2022 should be an interesting year for cattlemen. The markets are poised to be much stronger, but with inflation, they may not be as profitable. But it should also be a year of greater government attention.
This COVID-19 situation has uncovered many fundamental problems with food production and distribution. Government officials are looking at industry concentration and bottlenecks in supply chains and are looking for scapegoats. Somebody must be at fault. So right now, it’s the major beef packers who have experienced unrealistic profits and are the primary reason food prices are rising, while producer prices are flat.
Just over a year ago, the Department of Justice was to have started a comprehensive investigation into the meat processing business; we have yet to see a report or even a progress report. The government has placed more attention on antitrust issues with social media platforms and the meat packing industry.
Now we have a group of state attorneys general trying to make changes to the 100-year-old Packers and Stockyards (P&S) Act, which has done its job over that time. They support the proposal of a rule to clarify that parties do not need to demonstrate harm to competition in order to bring an action under Section 202(a) and 203(b) of the P&S Act. They want to clarify what unfair and deceptive practices, undue preferences and unjust practices are, and to change the poultry grower tournament system. These same changes were proposed in 2010 and 2016 by the Obama administration. Tom Vilsack was head of USDA then, too.
The North American Meat Institute said, “In the past, these sorts of proposals have been opposed by many livestock producers and Congress. In fact, the concepts embodied in these proposals have been rejected by eight federal appellate courts. They were a bad idea in 2010, they were a bad idea in 2016 and they are a bad idea in 2021. Should these proposals be implemented, they will limit producers’ ability to market their livestock the way they see fit and will lead to costly lawsuits.”
These attorneys general are asking USDA to conduct retrospective merger reviews to consider the effects of past mergers so that USDA can inform itself on how best to use the powers vested by Congress. They should use the $4 billion from the American Rescue Plan Act to investigate agriculture markets, the attorneys general said.
They seem to place some market fault with private data companies, similar to CattleFax, which provide customers with real-time regional data for supply and demand trends, which is well detailed. USDA provides a ton of raw market data to the public, but it doesn’t aggregate the data much. These private outfits do quite a bit more work, which costs companies money—it is not free like USDA data; is that unfair?
They also go into detail about cash spot markets and alternative marketing agreements (AMAs). They seem to support some of these legislative proposals to mandate some level of negotiated cash trade. They point out that AMAs first happened in the poultry industry and then 20 years ago in the hog industry, but they are worried that it is happening in the cattle industry—which it is. It’s called market evolution.
There is a healthy cash market for feeder cattle and cull animals at the auction markets. The fed cattle sector has grown to the point where 20 percent of the cattle feeders are feeding 80 percent of the fed cattle. Cattle feeders have fought packer concentration with their own type of feedlot consolidation. These large feeders are looking for those market signals and efficiencies through AMAs.
For this country to have this level of poultry and hog production, the markets had to streamline simply to get some consistency in those products. Hog processors don’t like it when a load of hogs changes by 10 pounds a head—they want them all the same weight. Poultry processors want a 4 lb. bird.
Perhaps the most constructive idea that these attorney generals came up with was for USDA to establish an Agriculture Markets Integrity Working Group to bring together leaders from the various agencies to discuss issues in the markets and share ideas and information to facilitate the proper agencies addressing each issue as they emerge.
This sounds like another elected bunch of attorneys who want to have political careers. Let’s commission a study before we do anything. Pray for rain. — PETE CROW
