WE HAVE THE MOST RICH AND THE MOST POOR

There is Overproduction and yet Some People Starve — Our Country is The Richest in Natural Resources in The World and Yet Destitution and Suffering Prevail –The Condition Should be Carefully Examined and Remedies Proposed

The principles on which the government of our country is founded are set forth in the Declaration of Independence and the Constitution.

The country in which we live is favored in natural resources above all others on the planet, but in spite of all the blessings of Providence, in spite of the acknowledged industry of an intelligent people, destitution and suffering prevail. Our cribs and granaries often are filled overflowing and yet we read of starvation. Often and often we read of overproduction, and yet, every day, we see men, women, and children suffering from cold and hunger. Again, we read that farmers are getting rich, but government statistics tell us that in 1850 the farmers owned half of the wealth in the United States, in 1890 one-fourth, and in 1913 less than one-fifth. We have more millionaires than any other nation in history, and more paupers, and the number of both are increasing. There must be something wrong with our political economy.

It is the duty of everyone to examine carefully the conditions which surround us – then propose remedies. I am glad to know that people are investigating and want to know the truth.

I am glad that we have arrived at that point where people are judging men by the work they accomplish, as the tree is judged by its fruit. By that measure, every honest man is willing to be measured, and by that measure, every honest man should measure others.

“I hope no man’s fealty to his party will prevent him from hearing and knowing the truth.”

I hope no man’s fealty to his party will prevent him from hearing and knowing the truth. I believe that the masses of the people are honest and want to know the truth and do right.

It is said we have five senses: namely, seeing, hearing, smelling, tasting and feeling. That used to do but that won’t answer the purpose now, you will have to go deeper down into yourself to diagnose conditions and learn the truth. Any fool can see, hear, smell, taste and feel. A mule is equipped that well.

If you have voted the Democratic ticket, you have no doubt done what you thought best. If you have voted the republican ticket you have done the same. A Socialist has done no more. We are all citizens of a common country. Our interests are the same. We all love our families, our, homes, our country, and its flag. If we are good citizens, we place each of those things above party and God above all.

But now my friends before I go any further, I want to tell you a little anecdote, and I hope you will make the right application of it. Away back in the eighties when it transpired. An old friend of mine, Peter Radford, told Bill Skinner he believed there were a hundred rats under his barn. Bill suggested that he had better come down a rat or two, but Peter wouldn’t do it, and finally, they made a bet, Bill betting five dollars that there were not a hundred rats there. Peter got a long pole and said he would get under the barn and stir up the rats and then Bill could count them. Bill said that was all right. Peter crawled under the barn and began to punch around and presently the whole ground was covered with rats. Directly peter called out: “How many rats do you see Bill?” “Not a rat,” said Bill. Then Peter did some more vigorous punching and again asked Bill how many he saw. “I didn’t see a rat,” replied Bill. Then Peter raised a bigger racket than ever, and the rats fairly swarmed and tumbled over each other. They were running out from under the barn across the lot, under the cribs and two or three actually ran over Bill, who was lying down, apparently looking under the barn. “Do you see any now?” asked Peter. “Not a rat,” said Bill. Peter threw down his pole in disgust, brushed his clothes, and said: “Bill why couldn’t you see the rats? They were running all over you.” “I had my eyes shut I didn’t want to see them,” said Bill.  Now, my friends, I want to tell you that Peter Radford is still my friend and that he is still after the rats. Over two million Bill Skinners have opened their eyes, watching the political barn and if rats are under it, they know that it is to the interest of all to see them and punch them out. Let us read our papers and all other reading matter with our eyes open, and then we will see the rats.

“There are a few men in this country who will contend that everything is lovely and that we are getting on swimmingly. They are mostly speculators.”

There are a few men in this country who will contend that everything is lovely and that we are getting on swimmingly. They are mostly speculators. They are reaping a rich harvest. Our natural resources are unparalleled. Yet, with all the blessings of a kind providence on one hand, we find want, destitution and suffering on the other, and so I am asking you to speak information as to the cause of this condition.

The notorious corruption of our law-making bodies is due almost wholly to their power to grant special privileges and to sell public franchises to private individuals or corporations. Legislative reform that ignores the cause of corruption is never excusable.

Public ownership of natural monopolies will abolish the bribe-taker by making impossible bribe-giver.

Every physical or moral ill is the result of some breach of natural or divine law. “Education” must be our watchword. It is only by education that we may hope to gain perfect liberty and equality. This republic can endure only while built upon the love of the whole people for each other and for the nation. The Constitution of The United States, says Congress shall have power, to establish post offices and post roads, to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.

When the money is scarce it takes more labor and more property to obtain it. To every cotton raiser, it means more cotton, to every wheat raiser it means more wheat, and to every stock raiser, it means more cattle and more hogs. Whoever controls the volume of money in any country is absolute master of all industry and commerce.

When the Farmers’ Union asked for a government loan on cotton, it raised a dickens of a bugaboo, we were told it was not only impractical but unconstitutional, that care should be taken that nothing was done that would embarrass the raising generation. It has become quite popular now to pronounce everything unconstitutional that has for its object relief for the masses. The government may loan to five individuals who will incorporate themselves into a company under the name of a national bank, but it’s a violation of the Constitution to loan to a farmer who owns the basis of all securities. The Government has loans millions of dollars to expositions and railroad companies with practically no security and no one has been swift to denounce it as unconstitutional or embarrassing to the rising generation. Government has loaned money to banks, with and without interest. The government has loaned money to those who went abroad and could not get back from Europe unless they had the gold, and the government loaned it to them. The government has loaned money to the States, and the States have loaned money to individuals, on real-estate security. The state of Missouri and Oregon loan their school money to farmers on real-estate security. Certainly, we farmers can better pay 2 or 3 percent interest than 8 or 10 percent. No man has ever been able to point out where or why it is unconstitutional for the government to loan money to the farmer.

