When four companies control 80 percent of the supply in a marketplace, even the most conservative economists would likely admit the potential is high for market manipulation. This is the case in the world of meatpacking, where four packers -- Tyson, Cargill, JBS and National Beef -- rule the scene. That's why, last year, the U.S. Department of Agriculture promulgated rules that would limit the ability of these companies to engage in practices that controlled the market unfairly. But the revised version of those rules recently released by USDA capitulate to packer demands and fail to make the marketplace more fair.
For years, small cow-calf producers, and the small- or mid-sized feedlots who sell much of their beef, say they have been mistreated by the giant meatpackers, who have conspired to set prices and manipulate supply. These manipulations force smaller sellers to take lower prices than packers give large ones, for meat of the same quality. Cattlemen have even taken packers like Tyson to court for price fixing. And in that case, they won $1.2 billion in damages -- until a judge overturned the verdict, saying that the cattleman-protecting Packers and Stockyards Act, which he likened to an antitrust law, does not protect individual packers mistreated by Tyson's manipulations, and only protects the marketplace as whole.
The intent of the Packers and Stockyards Act is to stop price fixing by big packers who control most of the market. It was passed in 1921, when the Big Five meatpackers (now they're the Big Four) were colluding to set prices. But the USDA has never interpreted the law by passing rules clarifying what it meant. So when cattlemen took big packers like Tyson to court, even though juries were sympathetic, judges, without a USDA interpretation, made up their own. They likened the Act to other antitrust laws like Sherman and Clayton, which require that maltreatment and collusion must damage competition and the marketplace as a whole, and whether or not individuals suffered damages is irrelevant. So cattlemen lost, even though they proved meatpackers fixed prices in a way that hurt their bottom line.
That burden of proof is a pretty big loophole. (Some liken it to having to prove a thief stealing your purse makes every shopper around less safe before the court would consider what the thief did to be illegal.) So after many years of lost cases, the cattlemen finally got Congress to tell the USDA it needed to write rules stating that the Act can be enforced even if a packer's manipulations hurt only one cattleman or feedlot owner. (Basically clarifying that stealing is illegal even if you only steal from one person.) The interpretation, nicknamed the GIPSA rules after the agriculture department branch -- Grain Inspection, Packers and Stockyards Administration -- that released them, also addressed poultry and hog production issues relating to competition. They were released in June last year, with comments taken until that November.
I wrote about the GIPSA rules in March, when the cattlemen, bruised from their months-long public relations fight with giant packers, their lobbying groups and congressional allies, believed the final rules might offer them hope of a fair marketplace, where they can at least get the same prices for their cattle as a big feedlot the packers treat preferentially.
They were wrong.
The independent rancher's demise has been speeded up by the Obama administration. Image courtesy Flickr user Roy Montgomery
Last week, the USDA signaled that it would not publish the portion of the rules addressing the cattle industry. Cattlemen are devastated.
"We always lose. If we win, we still lose, because these big corporations get the final vote. They own this government," said Mike Callicrate, an independent Colorado rancher who participated in the case against Tyson and has led efforts to reform the meatpacker monopsony. "The Packers and Stockyards Act is truly dead."
Fred Stokes, a Mississippi cow-calf producer who helped found the Organization for Competitive Markets, a group working to ensure farmers and ranchers have access to competitive, open markets, sounded defeated.
"(The USDA told us) 'I understand your situation, I feel your pain.' What happened to all that?" wondered Stokes.
As late as this summer, Secretary of Agriculture Tom Vilsack had stood strong for the rules, even in front of powerful packer groups like the American Meat Institute who took him to task for rules they believed would loosen their members' viselike grip on the meatpacking industry.
And J. Dudley Butler, the head of GIPSA, came into office stating his goal was "to enforce the Packers and Stockyards Act."
One can only conclude the USDA heads took their cues from higher-ups in the Obama administration, who are either cozy with big business and truly believe bigger is better, or fear the negative spin on the rules the meat lobby will roll out in swing farm states like Iowa. Even mainstream agricultural trade publications remarked upon the overt meat industry influence demonstrated by the sudden switch.
"Fundamentally I think what happened is Obama surrounded himself with a lot of people, corporate Democrats who have a lot of bad ideas," says Dave Murphy, an Iowa rural organizer whose group, Food Democracy Now!, was founded just after the 2008 election. In 2007, Murphy had supported Obama in the state's caucus, when he campaigned on reforming the big packers and cracking down on pollution from concentrated animal feeding operations, or CAFOs. The number of hog farmers in Iowa has dropped from 23,000 to 8,300 in the last 17 years and its hog sector has transformed into giant farms that have tremendous negative environmental impacts.
The number of independent cow-calf producers has declined by over 25 percent in the past 30 years. Hog and chicken farmers have bled numbers at even steeper rates, because the packers already fully control their industries and low prices have driven many out of business, and now those livestock sectors are increasingly the domain of the factory farm. Many cow-calf producers still work at what one might call the "family farm" level: A couple, their kids, maybe a hired hand or two whose primary income comes from producing a small or medium-sized amount of food and selling it into the marketplace for others to eat. Looking at the trend lines, though, one has to conclude that the era of the small livestock farmer is over. And the Obama administration's actions just accelerated that era's demise.
Stephanie Paige Ogburn is the online editor at High Country News.