Some things don’t change – Money, power and greed lead to corruption

famunion1918
By Mike Callicrate

Some things don’t change – In 1918 the Federal Trade Commission reported packers were “manipulating markets, restricting flow of foods, controlling the price of dressed meat, defrauding producers and consumers of food, and crushing competition.” Five packers (Armour, Cudahy, Morris, Swift and Wilson) controlled half the market. The Packers and Stockyards Act of 1921 was legislated to prevent another catastrophic monopoly-like meat trust from forming again. Today, four packers control 85% of the market, and predictably, the results are the same!

Without antitrust laws protecting a fair, open and competitive marketplace, cattle feeders are easy prey to the big meat packers.

Callicrate was a plaintiff in the 1996 meatpacker lawsuit Pickett vs. IBP.

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How did the big packers regain their control over the marketplace?

Capture your suppliers’ trade group

In the early years after the National Cattlemen’s Association was reorganized (1996) to include the big meat packers as members and final plans were in place to capture control of the $80 million dollar per year cattlemen’s beef checkoff (Beef Tax), there was heated debate over whether packers should be allowed to own livestock. The 1921 Packers and Stockyards Act prevented meat packers from owning or controlling everything from the stockyards to retail. The Act basically was designed to prevent packers from doing anything that would have even the effect of reducing competition. Cowboys wanted to raise cattle and for packers to be packers. They wanted a tight fence between them and the packer – a competitive market. Cattle producers wanted a fair price for their cattle and the packers wanted to buy them as cheap as possible – so why were they members of the same lobbying group?

March 5, 2000, Lee Pitts wrote – “I remember the Alamo and the first NCBA Convention. When I left San Antonio four years ago after the merger I felt we in the cattle industry had just been wiped out like those independent Texans of long ago. It was a massacre. There would be no survivors. The fact that I had worked very hard to raise some valid issues about the merger and ended up being treated like the enemy was puzzling to me. But my biggest scar from the Alamo Convention was that I had been forever disillusioned with how the ‘democratic’ process DOESN’T work within our national trade organization.

“One of my main concerns about the merger was that under the new industry structure packers would have too much influence on the proposed organization without having to pay fair market value for that influence! How un-American is that?
    


“It’s now official policy that the NCBA will oppose any legislation that would restrict packer ownership of livestock. That was always the unofficial policy of the NCBA due to the strong influence that Texas and Kansas cattle feeders have. Now, thanks to a balloting in the Stakeholder’s Congress that included 191 voters, when that other Congress in Washington DC visits this subject they will be advised officially that the million cattlemen represented by the NCBA are against any legislation that would prevent packers from controlling the market through direct ownership of cattle.
    


“By the way, this piece of NCBA legislation was officially given its blessing by IBP head cattle buyer and NCBA Board member Bruce Bass.”

Obama to the rescue – The next Teddy Roosevelt?

Excerpt from candidate Obama’s REAL LEADERSHIP FOR RURAL AMERICA document:

Prevent Anti-competitive Behavior Against Family Farms: In an era of market consolidation, Barack Obama and Joe Biden will fight to ensure family and independent farmers have fair access to markets, control over their production decisions, and transparency in prices. Obama is a strong supporter of Senator Tom Harkin’s (D-IA) legislation that protects independent producers by banning the ownership of livestock by meat packers, and he will fight for passage of the law as president. Today meatpackers produce more than 20 percent of the nation’s hogs, and their share is growing. When meatpackers own livestock, they bid less aggressively for the hogs and cattle produced by independent farmers. When supplies are short and prices are rising, they are able to stop buying livestock, which disrupts the market.

“The 1921 Packers and Stockyards Act prohibits price discrimination by meatpackers against small and mid-size farmers, but the law has not been enforced. Obama will issue regulations for what constitutes undue price discrimination and his administration will enforce the law. He will also strengthen anti-monopoly laws; change federal agriculture policy to strengthen producer protection from fraud, abuse, and market manipulation; and make sure that farm programs are helping family farmers, as opposed to large, vertically integrated corporate agribusiness.”

