Beef bills advance through Senate Ag Committee

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Justin Tupper, Vice-President U.S. Cattlemen’s Association

ST. ONGE, S.D. – After nearly two years of political wrangling, a pair of bills that have been in “beef brawl” negotiations, aimed at reducing consolidated power in the cattle market was passed by the Senate Ag Committee Wednesday, June 22, 2022, marking a milestone in a long-running battle in the livestock industry with the “Big Four” meatpackers.

The legislation was initiated in the last three years as live cattle prices fell and meat prices soared.

The first bill, the Cattle Price Discovery and Transparency Act, sponsored by Senator Deb Fischer, R-Neb. and has 19 co-sponsors, including 12 members of the Senate Ag Committee, would require major meatpackers to buy a certain percentage of their cattle through negotiated cash trade sales and would require the United States Department of Agriculture (USDA) to create a public library of marketing contracts between packers and producers.

The USDA would be required to establish minimum levels of negotiated cash trade for fed cattle in five to seven regions of the country.  The cash trade volumes would depend on the number of meatpackers in each region, the number of available cattle on feed, and the number of contractual arrangements or alternative marketing agreements in each region. Meatpackers would be required to purchase at least five percent of their daily cattle slaughtered in cash trade.  They will also be required to report the number of cattle to be delivered for slaughter each day.

In some of the compromises made in the bill, South Dakota will be included in the Minnesota and Iowa reporting region and Colorado will be included in the Wyoming and Nebraska region.

“When we started this work we were trying to get the packers to have to buy 50 percent of their fat cattle in the cash market. Obviously, that met very strong resistance, especially in the south. So the compromise came, this will start as a two-year average, the last two years with the average of cash cattle is and they have to buy at least that much as a minimum. It puts a floor in and we really think that’s significant because it is projected that Texas could be zero cash trade in the near future if we don’t do something of significance,” said Justin Tupper, Vice-President of the U.S. Cattlemen’s Association (USCA).

The bill would also create a library of alternative marketing agreement contracts allowing cattle producers to see the premiums corporate feedyards are receiving.  The library would also mandate meatpackers to report boxed beef prices.

“It’s really is meaningful legislation that will give some leverage back to the producers. The reason some of the cash trades went down are many of those big corporate feeders and then they have significant deals with the packer to take all their cattle to them at that one packer. And so they’ve got those sweetheart deals, and that’s some of the transparency that we’re trying to uncover,” said Tupper.

The second bill, the Meat and Poultry Special Investigators Act, which was sponsored by Senator Jon Tester, D-MT, and has 12 co-sponsors including South Dakota Republican Senators John Thune and Mike Rounds, would create a special investigator’s office in the USDA’s Packer and Stockyards Division. The House of Representatives also passed legislation recently that included the special investigator provisions.

This bill would give the USDA a team of investigators with subpoena power, dedicated to investigating and prosecuting violations of the Packers and Stockyards Act.  The bill would have the authority to bring civil action against packers and poultry dealers found to have anticompetitive practices. The office also would serve as a liaison to the Department of Justice (DOJ) and the Federal Trade Commission (FTC).

“I think the Meatpacking and Special Investigator Act, which also passed through the Senate Ag Committee, goes hand in hand with the transparency bill. We’ve been waiting on an investigation for a year and a half from the DOJ over the meat packers. We still don’t have resolution. We really believe that it gives some teeth and subpoena power to the Department of Justice to really find out what collusion is going on,” said Tupper. “You get those four packers that control that much of the market, they don’t even have to collude together to control the market. They just have that big a market share. And I think those are some of the things we have to look into. Along with that, the special prosecutor be able to see some of those sweetheart deals that these big corporate feedlots have got, to at least be transparent at the very least. And I think that would be huge within our industry. “

The four big packers are Tyson Foods, JBS, Cargill, and Marfrig, three of which are foreign-owned and control more than 80 percent of the meat processing market which allows them to control the price of cattle and the meat prices in the grocery stores.  Cargill is the only company that is U.S. owned. JBS and Marfrig are Brazilian-owned. Tyson Foods is American and Chinese-owned.

“We have one of the big four Packers that just paid a huge fine. We don’t know for what. And so these are the kind of things that need to come to light. We need transparency in our business. And when you have these big corporate packers that are out of country, for that matter, three of the four not even US owned so we’ve got to make sure that we have a good handle on what they’re doing and the kind of businesses they’re doing it. Some of them have very bad business practices in their past. And we’re going to make sure that we can bring to light any of those bad transactions that are happening. In that way we have transparency within business and everybody can be on a level playing field,” said Tupper.

“I was in Washington, D.C. a little over a week ago, and met with the Futures and Trading Commodities Commissioner, and we (USCA) believe that there are some things that we need to be careful of there. There’s lots of these trades now not being done as a price protection, but they’re done by big, big conglomerates of money, that push the market one way or the other. I think we’ve got to make sure that those practices are on the up and up and that we have the interest of the guys that have the cattle and using it for price protection should be the most important part of the market and not these big fund groups that can move the market one way or another,” he said.

While the legislation had good bipartisan support it encountered opposition from the National Cattlemen’s Beef Association and the American Farm Bureau Federation, but state representation in both organizations are split on the bills depending on which region of the country in which they are located. The U.S. Cattlemen’s Association and the National Farmers Union support the bills.

“It’s hard to get two ranchers to believe the sun comes up in the east and goes down in the west. So trying to get everybody on the same page has been very difficult. But I do think we are very close to getting at least a rung up on the ladder. And I think that’s what we need to do. I worry in this economy, as beef gets higher and the big four packers take the biggest part of that check, the piece of the pie that’s back to the producers has been significantly less year after year. And as these prices get high, if we don’t get our best part of that market share, then it’s very tough to be sustainable,” said Tupper.

Not surprisingly, the North American Meat Institute (NAMI) criticized both bills as “heavy-handed government interference.”

“The Grassley-Fischer bill being marked-up in the Senate Agriculture Committee this week will cost producers in the largest cattle producing region millions of dollars, and producers around the country will lose the ability to market their cattle as they choose,” said Julie Anna Potts, President and CEO of NAMI.

Tupper believes the legislation is good for South Dakota livestock producers.

“I think one of the things that it does is it gets –  tries to get to a closer level playing field so you have the same possibilities of getting the same prices that a big corporate feedyard does. That’s what we’re saying, that we shouldn’t be giving preferential treatment to the big corporate guys. We should be able to get the same for my cattle as an independent feeder as they can for those big corporate guys,” he said.

He also believes that there is more yet to be done to restore fairness and competition in the meatpacking industry and make the livestock industry sustainable for producers, including Country of Origin Labeling (COOL).

COOL was a consumer labeling law that would have required grocery stores and supermarkets to identify the country of origin on certain foods including meat. COOL was repealed in 2016 by Congress after Canada and Mexico challenged the U.S. in the World Trade Organization over the legislation.

“We’ve just begun to solve the problem and I think COOL is another big thing. We definitely want to see where our meat comes from. I think in this day and age, the consumer demands it. They want to know where it’s from. We know where our shirts, our hats, everything is from. It’s just senseless not to know where your food comes from. So I think we still have challenges and there’s many things we’re going to have to continue to work on. But in my lifetime and working on these issues with U.S. Cattlemen’s, this is the closest to significant change we’ve been and hopefully we can push it right over the finish line,” said Tupper.

 

 

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