A-PLUS legislation allowing auction markets to invest in and/or own slaughter plants is a step backwards in local/regional food system development.
April 11, 2022
It is not surprising that the National Cattlemen’s Beef Association (NCBA) is promoting another bad idea, but it is disheartening that the United States Cattlemen’s Association (USCA) and the Livestock Marketing Association (LMA) are going along with the Amplifying Processing of Livestock in the United States Act (A-PLUS). This Act, sponsored by Representatives Jimmy Panetta and Vicky Hartzier, would allow livestock market owners to invest in, and/or own packing plants, which is an obvious conflict of interest. Who will the auction market work for – you or the owner?
The genius of the Packers and Stockyards Act (P&S Act) is that it prohibited packing firms from owning cattle markets and stockyard owners from owning packing plants. In the days before 1921, the five dominate packers owned the railroad loading yards, the livestock cars, and the terminal market places. This ownership of the vital market infrastructure allowed for the packers to have an unpriced captive supply. Once a livestock producer committed their cattle or hogs to a packer, they were captive to whatever that packer decided to pay.
“An independent start-up packer, even one as large as the A-PLUS Act envisions, will not be able to get their product in front of the consumers.”
Rather than break up the packer cartel, the lawmakers in 1921 relied on free enterprise to restore a fair and competitive market. They did this by requiring that the packers divest of the market infrastructure that they owned and controlled – the rail yards, the livestock cars, and the terminal markets. The packers were obligated to buy cattle and hogs at independent auction markets. This allowed for smaller regional packing concerns to competitively bid for cattle and hogs. And it worked, because by the 1970s the four largest packers controlled only a quarter of the market.
Our current market problems began in the 1980s when our government arbitrarily changed the policy and essentially negated any antitrust enforcement. This included enforcing the P&S Act. Since 1980, the dominate packers merged with one another and quickly came to monopolize the cattle and hog industries. At the same time, the growth and consolidation of supermarket chains conspired to eliminate smaller regional packers. The Supermarkets preferred to buy through the centralized national system that the packer cartel provided.
“The solution is to restore the requirement that packers purchase in a market forum that they do not own and control.”
Over the past forty years, packers stopped using the public market in favor of captive supply arrangements where the cattle are not priced until delivery. The final price for most cattle and all hogs is now based on a very thin spot market. If a cattle feeder does not commit to this captive supply arrangement, they risk not having their cattle processed in a timely manner. The solution is to restore the requirement that packers purchase in a market forum that they do not own and control. The A-PLUS proposal goes in the exact wrong direction.
It is hard to know just who is pushing this crazy bad bill but it is obviously being advanced for the benefit of just a few, not independent livestock producers. The press release from the NCBA announcing the A-PLUS Act pretends that it is a matter of principal, helping to promote more packing capacity. A more likely possibility, is that certain parties are looking to cash in on the $500 million stimulus program earmarked for building moderate sized packing plants. This is certainly what happened with the Trump Administration’s stimulus plan, where big corporations and grifters got away with truckloads of money.
“The probable outcome of this whole scheme is that after these independent packers go out of business; the big packers will be able to buy brand new state of the art slaughter facilities for pennies on the dollar.”
The claim that the intention of A-PLUSE is to build small facilities is ludicrous. This bill allows for investment in or construction of packing plants capable of processing 2000 head per day or 700,000 per year. This is not small. A plant that size would process 2.5% of the total annual steer and heifer slaughter or 10.5% of the total cull, bull, and dairy cow slaughter. There is nothing modest about a plant that large.
What the Biden Administration apparently has not consider in proposing to use taxpayer’s money to subsidize the building of moderate size packing facilities, is how will these new concerns market the meat? The existing packer cartel has all the supermarket meat cases obligated to themselves. An independent start-up packer, even one as large as the A-PLUS Act envisions, will not be able to get their product in front of the consumers.
This is assuming that these new packing plants can even buy fed cattle at a competitive price out from under the packer cartel. The probable outcome of this whole scheme is that after these independent packers go out of business; the big packers will be able to buy brand new state of the art slaughter facilities for pennies on the dollar. Perhaps this is what the parties who are pushing the A-PLUS Bill are planning all along.
The A-PLUS Act is clearly a terrible idea. It moves the industry in the exact opposite direction than what is needed. If independent cattle ranchers and feeders are to survive, we need Congress and the Administration to restore competition. The way to do this is to do what was done in 1921 – require that the packers actually bid for their cattle in an open, competitive, and transparent market.
If you agree that the A-PLUS Act is a failure, call Representative Jimmy Panetta (202 225-2861) and Representative Vicky Hartzier (202 225-2876) and give them a piece of your mind.
Grass Range, Montana