In 1978, when I built the first feedyard in Cheyenne County, Kansas with a group of local investors, we could sell cattle to as many as twenty meat packers located anywhere from Denver to Omaha. Packer concentration was at historic lows. The biggest and fastest growing packer, IBP, seeking guidance on how to further increase its market share and profits, had already been advised by the Boston Consulting Group to cooperate, rather than compete with the other big packers. The fool’s game was on, but those being played for fools didn’t know it yet. By 1988, after I built my own feedyard, we smelled the rat. By 1994, even in the face of increasing demand, the spring market collapsed $17/cwt. in six weeks. NCBA’s plan for packer control of the cattle industry, modeled after the chicken and pork sectors, was falling into place. Over 1,500 cattlemen gathered in Omaha for the announcement of a lawsuit. The market recovered $12 in the next couple of weeks, and cattlemen settled down, not recognizing the markets were responding to manipulation by the big packers rather than recovering as a result of fair and open competition.

By 1998, I was down to one packer-buyer, and by January of 1999, I had none.

I called the Secretary of Agriculture Dan Glickman, the top enforcer of the Packers and Stockyards Act. I asked the Secretary why he wasn’t doing his job. He responded, “It’s different now [It’s not 1921], in today’s global market we need big companies that can do business globally.” He ordered ConAgra (formerly Monfort, now JBS/Swift) to buy all of my existing cattle, after which I closed my feedyard. Fifteen families lost their jobs and the community lost a buyer of locally grown cattle and feed.

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JBS Five Rivers Cattle Feeding LLC is a wholly owned subsidiary of JBS. Five Rivers has a combined feeding capacity of more than 980,000 head of cattle with locations in Colorado, Kansas, Oklahoma, Texas, Arizona, and Idaho. In addition to these locations, Five Rivers (on behalf of JBS Food Canada) manages a 75,000 head capacity feedyard in Brooks, Alberta, Canada.

Despite the wisdom, foresight and courage of presidents like Teddy Roosevelt, Woodrow Wilson and the Congress of the early 1900s, today’s “robber baron” packers – JBS, Tyson, Cargill and National Beef – operate outside the law, with their boot firmly on the necks of cattle producers and their hands deep in the consumer’s pocket. Ranchers have gone out of business in droves, and we’re now left with the smallest cowherd since the early 1950s. Retail prices for beef have skyrocketed to the highest levels in history. Rural communities are devastated, people and animals are being exploited and abused, and the environment degraded by gigantic industrial operations: everything the Congress of 1921 had worked to avoid has happened.

December 6, 2011 – “But Roosevelt also knew that the free market has never been a free license to take whatever you can from whomever you can. He understood the free market only works when there are rules of the road that ensure competition is fair and open and honest. And so he busted up monopolies…”
Remarks by President Obama in Osawatomie, Kansas, four months after the resignation of Christine Varney, U.S. Assistant Attorney General for the Antitrust Division

Today, 14 years after Lee Pitts wrote Blue Ribbons/Red Faces: Packer control of NCBA, the cattle industry is decimated. Thankfully, Presidents Teddy Roosevelt and Woodrow Wilson had the leadership, courage and stamina it took to go after the highly concentrated wealth and power that was crushing competition in the early 1900s. President Obama made promises and held hearings that farmers spent valuable time and money traveling to in order to tell their stories, but in the end he did nothing. Assistant Attorney General Christine Varney left the job for the generous financial benefits of a corporate position. Philip Weiser, Deputy Assistant Attorney General for the Antitrust Division, left to rejoin the faculty at the University of Colorado. Grain Inspection, Packers and Stockyards Administrator Dudley Butler went home to his farm in Mississippi and continues the fight for fair markets. The president’s lack of support and the departure of the top cops gave the nod for the packers to continue raping America’s farmers, ranchers and rural communities with impunity.

In an unbelievable affront to the cattlemen driven to liquidation, their demise was financed with the cattlemen’s own money – the mandatory Beef Checkoff! Over 80% of NCBA’s overhead is paid by the beef tax, purportedly legislated to help cattle producers increase demand for their product. NCBA continues to lobby against the interests of U.S. cattle producers, opposing Country of Origin Labeling for beef, pushing for opening our borders to more cheap foreign beef, opposing market transparency and fighting enforcement of antitrust laws like the Packers and Stockyards Act. NCBA and their meat packer partners continue to ignore the harmful effects their aggressive promotion of technologies like “Pink Slime” and performance enhancing drugs have on beef demand.

