Updated: Wednesday, February 08, 2012 11:42 AM
By MATEUSZ PERKOWSKI
Ranchers risk losing their independence unless they keep pressing for stronger oversight of meat packers, according to a former USDA official who recently resigned after losing a battle over livestock industry reforms.
Cattle producers are subject to the same forces as the packer-dominated hog and chicken industries, said Dudley Butler, who left his post as chief of the agency’s Grain Inspection Packers and Stockyards Administration in January.
“I’ve heard ranchers tell me, ‘We can’t be vertically integrated because they don’t want our land,'” Butler said Tuesday during a cattlemen’s meeting in Nebraska. “If they control the feedlots, they control you.”
In 2010, GIPSA proposed a major regulatory overhaul that would have asserted the agency’s authority to prevent unfair and deceptive practices, among other measures.
The proposed rule would have also banned packers from selling livestock to other packers, which was intended to discourage collusion and price manipulation.
Meat packing groups fought the proposal, which was scuttled last year when Congress denied funding for it.
Butler said he primarily blamed the Republican majority in the House of Representatives for killing the proposal.
President Barack Obama had to sign off on the action to obtain broader funding approval for federal programs and avoid a government shutdown, he said.
Butler acknowledged that USDA’s ability to revive the controversial reforms is under a legal cloud but urged livestock producers to keep the issue alive despite opposition from the meat packing industry.
“They got tons of money but they don’t have tons of votes,” he said.
The argument that GIPSA’s proposed rule would cause packers to be inundated with lawsuits was a “fear tactic” used to discredit the reforms and was “an insult to farmers and ranchers,” Butler said.
Meat packers will likely be emboldened by the effectiveness of the strategy, said Bill Bullard, CEO of the Ranchers-Cattlemen Action Legal Fund, who also spoke at the meeting.
“It was a hollow threat, but it worked,” he said.
The Packers and Stockyards Act of 1921 already prohibits packers from engaging in actions that are unfair, unjustly discriminatory or deceptive, Butler said. GIPSA just sought to establish that such violations do not also have to cause competitive injury in order to be actionable in court, he said.
Several federal appellate courts have ruled that plaintiffs must show that such unfair or deceptive conduct also distorts competition — contrary to the plain language of the statute, Butler said.
“What the courts are doing is disregarding those sections,” he said.
The goal of the proposed rule was to assert the USDA’s view that prohibitions against unfair and deceptive practices can be enforced independently of provisions barring market manipulation, Butler said.
If the USDA took such a position, “the court has to give deference” to the agency’s interpretation, he said.
The National Meat Association, an industry group, denies that increased litigation was merely a scare tactic.
Packers were worried that the rule would create vague standards of unfairness under which they would be held liable, said Jeremy Russell, communications director for the group.
“That was probably the number one concern I heard,” he said. “It wasn’t something that came out of nothing.”
Russell also challenged the argument that Congress buckled under pressure from meat packers to scrap funding for the proposal.
Lawmakers halted the revisions because they went beyond what Congress asked for in the 2008 Farm Bill, he said.
Russell said he doesn’t disagree with the notion of increased vertical integration in the livestock industry.
However, such changes are taking place due to stronger food safety regulations and demands from meat buyers, he said.
“There’s market pressure to move in that direction,” Russell said. “It helps to have the market intelligence of the people working with the retailers go back all the way to the farmers.”