Billings, Mont. – Today the U.S. Department of Agriculture (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) proposed a set of rules to implement key provisions of the Packers and Stockyards Act of 1921 (PSA). The Fair Practices Rules, previously known as the GIPSA rules, are intended to facilitate competition in the livestock and poultry markets. The rules were first proposed in 2010 but met fierce opposition by meatpacker lobbyists who succeed in blocking the rules through several back-to-back appropriations bills.
“The Trump Administration should support these rules because they are vital to reversing the ongoing decline of our U.S. cattle industry,” said R-CALF USA CEO Bill Bullard.
Bullard said the U.S. cattle industry is declining at an alarming rate. He said over half a million cattle farms, ranches and feedlots have exited the industry since 1980, the size of the U.S. cattle herd recently hit a 60-year low, and the volume of beef produced from U.S. cattle has fallen to a 20-year low.
“Our industry’s decline is not the result of any natural phenomenon or legitimate economic force; it’s the result of a failure to use the laws we have to protect competition. The new rules are aimed at implementing those critical protections,” Bullard said.
Bullard explained that Congress passed the PSA 95 years ago to establish a legal framework within which a small number of concentrated meatpackers would compete for cattle sold by hundreds of thousands of widely dispersed cattle producers. He said this framework consisted of clearly defined rules of competition to ensure fairness despite the disparity in economic power between cattle sellers and cattle buyers.
“Unfortunately, the largest meatpackers and the producer groups to which they belong thwarted every effort by the USDA to finalize rules to implement the decade’s old legal framework,” Bullard said.
One of the proposed rules would clarify what the PSA meant by language prohibiting meatpackers from engaging in unfair, unjustly discriminatory or deceptive practices and from making or giving “any undue or unreasonable preference or advantage” to some market participants but not to all.
Bullard said the undue preferences prohibited by the PSA are also known as “sweetheart deals” that meatpackers grant to preferred feedlots while other feedlots go broke because they are relegated to selling their cattle in a market void of competition.
Industry price data provided by the USDA and compiled by R-CALF USA show that the average monthly return to U.S. cattle feeders for the past 15 years was a negative $27.13 per head per month.
“While this explains why 85,000 small- to mid-sized cattle feedlots have recently exited our industry, it doesn’t explain why the largest feedlots continue growing despite these prolonged loses. The reason they are growing is that meatpackers are insulating their preferred, larger feedlots with sweetheart deals that allow them to profit even after competition disappears,” Bullard commented.
Another proposed rule would rebalance the competitive scale used by poultry companies to pay poultry growers.
The interim final rule included in the package clarifies that unlike older antitrust laws that largely protect competitive processes but not the actual competitors, the PSA does protect individual farmers and ranchers by not requiring them to first show injury to the competitive process prior to seeking protection under the law.
Bullard said it’s easy to see why the meatpackers, who he said want to capture the cattle supply chain away from independent cattle producers, are fighting so hard to kill these rules.
“Because these rules will implement the rules of competition, they will empower cattle producers to monitor the meatpackers’ conduct and enforce the rules when meatpackers act inappropriately. Importantly, producers would no longer have to wait for the federal government to act before anticompetitive conduct is corrected,” Bullard concluded.
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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is the largest producer-only cattle trade association in the United States. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. For more information, visit www.r-calfusa.com or, call 406-252-2516.