Op-Ed by R-CALF USA President Max Thornsberry, DVM, MBA** 

Part II: How GIPSA’s Competition Rule Disrupts Packers’ Plan to Control the Cattle Supply Chain  

August 25, 2010 The cattle industry is caught in a classic, catch-22 situation. It would be disastrous to limit cattle producers’ access to alternative marketing arrangements while packers continue to control timely access to the market. This is why the GIPSA Competition Rule “does not restrict limit or prohibit marketing agreements, the use of premiums, or other value-added activities.” (See USDA letter at: http://archive.gipsa.usda.gov/psp/avalosstatements.pdf.)   

It is, however, clearly obvious to critical thinkers why the packers and industry trade associations that have packers seated on their governing boards are doing everything in their power to mislead cattle producers into believing GIPSA’s competition rule  will limit or prohibit such marketing methods.      

The GIPSA rule disrupts the packers’ strategy by prohibiting them from exercising their power to limit producers’ access to the marketplace. It accomplishes this by:  

1) requiring packers to justify the offering of different prices and different terms (including the timing of market access) to feeders who sell similar quality cattle and market similar volumes of cattle;  

2) requiring packers to maintain documentation regarding the reasons premiums and/or discounts are granted to some feeders but not to others;  

3) requiring packers to provide justification for giving certain feeders price and/or market access preference or advantages while denying such treatment to others;  

4) requiring packers to submit sample contracts so feeders will know the specifications and pricing variations offered by the remaining packers;  

and, 5) clarifying that packers cannot avoid the PSA’s prohibitions against engaging in anticompetitive practices by claiming their actions only harmed an individual producer and not the competitiveness of the entire industry. It accomplishes this by clarifying that a producer need not prove harm to the entire industry (harm to competition) in order to stop a packer from engaging in an anticompetitive practice that is targeted at him or her. 

GIPSA’s rule also puts an end to practices known to reduce competition. It prohibits a packer that needs additional cattle to fill weekly supply needs from purchasing such residual cattle from a competing packer, which would enable the packer to avoid making bids in the competitive cash market. It accomplishes this by prohibiting packer-to-packer cattle sales. It also preserves competition by requiring that each packer use its own buyer to purchase cattle. This provision addresses the problem discovered in U.S. auction yards where three cow/bull packers joined together to hire a single cow/bull buyer. Though this was great for the three packers – their shared buyer was able to purchase all the cows and bulls the packers needed for the price the packers wanted to pay – it harmed cow/bull sellers because where once there were three bidders for their cattle, suddenly there was only one.  

Therefore, GIPSA’s competition rule is indeed necessary to prevent packers from exploiting their dominant market positions that already enable them to create market access risk for cattle feeders, entice cattle feeders to abandon the competitive cash market to avoid market access risk, and establish pricing strategies that effectively lower the aggregate price for all cattle.

The rule accomplishes this by addressing four factors that are known to reduce, if not eliminate, competition:  

1)      It addresses the lack of packer accountability by clarifying that packers are prohibited from engaging in unfair, unjustly discriminatory, and deceptive practices against cattle feeders even if such practices are directed at a single cattle feeder; 

2)      It addresses the lack of documentation needed to evaluate disparities in prices and terms offered for cattle of similar quality; 3) 

3)      It addresses the lack of transparency in the marketplace by requiring packers to submit sample contracts for cattle feeders to review; and, 

4)      It prohibits known practices that, by their nature, are anticompetitive: packer-to-packer sales and multiple packers colluding to use a single cattle buyer.  

In short, the GIPSA Competition Rule is the first comprehensive effort in nearly 90 years to both protect and preserve an open, fair, and transparent competitive marketplace for independent U.S. cattle producers. We urge everyone who is concerned about the future of Rural America to be at the upcoming USDA/DoJ competition workshop at 8 a.m. MDT on Friday, Aug. 27, in the Main Ballroom of the Lory Student Center, located at 1101 Centre Avenue Mall on the campus of Colorado State University in Fort Collins, Colo. 

Additionally, R-CALF USA does understand that some folks in the country just can’t make the trip, no matter how much they want to be there. If that’s the case with you and you would still like your voice to be heard, please visit this Web site, which will still be up after the Aug. 27 workshop: https://org2.democracyinaction.org/o/5924/p/salsa/event/common/public/?event_KEY=23746. 

** Contact R-CALF USA Communications Coordinator Shae Dodson-Chambers to request photo and/or bio information on R-CALF USA President/Region VI Director Max Thornsberry, DVM. Op-Ed is 762 words. 

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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA represents thousands of U.S. cattle producers on trade and marketing issues. Members are located across 47 states and are primarily cow/calf operators, cattle backgrounders, and/or feedlot owners. R-CALF USA directors and committee chairs are extremely active unpaid volunteers. R-CALF USA has dozens of affiliate organizations and various main-street businesses are associate members. For more information, visit www.r-calfusa.com  or, call 406-252-2516.   

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                            This page was last updated on Wednesday, October 12, 2011.