With over 40% of our ranchers now out of business, over 39,000 cattle feeding operations closed, and the U.S. now food insecure, it’s well past time to fully expose the fraud of NCBA, separate them from their beef tax slush fund, and hold them, the packers, and the Obama administration accountable for this historic debacle. Then we can begin the work of breaking up the meat packers and other food sector monopolies and begin rebuilding a new food system that serves everyone!

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The Farmers’ Union: Special Commission Appointed to Investigate Packers

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Special Commission Appointed to Investigate Packers Makes Report

DeClare the Five Big Packers Control One-Half of Meat Supply of Allied Nations-Have Used Their Power to Manipulate Livestock Market

President Wilson has made public the recently filed report of the special commission appointed some time ago to investigate the alleged monopolistic control of the meat industry by the big packing companies. The commission declares that the five big packers control half of the meat supply of the allied nations and that the power of the companies has been used to manipulate the live stock market, restrict food supplies and nationally and internationally, control the price of meats and meat substitutes, defraud both consumers and producers of food, destroy competition in buying and selling of meat secure special privileges from rail roads and municipalities and make unwarranted profits.

The five packing companies thus referred to are Swift & Co., Armour & Co., and Cudshy company, Wilson & Co. and Morris & Co.

The commission makes the following recommendations to the president:

Government Take Charge

First – that the government acquire, through the railroad administration, all rolling stock used for the transportation of meat animals and that such ownership be declared a government monopoly.

Second – that the government acquire, through the railroad administration, the principal and necessary stockyards of the country to be treated as freight depots and to be operated under such conditions as will insure open, competitive markets, with uniform scale of charges for all services performed, and the acquisition or establishment of such additional yards from time to time as the development of live stock production may require. This to include customary adjuncts to stockyards.

Third – that the government acquire, through the railroad administration, all privately owned refrigerator cars and all necessary equipment for their proper operation and that such ownership be declared a government monopoly.

Fourth – that the federal government acquire such of the branch houses, cold storage plants and warehouses as are necessary to provide facilities for competitive marketing and storage of food products in the principal centers of distribution and consumption. The same to be operated by the government as public markets and storage places under such conditions as will afford an outlet for all manufacturers and handlers of food products on equal terms. Supplementing the marketing and storage facilities thus acquired the federal government establish through the railroad administration at the terminals of all principal points of distribution and consumption, central wholesale markets and storage plants with facilities open to all upon payment of just and fair charges.”

“Out of the mass of information in our hands” the report continues, “the one fact stands out with all possible emphasis. The small dominant group of American meat packers are now international in their activities, while remaining American in their identity. Blame which now attaches to them for their practices abroad as well as at home inevitably will attach to our country if the practices continue.”

The commission says the five packing companies either separately or jointly own or control more than half of the export meat production of the Argentine, Brazil and Uruguay and have investments in other surplus producing countries, including Australia as well as branches in Great Britain, France, Italy, Germany, Canada, Denmark and Paraguay.

Control Meat for Allies

“Under present shipping conditions”, the report adds, “the big American packers control more than half of the meat upon which the allies are dependent.

Of the difficulties which the packers threw into the way of the commission’s investigations, headed by Francis J. Heney, the report says:
“The commission thru Mr. Heney had to meet deliberate falsification of returns properly required under legal authority; we had to meet schools for witnesses where the employees were coached in anticipation of their being called to testify in an investigation ordered by you (the president) and by the congress of the United States.”

The commission reports that the packers not only control the meat supply but a “countless number of by-products industries” and have invaded allied industries and even un-related ones. This control has extended now to the principal substitutes for meat, such as eggs cheese and vegetable oil products, the commission says and rapidly is being extended to cover fish and nearly every kind of foodstuff.

After detailing the control of the five companies over the meat and allied industries the commission says this control rests in the hands of a small group of individuals: J. Ogden Armour, the Swift Brothers, Morris brothers, Thomas E. Wilson, acting under the veto of a group of bankers including the Chase National bank, Guaranty Trust company, Kuhn, Leob & Co. William Salomon & Co, and Hallgarten & Co all of New York and the Cudahys.

