A livestock title for fair and competitive markets
This is the second in a series of five farm bill fact sheets from the Sustainable Agriculture Coalition. Want more details on all of the sustainable agriculture provisions in the next Farm Bill? Go here (PDF) for a matrix that shows the status of provisions in the House and Senate versions.
A shrinking number of companies dominate the nation’s food supply, exerting market power over the entire supply chain from farm gate to dinner plate. In the livestock sector, the increasingly concentrated market has left farmers and ranchers in a position to negotiate with corporations that have far greater bargaining power and control over price information. The 2008 Farm Bill is the country’s last best chance to restore competition and fairness to livestock markets for the next five years.
Contact your senators and representative today, and tell them to urge the Senate and House Agriculture Committee leadership to include a comprehensive Livestock Title in the final farm bill.
WHY PUBLIC POLICIES ARE NEEDED
- Packer ownership of livestock has a documented negative impact on independent producers. A 2007 report paid for by the USDA documented that a 1% increase in packer-owned hogs sold caused the cash/spot price to decline by 0.24 %. According to the Organization for Competitive Markets, this means that packers forced down the price for hogs at least $15-per-head lower than free market prices. Consequently, a five-thousand-head hog producer will lose $75,000 because of packer ownership in 2008.
- Agricultural contracts developed in an environment where corporate processors, handlers, packers, or buyers have a monopoly-like market power means that producers and growers have less bargaining power when negotiating contracts. The most recent data (PDF) from University of Missouri illustrates that two companies control 60% of the U.S. seed market, four companies control 49% of pork production, and another four companies control 58% of broiler chicken production. In 2007, 40% of all U.S. agricultural products were produced with either a marketing and/or production contract, many of which were with companies that dominate their sector. This trend of production and marketing contracts is rapidly spreading from poultry to hogs, to tobacco, specialty crops and grains.
- Mandatory arbitration forces livestock or poultry producers to sign away their rights to court through a non-negotiable contract. Many farmers and growers are forced to sign binding, mandatory arbitration clauses as part of a non-negotiable contract with large, vertically integrated processing firms. In doing so, they are forced to give up their basic constitutional right to a jury trial and instead must accept an alternative dispute resolution forum that limits their rights and is often prohibitively expensive.
STATUS OF RELEVANT PROVISIONS IN HOUSE AND SENATE BILLS
The House and Senate versions of the Farm Bill contain many differences in terms of enforcement of fair and competitive agricultural markets that must be resolved during conference committee negotiations:
- The Senate bill contains a strong set of competition provisions within the Livestock Title. The Senate bill:
- includes a ban on packer ownership of livestock, a requirement that USDA write regulations defining “unreasonable preference or advantage” to reduce price discrimination against small and medium-sized producers, an expanded Packers and Stockyards Act enforcement authority to all types of poultry, and a variety of contract grower protections, including investment protections and the right to discuss contract terms with business associates and other producers;
- makes it unlawful under the Agricultural Fair Practices Act for any firm to refuse to deal with a producer for belonging to a producer association or cooperative, requires good faith bargaining with producer associations, and provides legal remedies for producers injured by a handler;
- creates Special Counsel for Agricultural Competition within USDA to coordinate investigations and prosecutions under the Packers and Stockyards Act.