Competitive Markets for Wyoming’s ProducersWritten by Senator Enzi
The Packers and Stockyards Act was passed to ensure that producers had the opportunity to be heard if they suspected that buyers were engaged in anti-competitive or manipulative market behavior. For some time, the U.S. Department of Agriculture has been encouraged to increase communication between its economists and attorneys investigating complaints of anti-competitive behavior. This legislation creates a special counsel in USDA to coordinate efforts to investigate complaints more efficiently. Hearings by the Senate Agriculture Committee also found that the USDA has difficulties enforcing existing law that protects producers from being discriminated against for working to form a producer association. Many Wyoming producers benefit from these sorts of marketing arrangements and the Senate version of the Farm Bill includes this protection for ranchers.
Ban on Packer Ownership
Alternative marketing agreements have increased steadily over the past 10 years in the livestock industry. These marketing opportunities have worked well to offer producers options on how to reduce risk in their operations. As these marketing agreements have become popular, so too have new opportunities for manipulation of market prices. The livestock industry was controlled by only a handful of firms in 1921 when the Packers and Stockyards Act was put into law. In recent years, the industry has again become consolidated and now four firms control about 84 percent of cattle for slaughter. This level of consolidation not only threatens small producers but also makes packer ownership a powerful weapon against Wyoming’s livestock producers. An independent study commissioned by Congress released in January concluded that the direct ownership of livestock by packers has resulted in average lower cash market prices.
The ban on packer ownership in the livestock title excludes packers from engaging in the direct management of livestock. Additionally, the legislation only affects large firms by exempting packers that do not report under mandatory price reporting, producer organizations, and packers who own a single facility. Producers benefit greatly from alternative marketing agreements and their efforts should not be punished. The ban on packer ownership in the Farm Bill is designed to promote the use of these marketing tools while preventing them from becoming abused by packers.
Additional Issues Promoting Competition
A variety of other measures that would promote competition in the livestock market are not in the Farm Bill but are also being considered. I have spoken with many in Wyoming about the Captive Supply Reform Act, which requires that producers get a firm base price in their forward contracts. I introduced this legislation earlier this year and have worked with many to improve its ability to target a very troubling manipulative market practice. Although I did not have the opportunity to have this legislation considered during the Farm Bill I am looking forward to working with those in Wyoming on this issue in the future.
Another issue getting attention is the result of a 2005 court decision that reversed how the USDA historically interpreted the Packers and Stockyard Act. The London v. Fieldale decision requires producers facing deceptive market practices to prove “competitive injury” to not only their operations but also to other sellers in their region.
It would be like having your car stolen, and before your insurance company or police will process your claim, you must first prove how your misfortune affected everyone in your town even though it had nothing to do with them. Producers should not have to jump through these hurdles for fair treatment under the law.
Unlike how this law was enforced in the past, this decision requires a producer concerned about a discriminatory practice to also submit piles of paper and economic analysis explaining how their neighbor was harmed by such a misfortune. The USDA objected to this court decision and issued a brief explaining how it would undermine their efforts to properly enforce the Packers and Stockyards Act. I am sponsoring legislation with Senator Tom Harkin (D-Iowa) that would fix this problem by returning the law to how it has always been enforced.
Before the Farm Bill can go to the President for his signature, it must be considered by a Conference Committee with members from both the House and the Senate. As the Farm Bill advances and these issues continue to be debated, I look forward to hearing from Wyoming’s producers about their needs in our state. As a former small business owner, I understand how crucial access to a competitive market is for a family operation. Our ranchers deserve a fair price and a competitive market for their hard work and quality products.