More than a dozen state attorneys general have penned a letter to USDA Secretary Tom Vilsack, offering insight on issues in the livestock markets and potential solutions to strengthen enforcement under the Packers and Stockyards Act.
“For over a century, the Packers and Stockyards Act has served as an important tool to ensure fairness in livestock and poultry markets and protect the integrity of these markets,” the letter read.
“Structural changes in these markets, including increased concentration and changes in sales and marketing practices, have threatened producer viability, resulting in attrition, and reducing the number of producers participating in the livestock markets.”
The letter specifically addressed market concentration, alternative marketing arrangements (AMAs) and vertical integration, data sharing and increased coordination cooperation.
Market concentration
The attorneys general pointed out the concentration of the processing industry, noting that four beef packers control 85 percent of the market. “Unsurprisingly, as markets have concentrated, the number of cattle, hog, and chicken farms have also dropped dramatically,” they wrote.
The letter says the Packers and Stockyards Act originated in 1921 due to concerns about concentration, but at the time, the five largest processors controlled only 70 percent of the market, which indicates that concentration today is worse than at the time of the act’s passage.
“USDA should consider how increased concentration, both horizontal and vertical, has resulted in the packers’ ability to charge higher prices to consumers, while paying producers less for the livestock and poultry used in their products,” the attorneys general asserted.
AMAs
The letter criticizes AMAs and says they deplete packer and processor demand in cash markets, which suppress prices and make “producers more beholden to packers and processors.” The attorneys general write that USDA should evaluate whether AMAs are being used in a way that distorts price discovery and other market conditions and if they constitute an undue or unreasonable preference under the act.
The letter notes that some proposals have been put forth by producers’ organizations and Congress, including mandating cash trade. “Despite the potential for congressional action, the USDA should consider whether its rulemaking authority under the (act) can directly address this issue,” they wrote.
Data sharing
The letter also expresses concern with third-party data services, which typically do not publish public reports, unlike USDA.
“Multiple antitrust lawsuits have alleged that information collected and reported by these data servicers, while not identifying companies by name in the reports, is so granular by region and segment of the supply chain that it provides enough information to deanonymize the data and glean key competitor information,” the letter read. As such, they write, USDA should examine the type of information that private entities collect and share for profit and compare them to public USDA reports to ensure transparency.
Coordination cooperation
The attorneys general emphasized that in addition to protecting competition in the markets, it is important to ensure they operate with integrity and are fair and equal. This is why the Department of Justice, Federal Trade Commission and state attorneys general have enforcement authority over antitrust laws.
“Because each of these enforcement agencies have particular roles to play to protect these markets, we should all be eager to coordinate and cooperate to ensure that issues within these markets are brought to the attention of the enforcers and/or regulators most likely able to investigate and remedy the issues.”
Ultimately, the letter requests the USDA to aggressively enforce antitrust measures under the Packers and Stockyards Act. To do so, the attorneys general recommend the following specific measures:
• Establish a working group to bring together state and federal agencies to discuss market issues and facilitate collaboration and information sharing.
• Evaluate whether the USDA has the power to break up meat processing operations and partner with state antitrust enforcers.
• Invest in new competitor entrants into the processing industry and strengthen already existing small and very small facilities.
• Review exclusive contracts established by packers and processors.
• Encourage and examine proposals for reform put forth by producer organizations.
• Establish a grant that state antitrust enforcers could access to support their efforts to investigate and bring antitrust actions in ag markets.
“Our agrarian abundance and farms are fundamental to California’s economy, communities and culture,” said California Attorney General Rob Bonta in a statement. “But recent market consolidation in parts of the supply chain has left consumers and producers to pay the price.”
The letter was signed by the attorneys general of California, Delaware, Hawaii, Idaho, Illinois, Iowa, Maryland, Minnesota, Nevada, New Mexico, North Dakota, Oregon, Rhode Island, South Dakota, Utah and Wyoming. — Anna Miller, WLJ managing editor
