October 26, 2021
First let me thank you for inviting us to plead our case at your convention. I want to especially thank Doctor James Dillon. I’m not sure whether I should refer to him as Doctor Dillon or Colonel Dillon, but we especially appreciate his tolerance and help for our cause over the last couple of years.
For twenty-two years now, OCM has been about advocating for open, transparent, competitive, and fair agricultural markets; for both the buying and selling side of these markets. We have confronted the concentration in agriculture and the resulting monopolies and monopsonies that are the instruments of a rigged system. A system that has systematically and increasingly shortchanged farmers and ranchers and now threatens the very existence of independent family agriculture. Doctor Neil Harl, a well-known former economist from Iowa State University is often quoted as saying; “market concentration and vertical integration are a deadly combination”.
In 1998 the big packers broke hog prices down to 8 cents per pound. Overnight, the 667,000 independent producers were reduced by 90%. The cash market was replaced with contracts. A writer friend of mine wrote, “in today’s agriculture everyone works for the man, they’re tractor drivers for Cargill and hog house janitors for Smithfield. The big corporations don’t own farms they just own farmers”.
Today, the largest hog operation in America (Smithfield) is owned by China. The big corporations have managed to contractually shift the burden of financial investment, labor and market risk to the producer while maintaining iron-fisted control. Proud farmers become sniveling serfs at the bottom of a corporate dominated vertical production chain. Folks, that is CHICKENIZATION! It has devastated independent production agriculture. The poultry and hog industry have succumbed: two down, one to go! Is the cattle industry next?
Year after year that portion of the food dollar that goes to the producer has gotten smaller and smaller while a disproportionate and ever- increasing share goes to the processor and retailer. The most graphic example of this is the margins being exacted by the beef processors in the last year or so. Using as a pretext, the Tyson plant fire in Kansas, the processing slowdown resulting from the pandemic and the JBC cyber-attack, the big four concocted a phantom supply chain logjam and used it as justification for paying less for cattle and charging more for boxed beef. Their margins and profits are outrageous and unprecedented. You can bet the ranch that they will exploit this developing economic supply backup and work this scheme to again gouge their customers and mug cattle producers.
Something has to be done! Somehow, we have to bring about competition in the cattle market. Expanding the independent meat processing sector would seem to be an obvious way. We simply need more bidders for our cattle. For more than a year now, OCM has pursued expanding processing as a means of advancing competition and binging about a fairer price for our cattle. Expanding independent meat processing is now our major project. We are working with USDA, other governmental agencies, and several other NGOs in this effort.
In March of this year, USDA announced the appointment of a “Senior Advisor for Fair and Competitive Markets”. Probable due to our name and mission, OCM was contacted early on by this individual and a working relationship has ensued. We have also established a rapport with the current USDA Chief Economist.
In a July Press Release, USDA Secretary Vilsack announced a $500 million appropriation to expand meat processing, perhaps a belated action stemming from the 2010 Fort Collins workshop of the Obama Administration. At that event, producers pointed out the problem with lack of “decentralized meatpacking” and urged bringing back small and medium-sized meat packers.
In an announcement on September 9th, the Administration released a plan for bringing about better market competition. The plan included a compelling indictment of the existing situation.
There have been several encouraging signals from Capitol Hill, calls for an investigation of anticompetitive behavior by packers, a stronger enforcement of the Packers and Stockyards Act, allowing state-inspected beef to be shipped in interstate commerce and others.
USDA has renewed its effort to resurrect the Packers and Stockyards Act of 1921 by rulemaking that would more precisely define certain violations of the act and strengthening the argument that a demonstration of harm to competition across the industry is not required to invoke the Act. There is also a legislative initiative to much more aggressively enforce the Act. Action is also being taken to preclude beef from foreign sourced cattle being sold with a “product of USA” label.
To strengthen its campaign to expand independent meat processing, OCM has teamed up with a long-standing ally, American Antitrust Institute (AAI). Our antitrust laws are not being enforced and survival of these fledgling plant star-up will likely require some predator control.
The point I am trying to make is that the stars are in very good alignment to make a strong move forward. I see this as perhaps our best chance ever to bring about competition in cattle markets!
We envision increasing staffing to enable a day-to-day, vigorous, and ongoing effort to facilitate an expansion in independent meat processing; I emphasize the word “INDEPENDENT’. We want to be the one to find the elements for a potentially successful start-up and advise, refer, assist, and do everything we can to make it become a reality. We do not profess to currently be experts in meat processing, but we know or will come to know experts. We won’t be making grants or loans, or writing business plans, or designing plants, or a number of other aspects of starting up and operation a plant but we aim to be the bridge to those who can do these things.
Let me give you an example. I am currently working with a successful family-owned independent grocery chain here in Mississippi. They own a dozen stores and are a thriving business. Beef is the profit center for these stores. I am encouraging the CEO to consider the starting up of a beef processing plant. They have a captive market for the end product. Right now, is their best time ever for such a start-up. There is state and federal support and incentives and strong consumer preference for local and domestically produced foods.
Another aspect of our effort is to call attention to the situation here in the Southeast. We produce 25% of the nation’s calves but suffer big discounts due to the lack of feeding and processing this this region. These calves are typically shipped more than a thousand miles and then the beef is shipped back to the Publix and Winn Dixie store down here. A very inefficient way of doing business that generates a lot of unnecessary diesel smoke.
We have demonstrated that we can successfully feed and process cattle down here. We need a special attention and incentives for a feeding and processing infrastructure here in the Southeast.
The last point I want to make is that we need the support of you folks as we go forward with this effort.
First off, we need your help in identifying a couple of prospective hires to drive this initiative. Folks with your kind of background, who know the business and the various players throughout the system. We need candidates who understand that the system is broken and the need to repair it. Individuals who see this as an opportunity to do something constructive, a righteous cause rather than a job. We are presently embarked on a fundraising undertaking. We hope and expect to find the resources to hire these two people, to make this thing happen. Your help would be much appreciated.
I am happy to try to answer your questions. email@example.com