“No man has ever been able to point out where or why it is unconstitutional for the government to loan money to the farmer … it helps every man when you help the farmer.”

But I am asked how this would help the renter, who has no real estate. Loan it on his cotton, on his grain. But says the fellow who is not a farmer, how is this going to help us? We answer by saying it helps every man when you help the farmer. It increases the price of every laborer, thereby making it easier for them to pay their debts. The United States Supreme Court says:

“There are times when the exigencies of the State rightly absorb all subordinate considerations of the private interest, convenience, or feeling; and at such times the temporary though compulsory acceptance by a private individual of the government credit, in lieu of the debtor’s obligation to pay, is one of the slightest forms in which the necessary burdens of society can be sustained.

“The heart of the nation must not be crushed out. The people must be aided to pay their debts and meet their obligations.”

“When the ordinary currency disappears, as it often does in time of war when business begins to stagnate and general bankruptcy is imminent, then the government must have power at the same time to renovate its own resources and to revive the drooping energies of the nation by supplying it with a circulating medium. What the medium shall be what its character and qualities, will depend upon the greatness of the exigency and the degree of promptitude which it demands. These are the Legislative Questions. The heart of the nation must not be crushed out. The people must be aided to pay their debts and meet their obligations. The debtor interest of the country represents its bone and sinew and must be encouraged to pursue its avocations. If relief, were not afforded, universal bankruptcy would ensue, the industry would be stopped, and the government would be paralyzed in the paralysis of the people.”

“When I stand in the United States Treasury, I stand on English soil.” – Nathaniel P. Banks

It is chiefly the laws of property which have enabled the few to accumulate vast wealth while the masses live in poverty. For many generations, our laws have been framed with a view to the claims of property rather than the rights of man. For ages, the money power has controlled legislation the world over, and I am sorry to say, has exercised a controlling influence in our own land for many years. In the language of the Declaration of Independence: “All men are created equal and endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness.“ If man has an alienable right to life, then he has a right to the means which sustain life, and of which he can not be justly deprived by laws which permit one man, or set of men, to so absorb the means of life as not to leave sufficient to sustain the lives of all. If man has an inalienable right to liberty, then he cannot be justly deprived of liberty by another who assumes the right at his mere discretion to abridge it. If man has an inalienable right to the pursuit of happiness, then he cannot be justly deprived of that right by laws interposed in the way of its pursuit. Do such laws exist, and if so, how came they into existence?

“And our flag newly woven. Every stripe and every star. With the cannonballs for shuttles. In the roaring loom of war; And our gallant weavers dyed it with their manhood in each hue. Red for courage, white for honor. And for the faithfulness the blue.”

With best wishes for the Farmers’ Educational and Cooperative Union, I am truly yours

-O.F. DORNBLASER

Courtesy of National Farmers Union Historian, Tom Giessel

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Unintended Consequences of Allowing Captive Cattle Supply

April 28, 2020

By Gilles Stockton

The collapse of cattle prices following the outbreak of coronavirus has most certainly got our attention and has sparked an intense desire to do something about it. One idea that has gotten traction is to require that beef packers purchase more of their cattle in the spot market, which at best has been only 20% of the cattle and sometimes nearly none.  Both the US Cattlemen’s Association (USCA) and R-Calf have come up with competing versions of this idea.  USCA wants 30% of total fat cattle sales to be made in a spot market while R-Calf ups the ante to 50%.  My feeling is that we had best beware the law of unintended consequences.

More cattle purchased in the spot market would probably semi-solve a problem in pricing cattle sold under formula and basis arrangements (captive supply).  But it is the unintentional flip side that is the problem.  Requiring a certain level of spot market purchases sanctions the captive supply practices which make up the rest of the market – 70% captive supply in the case of the USCA’s plan and 50% in that of R-Calf.  This would not be good.

In looking to solve one problem, USCA’s and R-Calf’s proposals unintentionally concede that the packer monopoly and market dysfunction is inevitable. Passage will add to the economic forces pushing cattlemen to join the ranks of chicken and pork producers as vertically integrated cogs in a giant meat machine. An actual public competitive market for cattle will be a thing of the past as is already the case for chickens and pigs. I am sure that the proponents of enhanced spot market purchases do not desire this outcome.

Requiring packers to buy more fat cattle on the spot market will not increase competition or price discovery.  The spot market is nothing more than a negotiated sale for near term delivery. Because of the Mandatory Price Reporting law, spot market sales must be reported, which at least is a positive thing. The spot market price, in turn, is used to settle the delivery price for the captive supply cattle.

It will still be the same four packers buying and each will still have their own territories, which effectively eliminates any chance for competition between them. And there would still be no opportunity for a small competitor to bid against the big boys. In short, requiring that packers buy more cattle for immediate delivery would shine a little light on cattle pricing practices, but not nearly enough.

The worst effect of this approach is that it would undermine the most important protection we have that is written into the Packers and Stockyards Act – the prohibition of undue preference or unreasonable prejudice:

It shall be unlawful with respect to livestock . . . for any packer . . . to:

  • Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device; or
  • Make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever, or subject any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever; or . . .

The way that the market for fat cattle has evolved is plainly in violation of the P&S Act because it is based on secret arrangements that are predicated on undue preference and unreasonable prejudice.  The reason that this happened is that beginning about 1980, the Justice Department made a policy decision to stop enforcing the antitrust laws.

Neo-Liberal economic theory coming out to the Chicago School of Economics became the government’s de-facto anti-trust policy. Under this economic theory, it is assumed that larger firms have natural economies of scale which in turn results in lower prices for consumers. The effect on the market for those of us who supply the dominant firms with raw materials is, under Neo-Liberal economic theory, irrelevant.

