It’s our last chance!

The following article appeared three years after the IBP lawsuit was filed. The largest poultry company, Tyson, purchased IBP, the largest beef packer, before the case went to trial in 2004. The jury awarded the cattlemen $1.28 billion, which was unimportant compared to the injunctive relief that would follow. Judge Lyle E. Strom (A Reagan appointed de-reg judge) reversed the jury verdict and made cattlemen pay nearly $80,000 in court costs, giving the green light to today’s meatpacking monopoly.

April 15, 1999

It’s our last chance!

Tyson/IBP, along with other members of the monopoly meatpacking cartel, own congress and the courts.

 

“The IBP lawsuit is all that is standing between the cattle producer and bankruptcy.”

– Randy Beard, attorney, Pickett vs IBP

The market power of the big four packers is forcing cattle producers out of business and is clearly on a path, if left unchecked, that will lead to the total elimination of a sustainable cattle industry.

“It is clear proof of greed and monopoly control when consumers are buying record pounds of beef at record high prices and producers are going broke. Market prices are fixed below producer cost. U.S. cattle producers have not produced enough beef to meet U.S. consumer demand since 1951. This year will be the smallest U.S. calf crop since the early 1950’s. There is something wrong when packers are allowed to operate in blatant violation of federal laws, the P&S and RICO Acts,” Callicrate charges. “I am calling for immediate Department of Justice action.”

– The Agribusiness Examiner

Former Arizona Governor Bruce Babbit, now Secretary of the Interior, during the 1988 Iowa Democratic presidential caucuses branded IBP a “corporate outlaw.”

IBP is the biggest packer controlling nearly 40% of the cattle slaughter market. We believe IBP leads the way in setting prices and the other packers follow. In the early to mid 1970’s IBP and the other big packers found it more advantageous to cooperate rather than compete (The Boston Consulting Group analysis). They continue with that same philosophy today. The biggest four firm concentration has increased from 36% of the U.S. cattle slaughter to today’s current level of 87%. IBP continues to set record profits at the same time cattle producers continue to go out of business.

Former Arizona Governor Bruce Babbit, now Secretary of the Interior, during the 1988 Iowa Democratic presidential caucuses branded IBP a “corporate outlaw.” He singled it out as “a monument to everything shabby and backwards and wrong in the American economy – not only because the company lies and cheats, but because it believes its employees are the problem and not the solution.”

Today’s problems are not new:

“It has been brought to such a high degree of concentration that it is dominated by few men. The big packers, so called, stand between hundreds of thousands of producers on one hand and millions of consumers on the other. They have their fingers on the pulse of both the producing and consuming markets and are in such a position of strategic advantage they have unrestrained power to manipulate both markets to their own advantage and to the disadvantage of over 99 percent of the people of the country.  Such power is too great, Mr. President to repose in the hands of any men.”

-These words were spoken on the floor of the U.S. Senate by Wyoming Senator John Kendrick in 1921

The government has failed in its duties to enforce the P&S Act while ignoring clear violations, resulting in what researchers today agree is another powerful packer monopoly.

Following the intense pressure of producer litigation, the Packers and Stockyards Act of 1921 (P&S Act) was successfully legislated to prevent a packer monopoly from occurring again. Unfortunately, concentration of the big packers is far worse today than in 1921.

The government has failed in its duties to enforce the P&S Act while ignoring clear violations, resulting in what researchers today agree is another powerful packer monopoly.

Recent USDA studies have failed to show a problem with concentration of captive supplies. Why, when every feedyard manager with a Monday morning showlist knows there is essentially no market?

The Russell Parker-John Connor study, SMALL BUSINESS PROBLEMS IN THE MARKETING OF MEAT AND OTHER COMMODITIES (Part 7–Monopoly Effects on Producers and Consumers), related the following:

“In about 1950, economists and econometricians started doing statistical studies relating the level of concentration to the level of profits.  Some of

the studies related concentration to the level of prices, and others to price-cost margins computed by the Bureau of the Census.  All of these variables roughly measure the same thing: the costs of high concentration.  Nearly all of the studies showed a positive relationship: as concentration increases, profits, consumer prices, and price-cost margins increased.

“The studies were also interested in looking for critical levels of concentration.  If they could be identified they would be very useful to public policy considerations. Is there some range of concentration where industries are workably competitive?  Is there a concentration value below which antitrust authorities and other public policy organizations shouldn’t be concerned?  Beyond this critical point does concentration rapidly become a problem?

“Models which were specified to determine if there was a critical level have shown that up to about the 40-percent level of four-firm concentration, there is no evidence that concentration is related to the levels of prices, profits or price-cost margins.  In other words, industries with that level of concentration or lower are effectively competitive.