The commission says through the control of Wilson & CO., Inc. three of the most powerful banking groups in the country are “participating in the rapidly maturing food monopoly.” This participation of the bankers in the packing industry, it says was not at all displeasing to the big packers of J. Ogdon Armour and Louis F. Swift were consulted during the negotiations looking to acquisition of an interest in the industry by the bankers.

A Family Affair

“The menace of this concentrated control of the nation’s food,” says the report, “is increased by the fact that these five corporations and their five hundred and odd subsidiary, controlled and affiliated companies are bound together by joint ownerships, agreements, understandings, communities of interest and family relationships.”

In detailing how the packers are alleged to have gained control of the meat supply of the United States and the allies the commission said:

“The Armour, Swift, Morris and Wilson interest have centered into a combination with certain foreign corporations by which export shipments of beef, mutton, and other meats from the principal South American meat-producing counties are apportioned among the several companies on the basis of agreed percentages. In conjunction with this conspiracy, meetings are held for the purpose of securing the maintenance of the agreement and making such readjustments as from time to time may be desirable. The agreements restrict South American shipments to European countries and the United States.

“Since the meat supplies of North and South America constitute practically the only source from which the United States and her allies can satisfy their needs for the armies, navies, and civil populations, these two agreements constitute a conspiracy on the part of the big five, in conjunction with certain foreign corporations, to monopolize an essential part of the food of the United States, England, France, and Italy.”

Packers Object to the Plan

Protests against the recommendations of the federal trade commission that the government assume control of the packing industry were made by some of the heads of concerns involved.

J. Odgen Armour, president of Armour & Co., after pointing out that the government had been in control of the packing industry since November 1, 1917, said that the statement made by him at the beginning of the war, that “the United States government can save Armour & Co. and every employee and official thereof, if need be,” was reiterated “a thousand times more emphatically.”

Thomas E. Wilson, president of Wilson & Co., said that if any new methods for the benefit of the public can be worked out, “we will welcome them and co-operate to the fullest extent.”

Edward J. Morris, jr., for Morris & Co., issued the following:

“I have not seen the report but from what I can learn the idea of the federal commission is to turn the entire stock yards and packing industry over to the railroad administration.

“The main object now is “the winning of the war” and we know of no institution that has played as important a part and with profits limited to 2 1-2 cents on the dollar for business done, or a total of not over 9 per cent for the year. One the capital invested I cannot see where conditions would be improved.

“We believe that any one familiar with the situation would agree that the packing industry is the one industry that has performed its services with 100 per cent efficiency. This applies to the feeding of the army and all our allies, besides taking care of the civil population.

“Food products are now being handled by the packers to the entire satisfaction of the army, navy and our allies. Why try an experiment at this critical time?”

Louis F. Swift, president of Swift & Co, issued the following statement:

“We naturally do not like to be publicly charged with unlawful methods of gaining monopoly control when we know that we are in open and honest competition with every other packer. The report apparently tries to prove that the packers have obtained a monopolistic control through the ownership of live stock and refrigerator cars, stock yards and branch houses, and advocates that the government acquire these facilities.

“Swift & Co. is perfectly willing to let the railroad administration decide whether it shall take over our live stock and refrigerator cards. The principal thing to consider is whether the present services could be improved. The only reason we build our own refrigerator cars was that the railroads did not want to furnish the equipment.

“The stockyards are already being regulated by the United States department of agriculture, and we have no objection to the government’s taking them over completely if it sees fit to do so. We wish to point out, however, that our company has become interested in stockyards only for the purpose of providing proper market facilities that did not otherwise exist and that in such stockyards there are open competitive markets with uniform and reasonable charges for services performed. It is difficult to see how the public could be benefited by such action: in fact, quite the opposite effect might occur.

“We do not believe that taking over branch houses and storage houses would be practicable, as it would destroy personal initiative in handling of a highly perishable product, where great skill, acquired only by long experience, is necessary. It would also be a risky experiment in government operation that would be of doubtful benefit, even if successful and would undoubtedly react unfavorably on live stock values.

