Action Alert: Calls Needed to Rein In Meatpackers

Right now, three giant multinational corporations control over 85% of the meat packing industry. This is a virtual monopoly. These companies want to completely control the food we eat, from the farm to the fork.

Thanks to a grassroots coalition, the 2008 Farm Bill included a provision directing the USDA to develop rules to protect farmers against some of the abuses perpetrated by these giant companies. The USDA has proposed such rules, but the meatpackers are fighting hard to keep these rules from being finalized.

The latest tactic is a sneak attack through a Congressional “rider” on the USDA’s appropriations bill. This back-door “rider,” inserted into the bill in secret and without a vote, would stop the USDA from adopting fair market, anti-monopoly rules for the meat packing industry.

 

Take Action

The House of Representatives will debate, and possibly vote on, tha appropriations bill today, Tuesday, June 14.

Please call your Representative NOW to urge him or her to oppose the “rider” that would stop USDA from adopting the fair market, anti-monopoly rules (often referred to as the “GIPSA rules,” as explained in the background below).

To find out who represents you, go to www.house.gov or call the Capitol Switchboard at 202-224-3121 or toll-free at 866-220-0044.

 

Background

The Packers & Stockyards Act of 1921 (P&SA) was enacted to comprehensively regulate packers, stockyards, marketing agents and dealers. At the time of its passage, it was considered to be the strongest anti-trust law ever to be enacted. Unfortunately, the law has not been effectively enforced.

Consolidation and vertical integration have created a playing field ripe for abuse in which corporate meat packers and large integrators manipulate markets, deny or severely restrict market access to independent livestock producers, and use unfair practices like confidentiality clauses to the detriment of both contract producers and independent producers.

One result of market control by meat-packers is the loss of about 158,680 beef cattle operations since 1996.

The issue of consolidation of the market affects every American, including those who buy their meat directly from local farmers. As just one example, the virtual monopoly of the giant meatpackers is one of the reasons there are so few small-scale slaughterhouses – there are too few farmers to support the businesses. This makes it more difficult and more expensive for our grass-based farmers to process their animals for sale. The virtual monopoly of the giant meatpackers also means that they make giant profits, which they can then use to influence politicians and regulators to make things more difficult for small-scale farmers at every level.

Congress worked to remedy the lack of enforcement of the Packers & Stockyards Act in the 2008 Farm Bill. The Farm Bill required USDA to write rules to address the problems of manipulative markets and unfair contracts as a first step to addressing the problems of unfair livestock markets.

USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) drafted rules as Congress directed. The rules aim to bring greater fairness to livestock and poultry markets. The proposed rules clarify which practices by meatpackers and their partners are unfair, discriminatory or deceptive under the Packers and Stockyards Act.

These rules are vital to the livelihood of ranchers, poultry growers and feeders across our country. Without them, the trend of vertical integration, manipulated markets and unfair contracts will persist, resulting in the destruction of any free market system left in the livestock and poultry sectors. USDA is reviewing of 60,000 comments submitted (the majority of which support the rules) as well as conducting additional analysis before publishing the final rule.

 

What the GIPSA Rules Do

The rules lay out criteria the packers must follow to ensure contracts they make with producers, feeders and growers are fair. These rules would help livestock producers in five major areas:
It prevents packers from engaging in unfair trade practices that harm livestock producers and result in the elimination of livestock producers one at a time, or small groups at a time. (Sections 201.2 and 201.210.) It does this by defining “unfair, unjustly discriminatory and deceptive practices or devices” to include:

  • Unjustified material breach of a contractual duty by a packer.
  • A retaliatory action or omission by a packer.
  • An action to limit a livestock producer’s legal rights and remedies under the law.
  • Paying premiums or applying discounts without documenting reasons.
  • A fraudulent practice likely to mislead a reasonable livestock producer.
  • Any act that distorts or is likely to distort competition in the market.

It ensures GIPSA has the records needed to determine if packers are engaging in the unlawful practices enumerated in the Packers and Stockyards Act. (Section 201.94.) It does this by requiring packers to maintain written records that provide justification for differential pricing or deviations from standard prices offered to livestock producers.

It ensures packers are not engaged in giving undue or unreasonable preferences or advantages to select cattle feeders to encourage and accelerate the concentration of the feeding sector of the livestock industry (select feeders are incentivized to expand while non-select feeders exit the industry). (Section 201.211.) It does this by listing factors GIPSA could consider when determining if a feeder was subjected to legitimate supply-demand forces, or if the feeder received undue or unreasonable treatment. GIPSA may consider the following factors when making such a determination:

  • Whether contract terms are available to all producers who individually or collectively can meet the conditions set by the contract.
  • Whether premiums are offered in a manner that does not discriminate against other producers that can meet the same standards.
  • Whether information regarding livestock transactions is disclosed to all producers when it is disclosed to one or more producers.

It improves transparency in the fed cattle market. (Section 201.213.) It does this by requiring packers to provide GIPSA with sample copies of each unique type of contract or agreement offered by packers. GIPSA may then post a copy of each unique sample contract on its Web site but GIPSA will not disclose to the public provisions containing trade secrets, confidential business information and personally identifiable information.

It prohibits packers from obtaining their supply needs from other packers and from reducing competitive bidding for cattle. (Section 201.212.) It does this by prohibiting packer-to-packer sales and by prohibiting two or more packers from sharing a single packer buyer.