Ban On Meat Packer Ownership: Too Little, Too Late

By Mike Callicrate

Iowa Senator Chuck Grassley, a longtime advocate for fair markets, is once again reintroducing a bill that would make it unlawful for meat packers to own livestock more than seven days prior to slaughter. Similar legislation has been introduced before, but the powerful packer lobby has always succeeded in killing it.

Aside from whether the bill actually has a chance this time, there’s another question to consider. If Congress bans meat packers from owing livestock, who will be left to buy the ranchers’ calves and the stockers’ and backgrounders’ feeder cattle?

When packer ownership first became an issue back in the spring of 1994 — a crisis during which the market fell $17 per hundredweight ($220 per head) in just six weeks — few people understood the negative impacts of packer-owned livestock, also known as captive supplies. Well, now we know. The lack of price discovery is on everybody’s radar screen, underscored by one of the most egregious market failures of all time: the 2015 cattle market meltdown, which saw billions of dollars of equity transferred from the independent cattle-feeding sector to the powerful meat packers and food retailers. With losses exceeding $600 a head, already crippled cattle feeders were essentially wiped out in 2015 – the largest capital drain ever experienced by the cattle industry.

Even by historic standards, the 2015 free-fall was a watershed. And history has been brutal. The year 1994 was particularly punishing. When market leader IBP (now Tyson) stepped out of the market for six weeks, the other big packers no longer had a “boss cow” to follow for price leadership. More than 1,500 enraged cattlemen gathered in Omaha to protest the destructive price decline. Prices recovered $12 per hundredweight in the following weeks, but what was obvious to many sellers of finished cattle was confirmed later in 1996 by a former IBP vice president: the biggest meat packers had indeed agreed to basically cooperate rather than compete.

So now we come to the late summer of 2015 and the wrenching 30% drop in cattle prices. Even when the cattle market was at record levels in 2014, producers were still short of their 1975 share of the consumer beef dollar by about $200 per head, though it was a much-needed improvement. Unfortunately, it proved to be short lived. While consumers continued to pay essentially the same amount for beef, cattle producers got shafted. Tragically, there weren’t enough independent-thinking cattlemen left to even organize a protest. At least the feisty R-CALF organization was willing to step up and call for a Congressional hearing.

While the plundering of cattle producers ensued, Agriculture Secretary Tom Vilsack was asleep at the wheel by failing to enforce the 1921 Packers and Stockyards Act, intended to prevent another meatpacker monopoly. Instead, he was celebrating the lifting of import restrictions on South American beef, giving greedy meat packers and retailers all the leverage they needed to drive down U.S. cattle prices to far lower South American values while inflating their own profits.

Banning packer ownership of livestock now isn’t the solution it would have been had it been enacted when it was sorely needed. Years of de-regulation and antitrust neglect have allowed the biggest, most aggressive companies to gain monopoly control of our food supply. Competition is dead, and, without competitors, a true market can’t exist.

Our founding father Ben Franklin described family farm agriculture as “. . . the only honest way [to acquire wealth], wherein man received a real increase of the seed thrown into the ground, in a kind of continual miracle, wrought by the hand of God in his favor, as a reward for his innocent life and his virtuous industry.” Today’s environment is more akin to Jurassic World. Rather than creating wealth from the land, the winner-take-all super-predator corporations are running a giant mining operation. No new processors, feeders or producers can succeed, even though new players are what we critically need to revive competition, restore market access and keep cattle prices honest.

If food security is important to Americans, we need far more than a ban on meat packer ownership of livestock. We must break the monopoly power of big retail, big meat packing and big food in general and create a pathway for family farmers and ranchers to re-establish their traditional connection with consumers. An all-out effort must be made to rebuild a healthier family farm food system all the way from soil to table, giving new life to the most important sector in our economy — American agriculture.