Old arguments never die

Aug 20, 2010

The U.S. Justice Department and USDA’s Grain Inspection Packers and Stockyards Administration (GIPSA) will hold their next competition workshop this Friday, Aug. 27, in Fort Collins, CO. These workshops were scheduled last year for the government to learn more about livestock marketing issues after GIPSA was required by the 2008 Farm Bill to publish new rules regarding competition.

GIPSA published their proposed rules last June and provided a public comment period that was to end several days prior to this workshop that evaluates competition issues, specifically in the beef cattle markets, however, after complaints and threats from Congress, the comment period has been extended an additional 90 days until Nov. 22.

This workshop has been well promoted and is expected to attract a large number of concerned beef producers. Some cattle organizations have gone to the extent of chartering buses to bring in folks to the meeting. From what I can see, most of these efforts are from groups who want to see big changes in the current beef cattle marketing structure. If GIPSA moves forward with their proposed rules, it will mean more regulation in cattle marketing, which will affect everyone buying and selling cattle.

This workshop will be contentious and passionate and I expect we’ll have a lot of opinions. We’ll probably also hear many stories of foul play by packers, more dialog about captive supplies, forward and formula contracts, packer concentration and all the evil powers that meat packers hold over livestock producers. It’s doubtful that this confab will produce any meaningful guidance for GIPSA.

It is a political issue. There are meaningful arguments on both sides of this issue, but one thing baffles me and that is the fact that the majority of cattle producers wish it would just go away. At the end of the day, the 80-20 rule applies very well to the cattle business. That is to say 20 percent of the producers manage 80 percent of the cattle. That 20 percent creates the value of cattle for the other 80 percent. And, the groups who are advocates of more regulation, in an already highly regulated industry, represent a very small portion of the livestock-producing community. It’s really no different than many of the radical environmental groups battling the livestock industry; they are small but loud.

Last week, Sens. Tim Johnson, D-SD, and Tom Harkin, D-IA, produced a letter supporting GIPSA’s cause. Nineteen other senators signed the letter, mostly from populous northern cattle states. Ironically, our two Democratic senators from Colorado, Michael Bennett and Mark Udall, both signed it. What I can’t believe is that both the Colorado Cattlemen’s Association and the Colorado Livestock Association both disagree with the proposal and the two senators didn’t bother to call them for guidance. Farmers Union supports the proposals, but well-defined livestock groups with a long history are forgotten. It’s apparent that these senators don’t even know who to listen to.

About the most sensible comments on the regulations that I have read came from the Wyoming Stock Growers Association. In response to the rules, they asked four simple questions which came from their producers: 1) What is the current inequity that this change purports to address? 2) Will the rule increase my ability to profitably market my cattle or will it only increase the ability of the federal regulators to limit how I can profitably market my cattle? 3) What will the impact of the rule be on those whom it is intended to regulate—the packing industry? 4) What might the benefit be that this rule will bring to my own cattle business?

They are good questions and the industry and GIPSA should ask themselves these questions and be honest with their answers.

Unfortunately, there is a lot of bad information circulating around the business and most of the proposed rules are intended to change the packing industry, which has a strong relationship with the feeding industry. Some packers also buy feeder cattle for their own lots. The odd thing about these relationships is I don’t hear a lot of complaining from cattle feeders about the way fed cattle are bought or sold to packers. None of the nations’ organizations representing cattle feeders agree with the proposal. The perplexing part is that if packers are subjected to more government regulation, feeders will be, too, and it will flow all the way down to how you sell your feeder cattle.

This proposed rule is extremely ambiguous and is full of loose-ended regulatory thoughts. It is not a well-thought-out set of absolute rules. It will be a legal field day for attorneys as they attempt to define the new rules. — PETE CROW