But the anti-trust laws are still on the books, and the Packing Cartel would no doubt be delighted if the Packers and Stockyards Act was weakened. All that I am writing here would be merely academic if there were no proposal out there that would actually fix the cattle market dysfunction – once and for all. Not only has one been proposed, but it has also been vetted from both a legal and economic perspective. In addition, in 1999, USDA actually held a hearing on this proposal with nationally recognized legal and economic experts debating the pros and cons.

Of all of the ideas that have been tossed around, only Captive Supply Reform actually solves our problem.  It simply states that in order to be compliant with the P&S Act, 100% of the fat cattle must be purchased through a public market. This can be an exchange where the price and terms are publicly offered, or preferably a virtual auction, similar to the video market through which a large number of forward contracts for feeder calves are sold.

The actual wording is very simple. Captive Supply Reform only requires that a base price be set at the time the contract is agreed to. Instead of mandating that a set percentage of cattle be purchased on the spot market, feeders and packers would be free to enter into forward contracts for any length of time that is convenient for their purposes. Just as in feeder calf forward contracts, a base price would be set along with a list of conditions that will adjust the final settlement.

If packers desire to also be in the cattle feeding business, their cattle would have to be offered for sale in a public forum.  If fat cattle are shipped in from Canada, these too would have to be priced through a public forum. The beauty of all this is that no regulatory agency would be needed to monitor the program because all of the prices and terms of sale would be publicly open. The other beauty of Captive Supply Reform is that, although it does not break up the packer cartel, it would allow, for the first time in half a century, true competition by start-up specialty packer firms.

I have been told that Captive Supply Reform is too ambitious and that it would be better to tinker by fixing the cattle market in incremental steps. Besides, I have been informed, there is currently interest in Congress to require more cattle to be sold on the spot market and we should take advantage of this interest. But have the allies in Congress actually held hearings and debated the pros and cons – and the alternatives?  I don’t think that this has happened.

This coronavirus pandemic has revealed how vulnerable our globalized economy actually is.  Outsourcing of manufacturing, just in time delivery, dependency upon autocratic governments, control of important industries by criminal elements, the wholesale monopolization of key industries – Free Trade is revealed as a cynical lie. In agriculture, beef markets are undermined by imports while wheat, corn, and soybean exports are vulnerable to every global hiccup.

It is clearly time to rethink the structure of our economy including a complete overhaul of farm and rural policy.  Captive Supply Reform was proposed by a number of western state’s senators back in 2007, but it was our organizations that failed to coalesce to push for its passage. Division, among like the minded cattle producer organizations, has failed us time and again. However, we now see how vulnerable our future as independent cattle producers has become, the time has come to unite and restore competition to the cattle market.

Gilles Stockton

Grass Range, Mt 59032

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Corporate Colony or Strong Community?

Kerry Hoffschneider

Kerry Hoffschneider

Manager at Word & Deed Communications
Independent Journalism by Kerry Lea: Mike Callicrate shares his thoughts and experiences advocating for independence, fairness and transparency in the beef industry. He is not alone in his sentiments and is encouraging others to stand up, work together and lead. Unity is needed in agriculture, but it needs to be informed unity that understands how we got here.

By Kerry Lea Hoffschneider

A few weeks ago, when the COVID-19 panic hit, retail sales at Ranch Foods Direct, owned and operated by Mike Callicrate, were up 3.7 times compared to a year earlier. The sales are leveling out now, however, this independent model of direct to the consumer food items like meat, produce and eggs are increasing in demand.

“I am a rancher who is in the meat business,” said Callicrate, a member of the Organization for Competitive markets, who has been a long-time champion for beef and cattle producers after being blackballed by large meatpackers after he, along with a group of other ranchers, sued the packers for their monopoly of the market.

“I got blackballed by the big packers and built my own pathway to the market. My ranch is in St. Francis, Kan. and we slaughter onsite and ship the carcasses to Colorado Springs where they are processed and distributed. I have a pretty good idea of the process from the cow being bred to being steak on a plate,” he explained.

“Our workers, I am so proud of them,” Callicrate said about the effort the team at Ranch Foods Direct has made to meet the dramatic up-tick in demand after COVID-19 hit, “After the virus began, there was not a package of meat anywhere in Colorado Springs to be found in a big box. In this new age of globalization, the supply chains didn’t work in the times they were most needed, and we just proved it.  We don’t even have enough face masks or medical equipment we need, let alone the meat on the shelves.”

“The big packers have been cooperating since they became members of the National Cattlemen’s Beef Association (NCBA). In fact, the late Hughes Bagley – a former executive vice president of IBP, told me they’ve been cooperating since the 1970s,” Callicrate said.

Callicrate said he met Bagley, a former executive of IBP who was suing IBP for cheating him on his retirement the same time he was part of the cattlemen’s group suing IBP that led him to be blackballed, “Hughes developed what they called a ‘cattle pack’ for IBP. IBP was not getting enough of the entire animal sold. Coming from the retail sector, Hughes suggested that IBP put a program together that would incentivize retailers to purchase the whole animal. IBP literally credited Hughes for saving the company.”

“Hughes explained the ‘tram system’ to me. The small packer could not sell carcasses anymore to retailers because IBP had developed the box, which included the ‘cattle pack.’ The small packer, unable to box their beef, was forced to sell their carcasses to IBP. The problem with that is IBP competed against the small packer in the trade with fat cattle and the only buyer was IBP for the carcass,” he said.

“The ‘Tram’ was a combination of special semi-trailers designed to hold full half carcasses, along with specially designed docks that would only accommodate the tram trailer, thereby locking the small plant into the IBP tram system. And, it’s clear now because the small packers are nearly all gone. IBP dominated and took over.” Callicrate explained.

“What happened in 1996, is they blatantly jumped in bed together as new members of the NCBA. National Beef, Cargill – and the other packers gathered at the NCBA convention. We have all been flat-out played for fools and the big feedlots have also been part of the problem. The big feedlots, having lost a real competitive market, decided to align with the packers, beating the hell out of the cash market,” he went on.

