COMMENTS

Opinion
Aug 14, 2009

The new GIPSA

 

The new GIPSA

 

The Grain Inspection Packers and Stockyards Administration (GIPSA) is all of a sudden getting reacquainted with the cattle industry and has been very aggressive checking up on auction markets and cattle dealers. For many years, you could go on their Web site and see just a handful of bond violations. Over the past few months, there has been a dramatic change in the volume of bond violations, with some pretty healthy fines being levied on operations that may have been a bit loose on their custodial accounts, or those that didn’t have a bond. It’s a good thing that GIPSA is doing their audits and assuring prompt payment to livestock producers. But to have things heat up overnight is somewhat perplexing. I spoke with one market operator to find out if GIPSA has been nosing about and he said that he was being audited as we spoke on the telephone. Another market operator said GIPSA has been more visible in recent months than he could remember. One other market operator said GIPSA had visited his market investigating competition issues.

Since Secretary of Agriculture Tom Vilsack was installed several months ago, GISPA has been actively adding inspectors to their staff. With the addition of Dudley Butler as administrator for GIPSA, investigations of market manipulation have increased.

Butler has announced that the agency will be reinterpreting and enforcing the Packers and Stock Yards Act, which has been apparent from our discussions with many market operators.

Butler, a Tennessee attorney, has been very active in years past litigating anti-competitive cases in the meat industry. He was also very active in R-CALF and is a founding member of the Organization for Competitive Markets. Sources also tell us that the U.S. Cattlemen’s Association and R-CALF have been spending quite a bit of time in Butler’s office, no doubt offering guidance about packer concentration and related issues. With Butler’s past experience, it should seem rather clear that this man has an agenda and has a bias against big agriculture and big food. Last week, Vilsack and Attorney General Eric Holder announced they were going to conduct workshops on competitive issues facing agriculture. We know there has been a ton of legislation floating around regarding packer concentration and other competitive issues regarding big agriculture in recent years, so there is really nothing new here. However, these workshops almost appear to be a witch hunt. USDA said they, along with the Justice Department, are interested in receiving comments on the application of anti-trust laws to monopsony and vertical integration in the agricultural sector. They are also wanting to discuss the impact of agricultural concentration on food costs. They also intend to examine the effect of competition as it relates to patents, intellectual property, and market practices like the use of price spreads, forward contracting, packer ownership of livestock before slaughter, market transparency, and increasing retailer concentration.

This subject has been researched to death over the past 10 years. The packing industry has always been the target, but has never been found guilty of violating any regulations or exerting any market pressure up or down the chain.

The Government Accountability Office (GAO) recently released a report regarding industry concentration. Again, they found there was no downward price bias towards producers or pressure on food marketers. The report was addressed to Sen. Herb Kohl, D-WI, who chaired the anti-trust hearings regarding JBS Swift when they attempted to buy National Beef Packers, Smithfield Beef and Five Rivers Cattle Feeding. Our friend, Sen. Chuck Grassley, R-IA, who has been a critic of packer concentration in the past, also received the report.

GAO reaffirmed that there is no effect on farm prices or food prices due to concentration in agricultural industries. GAO said there is no economic research that has established that concentration in the processing segment of beef, pork or dairy sectors, or in retail, has adversely affected commodity or food prices.

“Most of the studies that we reviewed either found no evidence of market power or found efficiencies effects that were larger than the market power effects of concentration,” GAO concluded. One expert said recently that further increases in concentration would continue to generate efficiency gains and be beneficial to the industry and consumers.

It’s an interesting twist when several agency administrators are preparing to make a case against packer concentration and competition issues and then the GAO comes along and pulls the rug out from under them. My bet is they will ignore the GAO report and continue with their witch hunt. — PETE CROW

 

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