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Thursday, May 5, 2016

Meatpackers face new law

Monday, December 16, 2002

IBP expresses no interest in becoming a 'big player' in livestock feeding

U.S. Senator Chuck Grassley will continue to push for a ban on packer ownership of livestock, but the lawmaker wonders if proper enforcement of existing laws is all that is needed.

"It doesn't necessarily take new legislation," Grassley said in a conference call with Iowa farm reporters this week.

He said those in the Department of Agriculture complain that they do not have the proper resources to enforce regulation on meatpackers.

"I don't think it's a case of resources, I think it's a case of attitude," he said. "There doesn't seem to have much of attitude to vigorously enforce the Packers and Stockyards Act."

"If we had more vigorously and carrying out of that act in practice and spirit alike we would have more competition in agriculture and maybe we wouldn't need this or other prohibitions that we're talking about," Grassley said.

However, there is bipartisan support for the bill he sponsors that would ban the ownership of livestock.

There are some decisions to be made, he noted, such as whether the law should seek an outright ban of if it should use his proposal that 25 percent of the daily kill comes from the spot market.

Grassley said the act should be policed hard.

"Regardless of if we have a Republican or Democratic Secretary of Agriculture, we've had problems without adequate enforcement of the Packers and Stockyards Act," he said.

There is support from Iowa farm groups for Grassley's proposal. This month delegates at the Iowa Farm Bureau annual meeting renewed their call for national restrictions on packer ownership. It's also supported by the American Farm Bureau.

According to the Iowa Farm Bureau, the four largest beef packers slaughter 81 percent of the fed cattle, 25 percent of which are packer-owned. For hogs, the four largest packers slaughter 59 percent of the hogs and have partial or total ownership of 10 percent of the supply.

"The Iowa restrictions and any further restrictions on packer ownership should be at the federal level," delegates said.

The Farm Bureau said restrictions should apply to marketing arrangements, production contracts, financing, packer ownership of breeding stock and captive supplies, price distortions or deny access to competitive markets.

Tyson/IBP contends that a packer ownership ban would affect its operations very little. The company submitted testimony at a Senate hearing on the matter last August in Sioux Falls.

Tyson is the world's largest processor and marketer of beef, chicken and pork, and employs 120,000 people in more than 300 facilities across 30 states and 22 countries.

In the testimony, IBP says it depends upon independent livestock operations to meet cattle and hog demands, according to Gary Mickelson, spokesman for Tyson/IBP.

"In other words, we rely on a successful livestock industry in order to stay in business. Our company has no interest in becoming a big player in the livestock feeding business and would probably be affected less by legislation prohibiting packer feeding of livestock than most of our major competitors," he said.

While any such ban would not affect the company, Tyson said in the testimony that "such additional government regulation will produce unintended consequences and be detrimental to the livestock industry."

Mickelson said IBP buys "virtually" all of its cattle and hogs on either a daily cash market basis or through marketing arrangements with livestock producers.

Over the past 15 years, IBP has variety of marketing arrangements with pork producers. Contracts vary from ones that can be terminated immediately to fixed terms up to 10 years, Mickelson said.

While proponents of the packer ban claim IBP could call contracts in early if they do not like the cash markets, IBP says its contracts allow the producer to choose the week livestock is ready for processing.

"Most marketing agreements are based on grade and yield payments. A producer with a marketing agreement is not going to allow the packer to call livestock in before they are ready, since the grade and yield would be lower, thereby reducing the price he would receive," Mickelson said.

Mickelson said its profit margins have maintained right around 1 percent. The worst margin was 0.01 percent in 1991, the best was 2.16 percent in 1999, he said.

Grassley's legislation for price transparency would require 25 percent of a packer's daily kill to come from the open or spot market. About 16.7 percent of hogs are sold on the open market.

"We must increase competition between livestock processors, develop consistency in the Mandatory Price Reporting program, and assist processors with determining prices for certain livestock market contracts," said Grassley.

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