“In the 1980s I ran a custom feedlot and when people would send me their cattle to feed, I increasingly got the feeling I was a ‘transfer agent,’ in this rigged game. The meatpacker stole the wealth of the cattle owner and shared it with the big retailer. The feedlot is really just a ‘middleman’ that wants a ‘full hotel,’” he explained. “I had this shameful feeling of being that ‘transfer agent,’ and acting as the ‘tool’ of the meatpacker.”

Callicrate said cattle producers need to know many of the big feedlots are getting “seriously big” preferences for contributing a captive supply of cattle, “It’s known that some feedlots are secretly getting kickbacks annually on the live weight they sell to the packer. At 10 cents per pound live weight, that can be around a $135 advantage. Consider you are a Midwest farmer feeder and everything your farm is producing is going through your cattle. What if you go to the sale barn to buy feeder cattle and the guy has $135 advantage over you? This is how we have lost more than 80,000 feedlots. That big feeder also gets to sell his cattle in a timely fashion, when they are ready and not a month or more later. The United States Department of Agriculture (USDA), armed with the Packers & Stockyards Act, has done nothing about this unfair and illegal preference.”

“Trump has done nothing but make it worse,” Callicrate continued. “He’s even allowed imports of beef from Brazilian and African countries that are infected with foot and mouth disease. Can you imagine COVID-19 on one hand and dealing with foot and mouth disease outbreaks on the other?”

“The South American and other global producers are under the boot of the same big packers too. We are all losing. We are burning down the Amazon to plant more corn and soybeans so that JBS and Cargill can have cheap feed and so China can have feed for their Smithfield hogs. We have allowed the corporate takeover of our industry and our country,” he said.

Being blackballed by the meatpackers has forced Callicrate to learn some difficult lessons about all areas of the industry and how global markets work against the average U.S. producer, “We had 23 Chipotles at one time at Ranch Foods Direct. We were in talks to expand to over 50 locations including the Denver area. It was going to be a great deal for our company. Without notice, instead of expanding the business, Chipotle informed us that we were losing all the business. We were replaced with Australian beef at 30 percent below our cost of production. I had $250,000 of beef inventory on hand and a processing machine valued at $185,000 that hasn’t run since.”

“The Colorado Department of Agriculture is considering a new local/regional ‘Colorado’ brand to better support the region’s farmers and ranchers. In an interview last week, I warned that new infrastructure must be in place to sell directly to the consumer, otherwise the existing monopoly-controlled system will continue to extract the valuable wealth produced on the region’s farms and ranches.  Those corporations will not allow you to make any money, you are a cost to be reduced, essentially slaves to them,” he said.

That is why Ranch Foods Direct continues to focus on maintaining the trust of their customers that buy directly from them. Callicrate said for now he will continue to invest the profits from Callicrate Banders to keep their efforts going and to fight the big packers and their alignment with large, corporate retailers and distributors, “On any day, the big packers can manipulate the cattle futures, and thereby cattle prices, to their advantage. The cattle futures have been merely a mental conditioning tool, making willing sellers out of desperate cattle owners, and no longer serve any good purpose.”

“The cattle business has been a fool’s game for at least the last 30 years, and we have been the fools. During that time, cattle producers have lost 30 percent of their share of the consumer beef dollar, amounting to $1,000 per head loss at the farm and ranch gate. Unlike football, there are no referees in this game,” he said adamantly.

“The U.S. is a colony of big, corporate power. When is the last time a new mile of fence was built? So, without addressing the real problem of market concentration, we go out and throw money at the farmers. Without a market, anything you give the farmer or rancher will, in turn, be extracted by the big companies either through higher input costs or lower output prices. That is one of the reasons why prices for corn, wheat and soybeans are the same today as they were in the 1970s – that is not inflation adjusted, that is actual dollars,” he pointed out.

“One of the deadliest diseases that humanity has ever faced is aggressive price shopping consumerism, where you search for the cheapest of everything. You know what you end up with? You end up with more and more rural decline, broken-down, abandoned main streets with a Dollar Store at the edge of town. Farmers and ranchers, America’s real wealth creators, are now living in a second-hand Dollar Store economy,” Callicrate said and adamantly.

In closing, he urged his peers in agriculture to take action and lead in a community-driven fashion, “Make sure your neighbor is okay and you are treating your neighbor like they matter, not like in the 1980s when people were hoping the neighbor would go broke so they could get their land. It’s time to go home and make your community as good as you can make it.”

Follow Mike at:  https://nobull.mikecallicrate.com/

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Kerry Hoffschneider

Kerry Hoffschneider

Manager at Word & Deed Communications
Published • 3h

 

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Meat Market Slaughter – What happened to a fair, open, and competitive marketplace that once served both producers and consumers?

The Coronavirus has exposed the abject failures of a highly concentrated and centralized  industrial food system. Following is some history of how we got to this place that we can no longer feed ourselves.

Six years after the following 1990 LA Times article was written,  and after most of the competition in the meat industry was eliminated by IBP and the other major meatpackers, the confident IBP Chairman and CEO, Robert Peterson, proclaimed:

Eight years after Peterson’s bold statement, Tyson, the nation’s leading poultry company, purchased our nation’s largest beef packer and price leader, IBP. I explained the cattlemen’s lawsuit against IBP to John Tyson when we met at the 2002 NCBA convention. Mr. Tyson was there to announce that Big Chicken had just bought Big Beef!

Enter the criminal Batista brothers and JBS:

JBS Used Illegal Activity to Profit and Take Over the U.S. Beef Market

From a small butcher shop in Brazil, JBS has become the world’s largest meat processing company and a dominant force in America’s food industry, and much of its growth is the result of illegal activity.

JBS Bribed Brazilian Officials for Government-Backed Loans to Fuel Growth
In a decade-long scheme, the meat processor bribed more than 1,800 Brazilian politicians to secure Brazilian government development loans, which JBS admitted helped it take over the U.S. beef market. With these funds, JBS was able to acquire more than 40 rivals on four continents between 2007 and 2017.

