Clash of Opinions

October 1, 2010 11:36 AM

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The Obama administration’s series of hearings on competition in agriculture is churning up a mountain of enthusiasm in the small-family-farm movement, but mainstream agricultural groups have awakened in recent months. Looking at the two sides, one thing is clear: There is a wide gap between what each group would like to see unfold.

That was evident at the August hearing in Fort Collins, Colo., devoted to livestock issues. The meeting, the fourth of five the administration is hosting on competition in agriculture, drew producers, packers and livestock industry representatives together for firecracker discussions.

The National Pork Producers Council and National Cattlemen’s Beef Association are in a scramble to head off what they perceive as a threat to the way their members have come to do business. But they may be too late, and there is a sizable segment of producers who think that would be a good thing.

More than 2,000 people showed up at the meeting in Colorado. About 1,300 were seated in the main conference room at Colorado State University and many more were shifted into overflow rooms to listen in.

Secretary of Agriculture Tom Vilsack, Attorney General Eric Holder and Assistant Attorney General Christine Varney started off the meeting. They made it clear that they think, as Varney put it, “the system is broken” and that they’re looking for ways to develop regulations and use antitrust authority to change that.

“Ultimately, our conversation is about much more than simply last year’s trends or this year’s challenges,” Holder told the crowd. “It is about your livelihoods, your families, this region’s economy and our centuries-old American way of life. It is about our nation.”

Holder said rural “repopulation” is so much a priority for President Obama that he has made it a Cabinet-level issue. It’s about more than food, he added, it’s about saving an important part of “what makes America.” He and Vilsack said they are looking to attract young people back into agriculture.

From there, the meeting moved into panel discussions. Panelists included an economist who studied the effect of concentration and vertical integration on cattle markets; producers who
expressed concern about government intervention in the marketplace; and a mix of producers and others who shared concerns about the trend to more concentration and accumulation of market power in the hands of fewer feeders and large packers.

There was little new information at the meeting. Four packers control more than 80% of the fed cattle market and have done so since the 1980s. The amount of forward contracting has continued to grow, leaving fewer and fewer cattle in the cash market—and the impact is greater in some
regions and during certain periods.

On the pork side, forward contracting now accounts for more than 90% of the market, a fact that many panel members felt limits access to markets.

In both fields, the number of producers has fallen dramatically in recent years. That is the case more among hog producers than cattle producers.

These facts were not in dispute. But panel members and individuals who spoke in two-minute, open-mike sessions were a long way from agreeing on what should be done about it.
Some of the pig producers—those with vested interests in contract production as well as the lone banker on the panels—said such contracts are important in limiting their risk in a volatile market and to help them produce pigs that their packer buyers believe fit the market.

But more of the panel and open-mike speakers were inclined to think those benefits are outweighed by packers’ preference to contract with larger operators—putting small producers at a disadvantage and creating a market access challenge.

Similar arguments arose on the beef side. James Herring of Friona Industries said his contract with Cargill Meat Solutions allows him to reward producers who deliver consistently high-quality beef to branding programs managed by Excel and its retail customers. He said contracts are necessary. Other value-based brands, including Certified Angus Beef and U.S. Premium Beef, raised concerns as well.

But more of the invited speakers questioned the impact of such agreements on their ability to access processing markets. Taylor Haynes, an organic rancher and niche marketer from Wyoming, thinks the rise of big packers has limited his ability to find nearby processors. He said food safety rules have been a burden on small processors and suggested that if there were more small packers, there would be more small feeders.

Unlike previous meetings, the hearing was overshadowed by current events. This summer, USDA’s Grain Inspection, Packers and Stockyards Administraion (GIPSA) proposed a rule to implement some of the very ideas that were being advocated by the less main-stream, smaller producers.

Originally, the comment period on the regulations was to have closed before the Fort Collins meeting, but under pressure from members of the House Ag Committee, the comment period was extended until November. As a result, much of the discussion centered on specific regulations rather than on big picture issues.

But it’s all part of the mix, and as the hearings unfold, the chasm that has grown within much of agriculture will be examined for the first time by a sitting administration.

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