By MEGGIE. I. FOSTER
Assistant Editor WASHINGTON, D.C. — In the final days of the comment period for the USDA’s Grain Inspection, Packers and Stockyard’s Administration (GIPSA) proposed rule on livestock marketing, an organization representing thousands of America’s cattle producers strongly objected to recent claims that the GIPSA rule would have a negative impact on the U.S. economy and the livestock industry.
“The entire study is based on predictions in how packers might react if the rule is passed, not on how much the rule will cost,” said R-CALF CEO Bill Bullard in response to the release of a recent study from Informa Economics that claims an annual reduction in gross domestic product and a loss of jobs if the rule, as written, is passed. “This study predicts the packers will retaliate and forgo all marketing arrangements, and this is a false premise. The rule itself doesn’t restrict, limit or prohibit any of the marketing agreements used by the industry today.”
In fact, according Bullard, the rule would require packers to be transparent in their buying practices and require packers to maintain records to justify the purchase price of livestock.
Bullard claims that “packers do not want transparency in the marketplace, therefore they are threatening the public by stating that they will abandon mutually beneficial market arrangements that provide mutual profit for both the packer and the producer.”
For example, according to the National Cattlemen’s Beef Assoc. (NCBA) , premiums paid out to producers for Certified Angus (CAB) beef would be eliminated if the GIPSA would moves forward as written.
“We view this as a hollow threat,” added Bullard. “We don’t believe they will abandon mutually profitable marketing agreements simply because the USDA is requiring them to be more transparent.”
Bullard said programs such as CAB are market-driven programs and the “profit potential far outweighs the cost of the record-keeping requirement imposed by this rule.”
Bullard is confident that “the market simply would not allow this to happen.”
Dave Hutchins, a beef producer from West Mansfield, Ohio added that “commonsense tells you that if the No. 1 beef packer in the United States is owned by Brazil and the meatpackers control the NCBA, do you really think they are going to care how much it costs U.S. livestock producers and how many jobs are lost in the U.S. They don’t need U.S. cattle, they can get cattle elsewhere if they have to.”
R-CALF, a grassroots cattlemen’s organization representing the U.S. cattle industry that consists of more than 753,000 beef cattle ranchers, including 73,000 full-time cattlemen who raise more than 100-head of beef cattle, is concerned that those groups who wish to withdraw the GIPSA rule are being governed and controlled by large meatpackers.
“These organizations are fully-supportive of the corporatization of the livestock industry,” he explained, of the NCBA, the National Turkey Federation and the National Pork Producers’ Council (NPPC), groups that also commissioned the recent Informa study. “They support the meatpackers nearly complete capture of the supply chain.”
Bullard cited the pork industry as the prime example of transgression in and industry governed by meatpackers.
“Why do you think the NPPC remained silent while the packers single-handedly eliminated nine out 10 independent pork producers since 1980?” he asked.
Bullard continued on, expressing grave concern that the same plight was in store for independent cattle producers, if the GIPSA rule, would not pass.
However, despite all the negative rumblings on the assumed effects of the rule, Bullard is confident the rule will go forward.
“In fact, it must,” he said. “Congress mandated the agency (USDA) to write this rule in the 2008 Farm Bill.”
If passed, Bullard is hopeful that it would clarify that when a packer engages in unfair, unjustly discriminatory or deceptive practices against a cattle feeder, the cattle feeder can file a complaint with GIPSA to stop the packer’s unlawful actions without first having to prove that the packer’s actions also harmed the competitiveness of the entire industry (also known as “harm to competition”).
“This is where the NCBA and R-CALF differ considerably,” Bullard indicated. “This rule would balance the market power between individual producers and highly integrated and monopolistic packers. It limits the packers ability to use market power to leverage down prices paid to producers.”
The NCBA believes the rule would lower the base price paid to cattle producers, while R-CALF contends the rule would in fact, raise the base price.
“This is pure propaganda on NCBA’s part,” Bullard said.
For example, if an animal is valued at $1,000 and the price paid to cattlemen is reduced by the 3 percent that has been shown by studies to be caused by the packers’ exercise of market power, then $30 that should go to the producer goes to the packer, he said.
“This rule would prevent packers from exercising buying power that is allowing them to capture that 3 percent and because all contracts are tied to the cash market this would elevate the base price received for all cattle and allow producers to recapture that $30.”
Bullard believes that while the issue of market power is complex in the industry, the GIPSA rule is “straight-forward and it would provide transparency and accountability back into the marketplace.
“This rule represents the first time in history that the USDA has attempted to clarify a 90-year old provision in the Packers and Stockyards Act that prohibits packers from engaging in unfair practices that harm individual livestock producers,” said Bullard. “We believe this rule would save independent livestock producers from being pushed out of business from the meatpackers.”
R-CALF is not alone in their support of the GIPSA rule, other groups such as the Organization for Competitive Markets and the Buckeye Quality Beef Assoc. (BQBA) are also in favor of the livestock marketing rule.
To view a recent informational meeting hosted by BQBA in Zanesville, Ohio with Bullard in attendance, visit http://r-calfusa.com
The comment period for the GIPSA rule ended Nov. 22, but to review the rule and for addition updates as they become available, go online to www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=landing&topic=landing |