JBS’ Owners Defrauded Four Brazilian Pension Funds Out of $2.5 Billion
The Batista family of Brazil owns JBS and several other Brazilian companies. The Batista brothers, Josely and Wesley, led a stock fraud scheme that defrauded four Brazilan pension funds out of $2.5 billion.

JBS Was Caught Bribing Meat Inspectors
In 2017, JBS was caught exporting rotten meat worldwide and trying to cover up the stench using cancer-causing acid products.

JBS Ripped off U.S. Cattle Farmers and Ranchers
In 2018, USDA found JBS had ripped off U.S. cattle producers at three separate slaughter facilities by shorting them on payments for their cattle. While the JBS abuses were extensive, USDA settled the claims for a mere $50,000 penalty.

Today, after thirty years of the big meatpackers manipulating the market and managing cattle prices at levels that producers could be conditioned to accept, over 40% of our ranchers are now out of business, replaced with cheap and dangerous imports. Two of our nation’s big-four meatpackers are Brazilian owned. The drastic price drop after the Tyson fire and another even worse crash after the Coronavirus, has finally awakened cattle producers, but so far, USDA continues to do nothing.

Unfortunately, we didn’t listen to the warning from 1990:

Meat Market Slaughter: Competition in meatpacking is dwindling as three big companies gain market share and power. Smaller competitors and state regulators are alarmed.

By MARIA L. La GANGA

April 22, 1990

12 AM

TIMES STAFF WRITER

By the end of the week, it was hard to deny that something was wrong in the meatpacking industry:

Monday, March 5: Specialty meat processor Doskocil Cos. of Hutchinson, Kan., filed for protection under Chapter 11 of the U.S. Bankruptcy Code. its major competitors–the so-called Big Three meatpackers–are all angling to snap up the company’s slaughtering facilities, a Doskocil spokesman said.

Thursday, March 8: Farmstead Foods of Albert Lea, Minn., announced the immediate closure and liquidation of plants in Albert Lea and Cedar Rapids, Iowa, throwing nearly 3,000 workers out of their jobs.

Friday, March 9: Oscar Mayer Foods Corp. announced that it would close its Vernon processing plant by the end of September, laying off nearly 550 employees, most of them older workers who had labored at the plant for more than a decade and who hadn’t had a pay raise since 1980.

The three companies reflect sweeping changes in the meatpacking industry–technological advances that make older plants obsolete, increased competition from meats such as chicken and consolidation of the industry–that make it increasingly difficult for smaller firms to compete with the Big Three meatpackers.

“The change in concentration in the beef-packing industries is just beyond any historical precedent,” said John M. Connor, professor of agricultural economics at Purdue University. “I think it’s just a matter of time before the Big Three beef packers learn to cooperate (with each other) rather than compete in the aggressive way they have been in the last three years.”

It’s also just a matter of time before pork processing becomes as concentrated as beef, according to agricultural economists and industry analysts. The watershed year for concentration in the beef industry was 1987; the 1990s could be that threshold time for pork.

Concentration–when a small number of companies control a large share of an industry–is far from merely an abstract concern. It affects workers, farmers, consumers, contends John Helmuth, assistant director of the Center for Agriculture and Rural Affairs at Iowa Sate University.

Because of concentration, “not only have meat prices gone up for consumers, but at the same time prices paid to (farmers) have gone down,” Helmuth said. “Wage rates have gone down. I think that what we’re seeing is that . . . (the big) meatpacking plants are able to keep more of their own profits.”

Concentration

The Big Three meatpackers–IBP Inc. of Dakota City, Neb., ConAgra Inc. of Omaha, Neb., and Excel Corp. of Wichita, Kan.–dispute such arguments, saying that concentration brings greater efficiency, higher prices to livestock suppliers and lower costs to consumers.

“Concentration is not unique to the meat industry,” said Gary Mickelson, spokesman for IBP. “Others have experienced similar changes. . . . The meat industry is responding to a changing market reality and increasing competition from other protein sources. It’s an extremely competitive industry. The companies that were paying the high wages are not there anymore.”

Today, the Big Three beef-packing firms have about 70% market share, and the top four pork-packing plants currently control about 40% of the pork we eat.

By May, the market share for the largest pork packers will increase again, as IBP opens a new pork-packing plant in Waterloo, Iowa, a facility that will be able to slaughter 15,000 hogs each day.

And as concentration intensifies, legislatures and advocacy groups around the country are gearing up to do battle with the Big Three:

* The attorneys general from five Midwestern states have asked the Justice Department to launch an antitrust investigation into the Big Three’s business practices. In an April 12 letter, the attorneys general from North Dakota, South Dakota, Iowa, Minnesota and Montana said “there is growing concern over the continued competitive viability of this industry and the enhanced prospect of collusive anti-competitive activities taking place.”

* A handful of state governments are looking into legislation that will do what they contend federal laws have failed to accomplish–bring competition back to the meatpacking industry.

* The National Cattlemen’s Assn. appointed a task force in late 1988 to conduct a year-long study of concentration in the beef industry. The study was published in October. Its top recommendation was that “no more mergers or acquisitions of beef slaughter facilities by the Big Three packers be allowed.”

* The Center for Rural Affairs, an agricultural think tank in Walthill, Neb., will unveil a set of proposals at the end of April recommending such controversial actions as a federal cap to keep any single company from controlling too much of the meat market. That cap would be significantly lower than the market share already controlled by any of the Big Three companies, said Marty Strange, the center’s program director.

* Since the end of January, conferences addressing consolidation have been held throughout the country by interested industry groups. While the organizations vary greatly along the political spectrum, their messages are similar: Stop the Big Three now.