“… the effect of monopoly starts appearing when concentration goes above 40 percent and by the time concentration reaches 60 percent an industry is quite monopolistic.”

“Starting at about the 40-percent level of concentration, prices and profits start increasing and go up rapidly to about the 60-percent level of concentration where they level off.  There is no significant further increase in prices or profits beyond about the 60-percent level of four-firm concentration.  The conclusion is (pointing at the figure) that the effect of monopoly starts appearing when concentration goes above 40 percent and by the time concentration reaches 60 percent an industry is quite monopolistic.”

At the same time as four firm packer concentration has increased from 36% twenty years ago to today’s current high levels, consumers have continued to pay increasingly higher prices while producers have continued to receive less of the consumers’ meat dollar. Today the cattle producer has lost approximately 20% of the consumer dollar or about $300 per head. This has occurred at the same time the cattle producer has done more to produce a better product and the packer and retailer have done less. We believe this is clear evidence of abusive market power.

Independent packers have been regulated and predatory priced out of business.

Anti-competitive practices, evidenced by what IBP termed the “Death March,” (Wall Street Journal) have eliminated competitors as well as producers. Independent packers have been regulated and predatory priced out of business. We are now left with a packing monopoly that is stealing from both producers and consumers as well as threatening not only our food supply but a safe food supply.

The P&S Act; the law currently in place to prevent this tragedy, has been ignored. The Secretary of Agriculture, Dan Glickman is responsible for the enforcement of this law but apparently lacks the political will to enforce it.

The P&S Act basically says that if what a packer is doing has the effect of reducing competition, they must stop. The Secretary has injunctive power to stop packers from violating the Act.

Recently IBP’s highly secretive captive supply arrangements have provided them with captive supplies as high as 122%.

It has been proven that IBP uses captive supplies, those inventories of cattle available to IBP outside of the competitive market, to lower prices paid to producers. Recently IBP’s highly secretive captive supply arrangements have provided them with captive supplies as high as 122%. The cash market determines the value of these captive cattle. What is the cash market if the price leader IBP, doesn’t need any cattle?

The big packers do business with each other. Corporate Roundup – “In a move that made cattle feeders livid and has drawn attention from government regulators, ConAgra sold cattle to IBP for slaughter in late January 1998. ConAgra (and IBP) pushed cattle prices down with the deal, and left cattle feeders wondering if a competitive market — or laws against market manipulation — were still in force.”

USDA market reporters confirmed ConAgra sold 7250 head of cattle to IBP, breaking the cash market approximately $60 per head …

USDA market reporters confirmed ConAgra sold 7250 head of cattle to IBP, breaking the cash market approximately $60 per head from cattle feeder asking prices. In today’s market a sale of this volume causes the entire industry to flush their inventories of cattle at the going low price. Feeders have only minutes to decide on the take it or leave it offers by the big packers.

The P&S Act prohibits packers from engaging in any unfair, unjustly discriminatory, or deceptive practice or device; or showing undue preference to any particular person of locality.

  • Feedyards on the IBP formula receive preferential treatment, both with higher prices and the ability to market finished cattle on a more timely basis realizing improved performance and feed efficiencies.
  • IBP bids “not to buy” at some feedyards, thereby discriminating against certain feeders. These are the cash feedyards that set the formula price for IBP’s formula feedyards.

The Act prohibits packers from apportioning territory.

  • The exclusive “Formula” arrangement shuts other packers out of IBP formula feedyards.
  • Simplot, the largest cattle feeder in the Northwest has a full joint venture partnership with IBP, sharing in packing plant profits. IBP controls the Northwest finished cattle market with essentially no competition in the area.

It’s now up to us; our government, the USDA, charged with protecting our freedom, maintaining economic fairness and equal opportunity has failed in its responsibility. The Packers and Stockyards Act gives individuals private right of action in the courts to address the damaging anti-competitive practices of the big packers.

In Pickett vs IBP, we are first asking the court for injunctive relief to make the packers stop interfering with the market, causing low cattle prices. For every $1.00/cwt. IBP is able to lower the yearly price paid for live cattle they make $115 million.  Secondly, we are asking the court for compensatory and punitive damages.

Regardless of whether a cattle producer is a plaintiff or a member of a potential class depending on the extent of class certification, all cattle producers will win if a fair market is restored.

This is the beginning of a national effort to restore market fairness and profits back to the farm gate. Independent agriculture is looking at the IBP lawsuit for an indication of where we are headed. A win in this lawsuit will be a win for the consumer, all independent agricultural producers and their communities. It will mark the end to the relentless pursuit of corporate profits at the expense of producers and consumers.

