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No Clear Direction

January 7, 2011
By: Roger Bernard, Farm Journal Policy and Washington Editor
 
 

A combination of farmers, cowboys, consumers and union members descended on Washington, D.C., in early December for the last workshop on concentration in agriculture. As the day-long session drew to a close, it was still unclear exactly what will happen as a result of these five sessions sponsored by USDA and the Department of Justice (DOJ).

The final session opened with USDA Secretary Tom Vilsack offering an overview of the economic conditions in U.S. agriculture, paying special attention to the loss of farms and consolidation in the industry. With the final session primarily focusing on margins, Vilsack detailed that in 2009, hog producers received roughly half of the retail value for hogs compared with 1980; cattle producers pocketed about 20% less during the same period. Vilsack labeled these shifts “warning signs” that should be watched.

Hot topics. Concentration was the common thread in the series of workshops, and Vilsack laid out the details of how concentration has affected farmers regarding food retailers. “The four largest retailers accounted for 37% of U.S. grocery store sales in 2009, compared with 34% in 2004, 28% in 1999 and 17% in 1994,” Vilsack stated.

Another issue outlined at previous sessions related to enforcement of the Packers and Stockyards Act, a responsibility of the Grain Inspection, Packers and Stockyards Administration (GIPSA).

Vilsack said the agency has taken steps to explore unfair and deceptive practices in the marketplace. USDA, he said, “is hiring new attorneys and field investigators to handle complex competition investigations and other violations.”

Attorney General Eric Holder also addressed the gathering, saying the sessions have had a profound impact on him. “I believe that we will be better prepared to take the steps necessary to ensure a fair and competitive agricultural marketplace—for producers and consumers,” he remarked.

However, Holder admitted, “Anti-trust actions won’t solve all of the problems in the industry.”
On the issue of what consumers look for when buying food, Barry Carpenter, CEO of the National Meat Association, said that a recent meatcase study showed two-thirds of products in the meatcase are branded. That, he said, “helps develop trust with consumers.” For those producing the branded products, he said the focus is on “making sure the brands reflect consistent quality.”
Dan Vincent, president and CEO of Pacific Coast Producers, said the key factors for consumers are “price, quality and food safety.”

Christopher Waldrop, director of the Food Policy Institute of the Consumer Federation of America,
said consumers are becoming more interested “in where their food comes from. They want more information, period, on their food.”

Looking to the future, Carpenter, Waldrop and others said communication with the consumer will be vital. Waldrop pointed out that convenience will continue to be a priority for consumers. “We aren’t getting any less busy,” he remarked.

On the issue of whether consumers have more choices, most agreed that there is a broader array of food products from which consumers can choose. But Waldrop pointed out that while there are more choices, it might be an “illusion of choice”—more brands from the same company.

Erik Lieberman, regulatory counsel for the Food Marketing Institute, said that for retailers, competition for consumer attention and value-added efforts have “reversed the trend of declining meat consumption.” He also noted that consumers in the U.S. still spend only a small portion of their incomes on food, adding that many of the costs up the supply chain can’t be passed back through to producers.

Vaughn Meyer, a cattle producer from South Dakota, countered that those costs can be passed to producers.

“Indirectly, all costs are passed back through to the producer,” he said, “especially if consumers don’t buy.” That, he said, is then manifested in the form of a lower price to the producer.

Moving on, Carpenter said he suspected many of the attributes that consumers want in their food products originate with livestock producers.

“There’s not much variation in size in terms of what they want to sell to consumers,” he noted, adding that what one packer will pay a premium for is probably a “regular-priced item” for other packers.

Public opinion. Most of the panel discussions were orderly and relatively civil, with little
emotional reaction from the audience.

A glimpse of emotion did come from cattleman Meyer, however, when it was said that the Packers and Stockyards Act has done nothing to help cattlemen.

“We need GIPSA rules, and we need them immediately,” Meyer declared, prompting applause from the audience.

The GIPSA rules Meyer referenced are the controversial proposed livestock marketing rules the agency published in 2010. The comment period on the plan closed Nov. 22, with USDA receiving more than 60,000 public comments. Vilsack said USDA will consider those comments as a final rule is developed.

The audience reaction to Meyer’s statement was a sign of things to come. Each of the workshops featured panel discussions but also public comment periods where audience members could express their views.

The comment portion of the final workshop certainly did bring audience reaction, mostly in the form of applause as speaker after speaker made impassioned pleas for implementation of the GIPSA rule, more action against monopolies, and to bring more clarity and transparency to the market place. Some took issue with USDA’s nutrition guidelines while others waded into genetically modified organism crops or took aim at retailers.

Next steps. What will come of these sessions? It’s not clear just yet.

Attorney General Holder labeled the series of workshops a “good process,” and said that agriculture is “very important” to the Obama administration and these workshops show they are “very concerned about it.”

Christine Varney, chief of the DOJ’s Antitrust Division, said her agency is committed to ensuring fairness.

But when pressed for examples of what will happen, officials couldn’t offer many specifics, though Varney said that DOJ and USDA have an improved relationship as a result of the sessions. She said the two agencies would be in close consultation when it came to mergers in the agriculture industry.

In his remarks during the workshop, Vilsack offered perhaps what might be the biggest outcome.
“It is our hope that the dialogue that we have started extend beyond this last workshop and continue around the kitchen tables, in coffee shops, at academic institutions all across the country,” he said. “Government may not have all the solutions to these problems, but together we can continue exploring ways to address challenges that exist.”

More discussion on these topics probably isn’t what many of those who have championed these workshops were hoping for. Action is what they wanted, but it is important to understand the problem before a commonsense solution can be found—one rooted in facts, not emotion.


Fast Facts

  • USDA and the Department of Justice (DOJ) were key players at the forums, but many senators, congressmen, governors, state attorneys general, state secretaries of agriculture, the Commodity Futures Trading Commission and the Federal Trade Commission were involved.
  • The first four workshops saw a total of 3,500 participants, including 750 participants in Iowa, 450 in Alabama, 650 in Wisconsin and more than 1,700 in Colorado.
  • USDA and DOJ have set up a joint task force to help promote competition in the agriculture marketplace.
  • DOJ said it would provide USDA whatever resources it needs for new regulations under the Packers and Stockyards Act.
  • Farmers testifying at the sessions have given USDA and DOJ a much better understanding of how markets function.
  • DOJ’s Antitrust Division said the sessions have better equipped it to do its job in the future relative to agricultural issues.
     

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FEATURED IN: Farm Journal - January 2011
RELATED TOPICS: Policy, Livestock, USDA

 
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