Call for Regulation

Actually, the message might have been “Stop the Big Three–again.” This isn’t the first time that there has been a call for meatpacking regulation. Agricultural economists love to point out that 1990 is the 100th anniversary of the Sherman Antitrust Act, which was created in part to break up the so-called Beef Trust, or Big Four. The act was not particularly effective.

So when the Federal Trade Commission was established in 1914, one of its earliest actions was an investigation of the five largest meatpacking companies. The investigation’s result was a 1920 consent decree in which the “trust,” now the Big Five, agreed to forgo further consolidation and to sell stockyards, railroad equipment, refrigerated warehouses and meat stores.

Just for comparison’s sake, in the 1880s, the Big Four controlled 85% of the beef market. In the 1920s the Big Five controlled 71% of the beef market. Now that the Big Three control 70%, nothing’s being done about it, critics contend.

“Where have our antitrust laws been these past 10 years?” Helmuth wonders. “There have been zero Sherman Act violations brought by the Justice Department since 1980.”

When you’re talking market share in beef and pork, IBP is the indisputable king. It incorporated in 1960 as Iowa Beef Packers and now controls 32% of the national beef market and 15% of the pork market. IBP is a public company whose majority shareholder is Occidental Petroleum, which owns 50.5% of the stock.

Although ConAgra has been in the red meat business since the early 1980s, it occupies the No. 2 spot with 21% of the beef market and 9% of the pork market.

In its 1989 annual report, the company describes itself as the only major U.S. food company operating across the food chain:

“We have major businesses in crop protection chemicals, animal feed, fertilizer, specialty retailing, . . . grain processing, beef, pork, lamb, chicken, turkey, seafood, processed meats, dairy products, potatoes and a broad array of consumer frozen foods.”

Its acquisitions throughout the 1980s exemplify the decade–one of the most volatile periods in the meatpacking industry. The operates 17 plants under a half dozen banners.

Size Advantage

Companies such as ConAgra say size is the only thing that saves them–enormous, efficient, one-story plants and lots of them, technologically up-to-date plants where animals can flow in one end alive and out the other as product.

“You have to have the economies of size, operate the plants on double shifts, get as many head through there per day as possible to be competitive,” said Gene Meakins, vice president of public relations for ConAgra Red Meats Cos. in Greeley, Colo. “You’re dealing–even in good times–on very narrow margins.”

Not everyone buys that argument, though. G. Edward Shuh is dean of the Hubert Humphrey Institute of Public Affairs and headed up a group of agricultural economists that produced a study called “Competitive Issues in the Beef Sector: Can Beef Compete in the 1990s?”

A major point in the study, Shuh said, is that, while some consolidation does save money, the Big Three have eclipsed any economy of scale by getting too big. If the top four meatpackers operated enough big plants to exhaust all economies of scale, the study said, concentration would only range from 24% to 48% instead of 70%.

The major meatpackers consider concentration a natural byproduct of intense competition in a difficult industry. Its critics, however, point to the high costs that concentration has incurred: As the big have gotten bigger, the small have gone out of business.

Between 1972 and 1987, the most recent year for which statistics are available, more than 400 slaughtering packers shut down and some 40,000 jobs were lost. The concentration in beef-packing alone tripled between 1977 and 1987, an occurrence that is “simply outside the realm of experience,” according to the Humphrey Institute study.

Litvak Meat Co. opened its doors in Denver more than 50 years ago, slaughtering about 150 calves daily and employing a half-dozen workers. At its peak, in the mid-1980s, the slaughterhouse processed 1,200 head of cattle each day and had 200 employees.

At one point, Litvak’s Denver neighborhood supported at least 15 similar enterprises within a radius of two miles. Today they’re all gone, including Litvak Meat, which shut down in 1988, a casualty of concentration.

“We weren’t able to buy the live cattle due to the fact that these Big Boys, ConAgra and Cargill (which owns Excel) needed more numbers and outbid us,” said Leonard Litvak, chairman and chief executive of the defunct company. “The FTC allowed it. I don’t think the FTC could stop it. I even wrote the Justice Department; I never heard back.”

Casualties of War

Then there are the farmers, particularly those who operate feedlots and fatten cattle for slaughter. After studying beef prices for a decade, Bruce Marion found that purchase prices paid to farmers were between 0.5% and 1% lower in areas of greatest concentration than they were in areas where many packinghouses operated.

“If you start looking at it from the standpoint of how much do cattle feeders lose in a year that they would have gotten if they had more competitive markets, you’re talking about $50 million a year,” said Marion, a professor of agricultural economics at the University of Wisconsin in Madison.

Workers at meatpacking plants have also lost out through concentration and the closure of plants, according to economists and union representatives. In the 1950s, the meatpacking industry instituted cost of living increases for hourly workers, said Patrick Luby, a vice president and economist at Oscar Mayer Foods Corp.

“During the early 1980s, lower-paying companies were expanding,” Luby said. “They had no cost of living agreements. They drove out the old-line pork packers. Many of the plants were sold to new ownership, closed and reopened with lower pay scales. The labor costs did come down or level off.”

The same was true for beef, according to Lewie Anderson, a United Food & Commercial Workers Union vice president. And the union did little to stop it, Anderson said. In fact, industry watchers agree that the union’s strength has greatly diminished.

“The Big Three have not only slashed worker wages, but they have kept the wages of workers depressed for a protracted period of time,” Anderson said in “Return to the Jungle,” a position paper written last year. And concentration has affected wages throughout the industry.

Henry Lopez, a meatpacker at Oscar Mayer’s Vernon plant, hasn’t gotten a raise in the past 10 years. An hourly wage of $10.69 sounded good in 1980, but living at that level for a decade makes it tough to afford such things as health care and college tuition for his two daughters.

Early this month he got the news that the UFCW and Oscar Mayer had negotiated a 25-cent hourly raise, but that did little to improve Lopez’s spirits or those of his more than 500 colleagues. Because by the end of September, the Oscar Mayer plant will close.