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Packer Concentration – Historical Context, by Domina Law and Mike Callicrate

 

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Continuing on from the Domina Law timeline:

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Family Farm Dairies Hope “Build Back Better” Helps Soon

America needs a new food system, free of the market predators that have forced producers and workers into lives of perpetual fear and bankruptcy.

The most ideal organic dairy farms will be history if the Biden administration doesn’t act.

As of September 29th, 2021, one-hundred and seventy-eight of the best organic dairy farmers in the nation have been given a notice – a death notice. French dairy giant, Danone, is cancelling their contracts. This means certain death in today’s highly concentrated, monopoly-controlled marketplace, which Danone rules over.

Photo by Nick Levendofsky – 2021 Dairy Expo

Why isn’t the consumer of dairy products being informed of the loss of their local/regional food supply, instead of being fed the lie of how regenerative and forward-thinking Danone is? Currently, as our nation is recognizing the importance of a more local, decentralized, and resilient economy, why aren’t we jumping at the opportunity to build a new local/regional food system in the Northeast, keeping the ideal independent dairies and farms like Danone claims to support in business, while providing consumers the ability to eat better food from their own communities?

Rather than importing from Danone’s aquifer depleting, hyper-industrial factory-farm mega-dairies in the west, consumers of the New England states should have the choice to support the multi-generational family farm dairies close to home.

It’s Danone that should receive notice

It’s well past time for the monopoly power in our critical industries to be broken up, especially foreign market predators like Danone. It’s past time to expose the massive lies of efficiencies and economies of scale that have misled lawmakers and enforcers, enabling big corporations to capture the food system, leaving Americans with bare grocery shelves. How efficient is it to transport Danone’s dairy products from arid faraway places, like Texas, Western Kansas, and New Mexico, to the fertile and forage rich climate of the Northeast – a region fully capable of sustainably feeding itself? How smart is it to destroy local wealth creating enterprises, like family dairies, in favor of below-cost-of-production imports, produced with the extraction of precious and depleting resources, the exploitation of workers, mistreatment of animals, and the disastrous and on-going environmental degradation of industrial style agriculture?

The pandemic has raised awareness among both producers and consumers of the importance of a dependable and safe food system.

The Biden administration is talking local/regional food system development with “Build Back Better,” a plan to address the national security risk of a few corporations controlling farming and food and destroying our ability to feed ourselves. What will “Build Back Better” look like? How will the money be spent? How can the investment in infrastructure be sustainable and resilient? Will Big Food capture, control, and kill the efforts to rebuild, or will new antitrust actions stop these market predators?

Big Food corporations block fair market access to farmers, ranchers, and small food companies.

The safest pathway to consumers is going around the Big Food cartel.

Any new local/regional infrastructure should guarantee a safe pathway for family farmers, ranchers, and small processors to reach consumers, feeding people and communities instead of corporations.

Question: “Is the Ranch Foods Direct model scalable?” Answer: “No, it’s replicable. It’s not meant to be scalable.”

At Ranch Foods Direct our motto is “building community around local food.” To make that happen, we left the industrial food model to sell as directly as possible to the end consumer, seeking to avoid the Big Food monopoly and their predatory practices, which have eliminated many independent food producers attempting to compete.

Northeast dairy farmers are pleading for a fair, open, and competitive market for their milk, but one doesn’t currently exist. Like our nation’s desperate independent farmers and ranchers, they had no alternative but to be part of the abusive Big Food (Danone) below cost of production supply chain – a forced transfer of their work, health, and wealth, until all is lost, including the community. Why have we continued to allow unchecked corporate greed to destroy those who feed us?

Mid-sized regional food producers like Ranch Foods Direct are a more efficient, humane, and safe alternative than the big meatpacker, retailer, and food service cartel, allowing animals to be processed where they are raised and the carcasses transported to the whole animal butcher shop like we have in Colorado Springs. Fresh milk (raw) cheese, and other dairy products direct from the farm should have a major presence in any new market development, setting a new standard and acceptable price level for both producers and consumers.

What kind of alternative market infrastructure?

Globalized corporate supply chains aren’t the solution. The local food movement, along with the local farmer and food story, has been captured and falsely promoted by large multinational food companies like Danone. Producers lack places to process, prepare, and market food, and deceived and misled consumers are struggling to find ways to support authentic local/regional food production.

The pandemic has raised awareness among both producers and consumers of the importance of a dependable and safe food system. It has also left empty spaces in and around urban centers that could be ideal locations for new local/regional food infrastructure.

