Jul 22, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


Out to Pasture

RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

USDA-GIPSA Gets a Trip to the Woodshed

Jul 26, 2010

By Steve Cornett  

It sounds like Dudley Butler—that “new sheriff in town” President Obama appointed to enforce the Packers and Stockyards Act—ran into a bipartisan buzz saw last week when he showed up at the House Agriculture Subcommittee on Livestock, Dairy and Poultry to defend his proposed rule to hamstring meat and poultry packers.

Oops. I said “hamstring.” Of course, the purpose of the rule is to make the market place “fairer” and a dose of “fundamental change” for the meat business. 

Your reporter missed the hearing. But Kim Watson-Potts, Beef Today editor, caught it and so did Roger Bernard with Pro Farmer. In fact, so did just about everybody I talked to.

It sounds like it was remarkable. The Democratic chair of the subcommittee, David Scott of Georgia, basically told Butler and Undersecretary Avalos that it looked to him like the rules were an attempt to circumvent the will of congress. 

Congress, during their considerable discussion of the issues at hand, had considered and decided against many of the provisions, he said. The message from the Republican side was the same.

You may have noticed in this space earlier that this reporter has mixed emotions about the proposed rules. It’s good that somebody has finally decided to include poultry in the rulemaking process. If you’re going to attempt to make free markets more “fair” rather than more efficient, it’s at least nice if some of the same anti-efficiency rules apply not just to beef, but to the competition as well.

But it also looks like Representative Scott is right. These rules are an attempt to do what congress discussed and agreed not to do—eliminate “captive supplies,” despite any convincing evidence they are contributing to industry consolidation. Or, for that matter, that consolidation is something so undeniably “bad” that it must be stopped at whatever cost to freedom and individual rights.

This writer is not without recognition of the challenge posed by the consolidation of the packing segment and the evolution of the feeder-packer marketing intersection. There’s no reason to doubt that Randy Stevenson was told by a packer buyer than he couldn’t pay more for a certain set of high-value cattle because it would impact the price of a much larger group of basis-priced contract cattle.

Moreover, I’ve no reason to doubt the feedyard owner who told me years ago—during the prompt payment debate of the 70s—that his packer buyer had promised to boycott his yard if he supported the law.

But new laws and GIPSA regulations are not likely to provide a solution we’ll like.

Rather, the industry should be looking for ways to adapt. That means finding new ways to price cattle. As more cattle move on contracts, the cash market gets thinner. You can’t continue to base the whole thing on an increasing thin, decreasingly representative, sliver of the cattle.

We’ve talked about other options. A few people have actually worked out risk-sharing and cost-plus arrangements. I’m not sure how long we’ve been batting around the idea of tying cattle prices to boxed beef values. I’m not sure where it will wind up. But as things change, things will change.  The laws need to allow the market to adjust. 

What the Dudley Butlers want isn’t going to work.  Consolidation is being driven by factors well beyond their control. You and I may not like it, but it is helping provide consumers with more affordable, higher quality products. We’re not all going to be able to make a living growing cattle in the future, I suppose. But by what reasoning do we suppose we have a right—a RIGHT!—to do so?

This is, when you boil it down, the same debate we’ve been hearing in recent years about big box stores driving the mom and pop locals out of business. I never believed that a local hardware man had a “right” to force me to pay more for his products. I’m not sure why, then I have a “right” to feed cattle when others can obviously do it better and cheaper.

We have a right to a fair market. A fair chance. We have a right to start the race, but we don’t have a right to win the blue ribbon.

And USDA just announced an extension to the public comment period. That only makes sense to extend the comment period until at least after the Denver DOJ-GIPSA hearing on these very matters.

And we can hope that the pressure from the Congressmen will make a difference.

Steve Cornett is editor emeritus at Beef Today. You can reach him via e-mail at scornett@farmjournal.com.

This column is part of the Beef Today Cattle Drive
e-newsletter, which is delivered to subscribers biweekly and includes beef industry analysis, market information as well as the latest beef headline news. 
Click here to subscribe.

 

 

 

Log In or Sign Up to comment

COMMENTS (9 Comments)

Anonymous
The reason that socialism never works is that, as we can see in the case of our public schools, the system gives a monopoly and the monoploly has no compelling reason to create the best product at a low price with great service. The other reason we don't allow monopolies is that it creates a power imbalance in terms of small negotiating with huge. This means the rights and dignity of the small producer, "Huge's" employees can be trampled. When you live under a monopoly system the little guy is no better than the citizen of a socialist country. You are simple and trusting to think these Huge businesses got huge by honest dealings. Most of them bribed, lied, cheated, and stole their way to the top. Tyson and the Clintons rose at the same time. Under your system we would be guaranteed that whoever made it to the top was the hardest employer, the best briber, the hardest bargainer and possibly the most inovative, but really, inovation can be coppied, so we all know how you get there and how you stay there. There are exceptions, but by allowing economic darwinism to play all the way out to the monopoly level you guarantee that in almost all cases the worst rise to the top, and they take away the freedom of good men to pay a fair wage, to deal honestly ect, because they will have a higher cost of production.
12:52 PM Jul 29th
 
Anonymous
You are half informed on this issue of the big box stores driving the mom and pop locals out of business. The part that you never considered is that these huge expansions are only posible with "cheap money" that can only come into existence by being loaned out. Malwart is using its' size to demand lower prices from their venders, and that is why we often find ourselves producing our agricultural products below the cost of production. Their is a national economic security issue involved here when every business is built on a massive leveraged debt, a model that is unsustainable, so unsustainable that we call it "Too big to fail". Because businesses are not owned by folks who have saved their money and expanded slowly over time,and therefore have a firm base to stand on when times get bad, then our whole country has to be bailed out with federal money because we have none of our own. You are drinking the unreality cool-aid. Also you need to read the ruling class article on the American spectator to see how all these big businesses become a part of the ruling class and by suporting the right politicians get their bail-out while others who are not part of the club get no money.
12:33 PM Jul 29th
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions