago, market transparency laws were enacted to address this
issue.
Producer Chris Petersen said that these laws need to be enforced or revamped
to “21st century standards.”
John Lawrence, director of the Iowa Beef Center and an agriculture
economist at Iowa State University, said that there has been a “long-running
tension” between farmers and producers in general.
“By the nature of production and processing, there are often a large number of
relatively small producers and a small number of relative large processors. The
issue of packer market power has been around for nearly 100 years. The original
Packers and Stockyards Act of 1921 was because of concern about packer
market power. The issues have evolved over time, from prompt payment and
certified scales, to concentration of packers (fewer and larger), and more recently
buying practices,” Lawrence said. “Obviously, packers play an important role in
the supply chain. They start the conversion of a live animal into a consumer
product. In addition to buying and processing livestock, they also play a role in
conveying consumer preferences back to producers.”
Petersen said that his fellow Iowa Farmers Union members support a packer ban
and that these producers range from free range to sustainable to confinement
producers.
“We hope this legislation is passed into law,” he said. “Also, keep in mind this in
the best interests of the contract growers as all contracts are based off the open
market, which as been vertically integrated by none farmers to such a threshold
that a true market of supply and demand has been compromised. This reflects on
whether contracts being economically fair/unfair even for the farmers (farming the
farmer game) who are part of the vertical integrators now. This (packers owning
livestock) has defiantly affected the independent producers and an open fair/
balanced transparent marketplace. The IFU and NFU also support a full
competition title in the farm bill.”
Dave Moody, a pork producer from Nevada and Iowa Pork Producers
Association (IPPA) president-elect, said that the group acknowledges the right of
all pork producers of any size or type of production system to market access and
opposes anything that hinders market access. The group’s policy, which has
been modified from its stance five years ago supporting the packer pan, was
adopted in January 2006 by delegates to the IPPA annual meeting, Moody said.
“IPPA does not encourage packer ownership of hogs. IPPA’s position concerning
a ban on packer ownership is the same as National Pork Producers Council,”
Moody said. “That policy was adopted immediately following the Iowa attorney
general’s settlement with Smithfield Foods to allow packer ownership in Iowa.
We are bound by the legal settlement in Iowa and the agreement remains alive
and well in the state with not only Smithfield, but other packers as well.”
Iowa’s own U.S. Sen. Charles Grassley has fought for the packer ban for quite
some time, saying that packers drive down livestock prices by controlling
supplies.
“Outlawing packer ownership of livestock would make sure the forces of the
marketplace would work for the benefit of the farmer just as much as it does for
the slaughterhouse. You could even say that packer ownership of livestock
frustrates and compromises the marketplace so the farmer doesn’t get a fair
price,” Grassley said in a statement.
A study commissioned by Congress that was released earlier this year supported
Grassley’s stance that meatpackers’ use of contracts with producers and
corporate ownership of livestock reduces the prices farms are paid for their
animals. But Grassley acknowledged that producers have expressed how
integral such contractors are in their success—and often survival.
Lawrence noted that livestock producers and the organizations that represent
them
disagree on the impact packer procurement methods (specifically ownership and
contracting) have on cash market prices.
“Some believe that these practices should be restricted or banned all together,”
he said. “Others believe that producers (and packers) should be allowed to use
alternative methods of procurement. The research on these topics over the last
20 years has been mixed. It often shows that increased use of non-cash
marketing arrangements is associated with lower cash price. It typically is
statistically significant, but not economically significant (very small).”
Sen. Tom Harkin also has stressed concern about the packer ban—but on the
opposite side of the fence.
“Chairman Harkin is concerned that the livestock industry is becoming so
consolidated and vertically integrated that initiatives such as the packer ban are
needed to prevent the marketplace from becoming dysfunctional,” said his
communications director Kate Cyrul. “He supports the packer ban and will work
to see that it is enacted.”
Mark Salvador, Iowa Farm Bureau Federation national policy advisor, said that
the large organization does not have policy addressing the issue, but that the
group does support the livestock competition title contained in the Senate’s
version of the 2007 farm bill.
“We feel that the ‘Office of Special Counsel on Agriculture Competition’ at the
USDA, created in the title, will enhance enforcement of the packers and
stockyards act and the agricultural fair practices act by combining investigations
and prosecutions into one office,” he said. “Continued consolidation of the
livestock packing industry requires oversight by the USDA and the Department of
Justice to ensure that all farmers are receiving a fair price that truly reflects that
market value of their livestock. At the same time, we must be careful not to
interfere with the ability of our livestock producers to enter into desirable
contractual arrangements. These agreements are often sought out by farmers as
a method of risk reduction and enhanced profitability.”