Local food related businesses have long been at the mercy of rent-seeking developers and property owners. Other options should be considered for new infrastructure that provide more direct connections between the producer and consumer, with more of the food dollar remaining in the community and region, building healthier, fairer, and more resilient economies.

One alternative would be publicly owned infrastructure like the historic Queen Victoria public market in Melbourne, Australia:

Another option is a private vendor-owned multi-establishment food hub and retail market connecting local/regional food producers to consumers using a cooperative-condo ownership model.

A new co-op designed ownership model could offer a better option in which a diversity of member/owners could own and control the food-hub/market real estate, earning appreciation in land and facilities, while benefiting from the synergy of co-locating. Consumers and local restaurants would have access to local food from the whole animal butcher and baker to the produce vendor, cheese maker, brewery, grain miller, coffee roaster, etc., in a lively community space within either existing or new purpose-built facilities. The food-hub/market could also offer opportunities for education and job skill development, as well as indoor and outdoor space to incubate new food related businesses. Fair market access would restore producer and worker share of the consumer food dollar and provide consumers with an affordable, healthy, safe, and dependable food supply.

Perhaps the place to begin building something better is in the Northeast where there are many appropriately sized, sustainable, but very worried dairy farmers.

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What Monopoly Power Does to Farmers and Ranchers

What if a producer could avoid the big food cartel and sell direct?

Rather than scaling up, and playing the fools game of “Get big or get out,” is it possible to scale back, improve meat quality, and sell more direct to the end consumer? With improved returns to the farm and ranch gate, investments can once again be made in livestock operations and in rural communities. Consistent returns, without the constant “Black Swan” events threatening our livelihoods, will also improve mental and physical heath, and perhaps, hopefully, the kids will want to take over some day.

Today, many bigger cattle operations, trapped in the extractive industrial supply chain, are unable to scale back. Building more local/regional food system infrastructure, along with aggressive antitrust enforcement, that profitably connects producers more directly with consumers, should provide pressure for a more competitive marketplace with improved price levels for all cattle operations nationally.

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The Packer and Retailer Mess

CHAINFEEDING – Typical chain store feeding operation, north of Denver, handles an estimated 20,000 head per year for National Food Stores. Others nearby handle up to 40,000 head per year. Feeders are purchased direct, bypassing marketplace, and go from feedlot to chainstore’s packing plant. This chain slaughters 1,500 head per week for Denver-area market alone.

By Roscoe Fleming

Publication Date:  June 1958

U.S. Senate votes to Close FTC-USDA loophole that let chain stores evade trust charges.

The U.S. Senate has voted to wrench the great supermarket chains – which sell one-third of the nation’s food – from the kindly, non-regulating arms of Ezra Benson, and put them under the Federal Trade Commission.

This meant no regulation at all, since USDA has not enforced the packers’ section of the Packer and Stockyards Act of 1920.

For years the chains have managed to escape from FTC regulation by qualifying as “packers,” which put them under the Department of Agriculture.  This meant no regulation at all, since USDA has not enforced the packers’ section of the Packer and Stockyards Act of 1920.

One effect if the bill becomes law may be to check the rush toward “vertical integration,” which has hurt livestock producers, since food companies would no longer be able to escape regulation by becoming “packers.”

The senate passed a version of S. 1356 by Senators Watkins (R-Utah) and O’Mahoney (D-Wyo.). The final version was worked out by Senators Carroll (D-Colo.) and Young (R-N.D.).  It would be effective for three years.  The House still must pass the bill.

Regulation of livestock and poultry marketing would remain with the Department of Agriculture, through the packing houses.  Agriculture would actually get wider powers over marketing of all livestock in interstate commerce.  Now it is restricted to regulating the larger “posted” and terminal markets.

But “packers” would be specifically subject to FTC regulation of their unfair business practices – which is what they have escaped by fleeing to the arms of Agriculture.

The House still must pass the bill, and Farm Bureau and other forces that oppose it are expected to weaken it there.  Some farm observers feel that it is too weak already.

USDA’s failure to enforce the packer section of the Packers and Stockyards Act has had two effects:

  1. The huge supermarket chains, when charged by the FTC with unfair or monopolistic practices, have successfully slipped out of FTC control by claiming they were “packers.” (See accompanying list.)
  2. Both to qualify as packers and because it is cheaper and thus increases meat-handling profits, many have gone to “vertical integration” in the livestock country, buying lean animals at the farm or ranch, fattening them in their own huge feedlots, and slaughtering them in their own plants.