“Here’s this company I gave 20 years of my best labor to, and they’re throwing us out the door,” Lopez said. “I don’t understand why I have to leave. I know I’ve given them my best.”

While wages have been depressed because of concentration, Oscar Mayer officials said their plant will close “because the cost of doing business at that plant has steadily increased,” said James Aehl, corporate spokesman. “It has become increasingly difficult to remain competitive in an increasingly competitive industry.”

The Vernon plant was built before World War II and has been renovated several times since, Aehl said. But it’s still a relatively small five-story facility in an era when “new breed” plants are bigger and only one story tall. Multistory plants lose efficiency because meat must be moved from floor to floor instead of flowing through from processing to warehousing.

“You have machinery in plants being technologically bypassed,” Aehl said. “A little bit of this is consumer change in eating more poultry products. We have not closed a large poultry plant.”

Nicholas Spaeth, North Dakota’s attorney general, said antitrust concerns in the meatpacking industry have grown sufficiently in the Midwest that the Justice Department should step in to investigate.

North Dakota, Iowa, South Dakota, Minnesota and Montana together “considered trying to launch an investigation on our own, but the meatpacking industry is a national industry,” Spaeth said. “We don’t have the resources. The states involved are relatively small and rural.”

The Justice Department has received the letter, but no investigation is planned to date, said Joseph Krovisky, a department spokesman.

“Justice is aware of the concern expressed by meat-producing groups about concentration in the industry,” Krovisky said. “It has carefully monitored the industry in the past and will continue to do so. We do not have any action pending against any of the meatpackers.”

Which basically leaves any action up to the states themselves. Groups such as the National Cattlemen’s Assn. are calling for an end to concentration, but not a breakup of the largest packers. And the National Farmers Union is working with several states to get legislation passed that will do that.

In Kansas, legislation has been introduced to prohibit large packing plants and grain companies from owning and operating feedlots, said Bruce Larkin, a Democrat who represents the state’s 62nd District. “I’d like to see the individuality stay in the operations and maintain more competition.”

The legislation’s intent: antitrust. Its future: questionable.

“It hasn’t been killed,” he said. “But for all practical purposes, it is not going anywhere this year.”

CONCENTRATION IN THE MEATPACKING INDUSTRY

1988: 69.7%

Source, Department of Agriculture

PLANT CLOSURES: IOWA AND NEBRASKA

Between 1969 and 1989, the following beef plants were closed in the states of Iowa and Nebraska, displacing an estimated 7,000 workers.

NEBRASKA

1 Omaha, Nebraska Armour B.C. Dressed Beef Wilson American Beef Palmayer Beef

2 Scottsbluff Swift

3 Grand Island, Nebraska Swift

4 Lincoln American Stores

IOWA

1 Des Moines, Iowa Swift Wilson

2 Estherville Morrell

3 Oakland Spencer Foods

4 Spencer Spencer Beef

5 Council Bluffs American Beef

6 Sioux City Needham Pack Raskin Pack Meyer Pack Mid-States

7 Fort Dodge IBP

8 Postville Hygrade

9 Denison Dubuque

Source: United Food and Commercial Workers Union

Maria L. La Ganga

Maria L. La Ganga is a Metro reporter for the Los Angeles Times. She has covered six presidential elections and served as bureau chief in San Francisco and Seattle.

2011 – Cattlemen struggle against giant meatpackers and economic squeezes

2012 – Obama’s Game of Chicken

 

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When Wealth and Power Become Too Concentrated

The “Omaha Platform” of the People’s Party (1892)

In 1892, the People’s, or Populist, Party crafted a platform that indicted the corruptions of the Gilded Age and promised government policies to aid “the people.”

PREAMBLE

The conditions which surround us best justify our co-operation; we meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. The people are demoralized; most of the States have been compelled to isolate the voters at the polling places to prevent universal intimidation and bribery. The newspapers are largely subsidized or muzzled, public opinion silenced, business prostrated, homes covered with mortgages, labor impoverished, and the land concentrating in the hands of capitalists. The urban workmen are denied the right to organize for self-protection, imported pauperized labor beats down their wages, a hireling standing army, unrecognized by our laws, is established to shoot them down, and they are rapidly degenerating into European conditions. The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind; and the possessors of those, in turn, despise the republic and endanger liberty. From the same prolific womb of governmental injustice we breed the two great classes—tramps and millionaires.

The national power to create money is appropriated to enrich bondholders; a vast public debt payable in legal tender currency has been funded into gold-bearing bonds, thereby adding millions to the burdens of the people.

Silver, which has been accepted as coin since the dawn of history, has been demonetized to add to the purchasing power of gold by decreasing the value of all forms of property as well as human labor, and the supply of currency is purposely abridged to fatten usurers, bankrupt enterprise, and enslave industry. A vast conspiracy against mankind has been organized on two continents, and it is rapidly taking possession of the world. If not met and overthrown at once it forebodes terrible social convulsions, the destruction of civilization, or the establishment of an absolute despotism.

We have witnessed for more than a quarter of a century the struggles of the two great political parties for power and plunder, while grievous wrongs have been inflicted upon the suffering people. We charge that the controlling influences dominating both these parties have permitted the existing dreadful conditions to develop without serious effort to prevent or restrain them. Neither do they now promise us any substantial reform. They have agreed together to ignore, in the coming campaign, every issue but one. They propose to drown the outcries of a plundered people with the uproar of a sham battle over the tariff, so that capitalists, corporations, national banks, rings, trusts, watered stock, the demonetization of silver and the oppressions of the usurers may all be lost sight of. They propose to sacrifice our homes, lives, and children on the altar of mammon; to destroy the multitude in order to secure corruption funds from the millionaires.

Assembled on the anniversary of the birthday of the nation, and filled with the spirit of the grand general and chief who established our independence, we seek to restore the government of the Republic to the hands of “the plain people,” with which class it originated. We assert our purposes to be identical with the purposes of the National Constitution; to form a more perfect union and establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty for ourselves and our posterity.