“No one is more interested in improving conditions in the live stock and meat trades than we are, and we are willing to cooperate with the government in any practical constructive plan.” – The Idaho Farmer.

Original Article: The Farmers Union: Special Commission Makes Reporton Packers 1918

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The Politics & Economics of Food – A presentation at Lamar Community College March 2014

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I studied Animal Science at Lamar Community College in 1972 and 1973 prior to completing my Animal Science degree at Colorado State University. A lot has changed in agriculture as Land Grant institutions have taught students that agriculture is a business, not a way of life, steering us well off the path of a sustainable food system. Hopefully we can see a shift back from the destructive industrial model to an agriculture that includes good animal husbandry, responsible land stewardship and good healthy food. All it takes is better government policy and a million farmers returning to the land, earning a living income.

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Letter to FTC concerning Sysco US Foods merger

Ranch Foods Direct
2901 N. El Paso
Colorado Springs, CO 80907 866-866-6328
719-473-2306
www.RanchFoodsDirect.com
Ms. Deborah L. Feinstein
Director, Bureau of Competition Office of Policy and Coordination
Room 7117
Federal Trade Commission
601 New Jersey Avenue NW

March 17, 2014

BY POST AND ELECTRONIC MAIL: antitrust@ftc.gov

Dear Director Feinstein:

RE: Sysco purchase of US Foods

Ranch Foods Direct is a meat company based in Colorado Springs, Colorado. We distribute to over 100 restaurants, four school districts and sell direct to customers through our retail store located in the same building as our processing plant. Ranch Foods Direct also cuts and packages meat for around 40 other producers that are also seeking access to the consuming market for the livestock they raise.

As the name implies, the mission of Ranch Foods Direct is to provide a more direct connection between the farm and ranch and the consumer. Our approach is to go around the big food service and national food retail chains that have captured the markets and are now blocking fair market access for smaller producers.

The following chart prepared by C. Robert Taylor, Alfa Eminent Scholar and Economics Professor at Auburn University, shows the return on equity for the various market sectors from producer to consumer:

ROE

Sysco and US Foods dominate the wholesale restaurant marketplace in the same way the big food retailers dominate the retail consumer market.

A powerful market predator in an already far-too-concentrated food service industry, Sysco takes advantage of both the supplier and the customer. Sysco’s abusive market power even reaches back to the farmer and rancher. They buy large amounts of low quality, industrially produced items from global agribusiness firms that, in turn, find it easier to dictate low prices for the commodities they buy from farmers and ranchers than to pass on higher costs of production to Sysco.

Sysco competes unfairly by offering products below cost of production to restaurants that are either customers or are potential customers of Ranch Foods Direct. We have heard from these restaurants that Sysco has paid kickbacks (signing bonuses) if they agree to a long-term contract and refuse to buy from us. These same restaurants eventually see prices rise well above the original predatory price and higher than the original price offered by Ranch Foods Direct. Sysco makes false claims about their own products, while disparaging Ranch Foods Direct.

Sysco blocks market access to small producers. One sheep rancher, offering local lamb, was told by the restaurant owner that he had been warned by Sysco – if he purchased local lamb, he could plan on buying his tomatoes, potatoes, spices, napkins, etc. also from the rancher. The cheaper New Zealand and Australian lamb remained on the menu and the Sysco truck still stops weekly.

Sysco is a dominant buyer that can dictate terms to even its biggest suppliers, as well as a dangerous market predator that can crush its smaller competitors. Sysco preys on communities working to build local food systems, like Colorado Springs, which is striving to become more self- sustaining and self-reliant around a fledgling local food economy. In selling things from somewhere else and taking the money away every day, Sysco constantly extracts wealth, gutting local economies.

The purchase of US Foods would increase Sysco’s near monopoly power over the wholesale food business. The Federal Trade Commission should not only block Sysco’s purchase of US Foods, but should breakup Sysco, allowing smaller competitors access to a more fair, open and competitive marketplace, while providing restaurants and consumers with more and better choices.

Sincerely,

Mike Callicrate
Owner/Operator

Connecting consumers with family farmers and ranchers

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