 HIGHER PROFITS AT BOTH ENDS

This in turn enabled them to make higher profits from meat than those retailers who bought from the traditional packers, who in turn bought from the traditional “stockyards” or terminal markets.

The result was to depress livestock prices clear back to the farm or ranch, according to Senators Watkins, O’Mahoney, Carroll and Young.

But housewives got no benefit.  Meat prices at the city counter are nearly at an all-time high, housewives are blaming the livestock growers …

But housewives got no benefit.  Meat prices at the city counter are nearly at an all-time high, housewives are blaming the livestock growers– and the Department of Agriculture is bragging of higher farm prices based mostly on this peaking of meat prices.

The massive change in marketing practices is shown by a recent Department of Agriculture report that– even in 1955– more than half of all “animal units” sold for slaughter in the U.S. were bought elsewhere than at the terminal markets.

This tendency has since steepened fast.  In 1953, 96.8 percent of all cattle bought for slaughter in the Denver area, for example, were bought through the Denver Union Stockyards, a typical terminal market.  By 1957, this figure had slid to 74.8 percent.  The terminals have become desperate at so much loss of business and tried to check it.

Denver Union Stockyards Co., for example, made a rule in 1955 that, within about nine-tenths of the area of Colorado, traders had to bring all their livestock to it for market, or be shut out of using its facilities altogether.

YARDS GET SLAPPED

This oppressive rule was approved by the Department of Agriculture.  When a farmers’ cooperative fought it all the way to the Supreme Court, Department of Agriculture lawyers defended it.  In a ringing decision written by Justice W. O. Douglas, the Supreme Court recently knocked it out, declaring:

“…The (company’s) argument is promised on the theory that stockyard owners, like feudal barons of old, can divide up the country, set the bounds of their domain, establish ‘no trespassing’ signs, and make market agencies registering with them, their exclusive agents.”

The stockyards have tried other expedients.  For example, they are supposed to be auction markets, but, at some of them, buyers sought to get around making the purchase an actual auction by using the “turn system.”

Only one buyer would make an offer at a time – and, if this were rejected, the owner of the livestock would be left to stew, with stockyard expenses running up …

Only one buyer would make an offer at a time – and, if this were rejected, the owner of the livestock would be left to stew, with stockyard expenses running up, until the next day when maybe someone else would bid.  This practice has supposedly been abandoned also.

DIRECT BUYING KILLS MARKET

But the many of the nation’s 66 “terminal markets” have become virtually sideshows. Particularly in the West, the bigger business is now back at the feedlots.  Whether independently or retailer-owned, many feedlots each fatten thousands of animals yearly, doing an annual business that runs in to the millions of dollars.  They buy direct from the range and sell for slaughter– and usually directly to the packer.

In turn, some of the largest packing houses outside the “big four,” are now run by retail chains.  Two such in Colorado each year slaughter, respectively, about 100,000 and 75,000 cattle.  In other words, the era of “big business” has now fully come to the livestock industry, with resulting massive effects all up and down the line—most of them depressing for the actual livestock farmers in the back country.

One odd angle is that the packers, who “consented” back in the early 20’s to stay out of retailing – under threat of anti-trust prosecution—now find themselves facing stiff competition right in their own backyards from the big food chains.

So, they are pleading with the Department of Justice for escape from the consent decree.  If they get it, we may see Swift and Armour retail markets blossoming all over the country.

‘Big 7’ Chains Claim Packer Protection

Among the supermarket claims that have qualified as “packers” and thus under present law escape Federal Trade Commission anti-trust jurisdiction, are:

The Great Atlantic and Pacific Tea Co., with 4,650 supermarkets and doing $4.5 billion worth of business yearly –or 10 percent of all American retail food sales.

Safeway, doing $2 billion annual business in 2,000 supermarkets.

Kroger, doing $1.5 billion in 1,500 supermarkets.

American Stores, doing $650 million in 1,000 markets.

National Tea, doing $620 million in 760 supermarkets.

First National, doing $500 million in 660 supermarkets.

Food Fair, doing $500 million in 240 supermarkets.

Scores of smaller chains have also qualified as “packers,” and together these “packers” do almost one-third of the nation’s retail food business.

The big food processors, too, have joined the procession.  Among those qualifying as “packers” and thus under the benevolent jurisdiction of the Department of Agriculture, are:

Proctor and Gamble, Campbell Soup Co., Carnation Co., Quaker Oats, Seabrook Farms, General Foods Corp., Beatrice Foods, Stokely-Van Camp, and scores more.

Approximately 2,000 companies are registered with the Department of Agriculture as “packers.”

Thanks to NFU Historian, Tom Giessel

 

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