We declare that this Republic can only endure as a free government while built upon the love of the whole people for each other and for the nation; that it cannot be pinned together by bayonets; that the civil war is over, and that every passion and resentment which grew out of it must die with it, and that we must be in fact, as we are in name, one united brotherhood of free men.

Our country finds itself confronted by conditions for which there is no precedent in the history of the world; our annual agricultural productions amount to billions of dollars in value, which must, within a few weeks or months, be exchanged for billions of dollars’ worth of commodities consumed in their production; the existing currency supply is wholly inadequate to make this exchange; the results are falling prices, the formation of combines and rings, the impoverishment of the producing class. We pledge ourselves that if given power we will labor to correct these evils by wise and reasonable legislation, in accordance with the terms of our platform.

We believe that the power of government—in other words, of the people—should be expanded (as in the case of the postal service) as rapidly and as far as the good sense of an intelligent people and the teachings of experience shall justify, to the end that oppression, injustice, and poverty shall eventually cease in the land.

While our sympathies as a party of reform are naturally upon the side of every proposition which will tend to make men intelligent, virtuous, and temperate, we nevertheless regard these questions, important as they are, as secondary to the great issues now pressing for solution, and upon which not only our individual prosperity but the very existence of free institutions depend; and we ask all men to first help us to determine whether we are to have a republic to administer before we differ as to the conditions upon which it is to be administered, believing that the forces of reform this day organized will never cease to move forward until every wrong is remedied and equal rights and equal privileges securely established for all the men and women of this country.

PLATFORM

We declare, therefore—

First.—That the union of the labor forces of the United States this day consummated shall be permanent and perpetual; may its spirit enter into all hearts for the salvation of the Republic and the uplifting of mankind.

Second.—Wealth belongs to him who creates it, and every dollar taken from industry without an equivalent is robbery. “If any will not work, neither shall he eat.” The interests of rural and civic labor are the same; their enemies are identical.

Third.—We believe that the time has come when the railroad corporations will either own the people or the people must own the railroads, and should the government enter upon the work of owning and managing all railroads, we should favor an amendment to the Constitution by which all persons engaged in the government service shall be placed under a civil-service regulation of the most rigid character, so as to prevent the increase of the power of the national administration by the use of such additional government employes.

FINANCE.—We demand a national currency, safe, sound, and flexible, issued by the general government only, a full legal tender for all debts, public and private, and that without the use of banking corporations, a just, equitable, and efficient means of distribution direct to the people, at a tax not to exceed 2 per cent. per annum, to be provided as set forth in the sub-treasury plan of the Farmers’ Alliance, or a better system; also by payments in discharge of its obligations for public improvements.

  1. We demand free and unlimited coinage of silver and gold at the present legal ratio of l6 to 1.
  2. We demand that the amount of circulating medium be speedily increased to not less than $50 per capita.
  3. We demand a graduated income tax.
  4. We believe that the money of the country should be kept as much as possible in the hands of the people, and hence we demand that all State and national revenues shall be limited to the necessary expenses of the government, economically and honestly administered.
  5. We demand that postal savings banks be established by the government for the safe deposit of the earnings of the people and to facilitate exchange.

TRANSPORTATION—Transportation being a means of exchange and a public necessity, the government should own and operate the railroads in the interest of the people. The telegraph, telephone, like the post-office system, being a necessity for the transmission of news, should be owned and operated by the government in the interest of the people.

LAND.—The land, including all the natural sources of wealth, is the heritage of the people, and should not be monopolized for speculative purposes, and alien ownership of land should be prohibited. All land now held by railroads and other corporations in excess of their actual needs, and all lands now owned by aliens should be reclaimed by the government and held for actual settlers only.

EXPRESSION OF SENTIMENTS

Your Committee on Platform and Resolutions beg leave unanimously to report the following:

Whereas, Other questions have been presented for our consideration, we hereby submit the following, not as a part of the Platform of the People’s Party, but as resolutions expressive of the sentiment of this Convention.

  1. RESOLVED, That we demand a free ballot and a fair count in all elections and pledge ourselves to secure it to every legal voter without Federal Intervention, through the adoption by the States of the unperverted Australian or secret ballot system.
  2. RESOLVED, That the revenue derived from a graduated income tax should be applied to the reduction of the burden of taxation now levied upon the domestic industries of this country.
  3. RESOLVED, That we pledge our support to fair and liberal pensions to ex-Union soldiers and sailors.
  4. RESOLVED, That we condemn the fallacy of protecting American labor under the present system, which opens our ports to the pauper and criminal classes of the world and crowds out our wage-earners; and we denounce the present ineffective laws against contract labor, and demand the further restriction of undesirable emigration.
  5. RESOLVED, That we cordially sympathize with the efforts of organized workingmen to shorten the hours of labor, and demand a rigid enforcement of the existing eight-hour law on Government work, and ask that a penalty clause be added to the said law.
  6. RESOLVED, That we regard the maintenance of a large standing army of mercenaries, known as the Pinkerton system, as a menace to our liberties, and we demand its abolition. . . .
  7. RESOLVED, That we commend to the favorable consideration of the people and the reform press the legislative system known as the initiative and referendum.
  8. RESOLVED, That we favor a constitutional provision limiting the office of President and Vice-President to one term, and providing for the election of Senators of the United States by a direct vote of the people.
  9. RESOLVED, That we oppose any subsidy or national aid to any private corporation for any purpose.
  10. RESOLVED, That this convention sympathizes with the Knights of Labor and their righteous contest with the tyrannical combine of clothing manufacturers of Rochester, and declare it to be a duty of all who hate tyranny and oppression to refuse to purchase the goods made by the said manufacturers, or to patronize any merchants who sell such goods.

 

Source: Edward McPherson, A Handbook of Politics for 1892 (Washington D.C.: James J. Chapman, 1892), 269-271.

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