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USDA is taking more steps in its quest to promote fair and competitive markets, following through on an executive order signed by President Joe Biden in July 2021. The department has released three actions that is says will not only promote fairer markets for farmers and ranchers, but also lower food prices for Americans.
“For too long, consolidation in the agriculture industry has been swallowing up family farms, lowering incomes and choices for farmers, and raising prices at the grocery store,” said National Economic Adviser Lael Brainard. “Today’s announcements build on our work to restore fair competition in farming and food markets and to lower grocery prices for working families.”
USDA issued an advanced notice of proposed rulemaking under the Packers and Stockyards (P&S) Act to gather feedback on ways to create new benchmarks for alternative marketing agreement (AMA) base prices and methods for trading with those benchmarks.
In addition, the department released an interim report that assesses competition in the meat retail industry. The report identifies potential problematic fees and anticompetitive pricing strategies in the beef market as a case study.
For the seed industry, USDA plans to increase transparency and improve researchers’ access to seed germplasm by giving researchers more access to breeding history, pedigrees and seed samples.
“Consolidation in the agricultural industry is making it too hard for small family farms to survive as they face concentrated market power in the channels for selling agricultural products,” USDA said.
Cattle, beef industry actions
Biden’s executive order directed USDA to address anticompetition in the marketplace through rulemaking actions under the P&S Act. In addition, the department was tasked with finding ways to enhance price discovery, increase transparency and improve the functioning of the cattle and livestock markets.
Once the proposed rulemaking is published, the Packers and Stockyards Division is seeking comment on ways to improve price discovery and fair and competitive trading in fed cattle markets. USDA said the options focus on the best ways to ensure AMAs are representative of relevant market conditions and aren’t vulnerable to events that cause prices to shift for reasons other than supply and demand.
“These options are intended to mitigate the concern that AMAs have negative price effects on the spot market and otherwise distort the trading of fed cattle, which are complaints that (Agricultural Marketing Service) has received over the years,” USDA said.
In addition to the advanced notice of proposed rulemaking, USDA released the “Competition and Fair Practices in Meat Merchandising” interim report to better understand access to retail dynamics for producers and processors. USDA said the report identified a trend of increasing market concentration, especially among the Big Four. The report also highlights interviews with farmers and small-to-midsize or independent packers and retailers, who shared their concerns.
Following the report’s release, USDA plans to continue an investigative study, enforcing subpoenas when necessary. The department will then announce an advanced notice of proposed rulemaking to seek input about potential next steps.
“Together, these efforts will protect free and fair competition on the merits for businesses operating in the retail channel; ensure that small, midsize, or independent businesses can continue to raise and process livestock; and help these businesses distribute and sell meat to the families and local communities that they serve,” USDA said.
Industry reactions
There were mixed reactions in the industry regarding USDA’s plans to address AMAs through a rulemaking.
The National Cattlemen’s Beef Association (NCBA) expressed concern with the announcement, saying it ignores the input of cattle producers, reduces innovation and harms producer profitability.
“NCBA has very real concerns about USDA’s efforts to exert more power over how cattle are priced and marketed,” NCBA Vice President of Government Affairs Ethan Lane told WLJ in an email. “The vast majority of cattle farms and ranches are family-owned and operated, and the average herd size is fewer than 50 head. With such a diverse industry, farmers and ranchers have each found unique, innovative ways to market their cattle and fill consumer demand.”
The U.S. Cattlemen’s Association (USCA) said it was reviewing the proposed rulemaking and report but commended the announcement.
“USDA has worked diligently to gather input from our industry on both the investigation and for the proposed price discovery options,” said USCA President Justin Tupper. “Their willingness to connect with producers and organizations like USCA is appreciated and helps yield rulemaking procedures that make a difference for those of us in the countryside.”
The Ranchers-Cattlemen Action Legal Fund, USA (R-CALF) said it has long-argued that producers receive a less-than-competitive price for their cattle due to AMAs.
“We strongly support USDA’s effort and view it as the most critical step undertaken by any administration over the past two decades to restore for independent cattle producers a robustly competitive marketplace, which is absolutely essential to our goal of reversing the alarming decline in the number independent cattle feeders and independent cattle farmers and ranchers, and for ensuring an abundant and affordable supply of beef for American consumers,” said R-CALF CEO Bill Bullard in a news release.
The Meat Institute, which represents packers and processors, denounced USDA’s plan.
“Biden’s USDA is once again attempting to assert government control over the free market to the detriment of cattle producers, packers and consumers,” said Meat Institute President and CEO Julie Anna Potts in a statement. “This is not about transparency. This is about the government dictating how cattle may be bought and sold.” — Anna Miller, WLJ managing editor
