by Gilles Stockton | January 2, 2019
We brand our calves to prevent theft and it works pretty good, but because Department of Agriculture Secretary Purdue withdrew the GIPSA Rules, once those cattle reach a slaughter plant, rustling is condoned. Theft by packing plants may not be strictly legal but since there is nothing practical that a cattle owner can do about it, it comes to the same thing. Under President Obama, USDA went through the rule making process to clarify the Packers and Stockyards Act as to what kinds of actions by packing plants and poultry integrators is “undue and deceptive.” Underpaying because of inaccurate weights and wrong grades was definitely considered “undue and deceptive” under the new GIPSA Rule.
The Trump Administration withdrew the GIPSA Rule as fast as they could and now that a Federal Judge has agreed with them, cattle producers again do not have the right to sue packers for under weighing and mis-grading carcasses. The National Cattlemen’s Beef Association (NCBA) agrees with the withdrawal of the GIPSA Rule because according to them, if cattle feeders are allowed to sue beef packers for underpayment, the entire system of marketing fat cattle would fall apart.
The NCBA is right of course, if packers were required to bid on cattle and accurately pay for what they bought, the current system would fall apart. Captive supplies are what makes the current market for cattle work, and captive supply is designed to extract cattle from the people who raise and feed them as cheap as possible. It is perfectly true that this is what companies do, they strive to buy low and sell high. The problem is that when a segment of an industry becomes sufficiently concentrated, it no longer makes sense for them to actively compete against each other. Economic studies have clearly shown that the three dominate packing companies have every incentive to coordinate how they buy and sell their products – in this case fat cattle and beef.
The purpose of anti-trust laws is not to punish successful businesses but to insure competition. When an industry becomes too concentrated, competition is compromised which in turn distorts the market and the structure of that industry. We see this clearly in the loss of smaller independent cattle feeders. This is important for cow/calf producers because with fewer independent feeders and the growth of larger feedlots that are vertically integrated with packing firms, there is less competitive bidding on feeder calves. Witness this past fall’s feeder calf sales which were uniformly less than the cost of raising them.
USDA withdrew the GIPSA Rule in October of 2017. By December 2018 USDA announced that they were fining JBS USA for not accurately tracking, weighing, and grading dressed carcasses. This underpayment happened over a four-month period starting in December of 2017 through March of 2018. JBS was fined a whopping $50,000. This is a fine example of how our government looks after our interests and protects our backs. JBS probably stole more than $50,000 in just one hour of operation.
The Packers and Stockyards Act is a continual embarrassment to the packing concerns and their captive supply of cattlemen’s associations, docile federal employees, bought and paid for politicians, and agricultural economists. The Act clearly states that packers should not be engaged in deceptive practices but because their business model is based on deceptive practices, they are in constant violation of the
law. They get by year after year by conveniently ignoring this law, emasculating the regulators, and using litigation to block reforms to the cattle markets. It is interesting that the NCBA and the packers are in favor of litigation when its them doing the suing, but they oppose cattle producers being able to sue for accurate payments. Past statements by the packers and the NCBA are quite clear, should cattle feeders ever be allowed to sue beef packers the sky would fall.
We have a see saw situation going on. The Democrats, when they have power and after they have summoned up a little bit of courage attempt to reform the cattle market. Over the last two decades Democrats looked at forbidding captive supplies, passed Country of Origin Labeling, and enacted the GIPSA Rule. The Republicans, on the other hand, rescind these reforms as fast as they possibly can.
It is actually quite simple to restore function to this dysfunctional livestock market. All that is needed is to require that packers actually bid for their cattle supply. Individual cattle producers have a couple of choices about what to do about cleaning up the fraud in the cattle market. One of them is to continue to do what many cattlemen have been doing – which is not putting up much of a fuss at all. On the other hand they can insist that Country of Origin Labeling is reinstated and follow that up with restoring competitive markets in fat cattle.
Grass Range, Montana