Producers Press for More Competition

Farmers and ranchers meet with union representatives and lawyers in Omaha, to discuss the future and the federal laws that will make or break their livelihoods.

Share This:

Editor’s Note: The Organization for Competitive Markets meets this Tuesday and Wednesday in Omaha, Nebraska. The Daily Yonder’s Bill Bishop and Richard Oswald will be live-blogging from Omaha. (Find more reports from the OCM meeting here.)

9 a.m./Wednesday: The picture flashed up on the screen first thing Wednesday morning was headlined “The Cowboy, An Endangered Species.”

Each month more than 1,000 ranches are going out of business. That rate of failure has been steady for the past 30 years. The question for this morning is why.

Colorado beef producer Mike Callicrate has one answer: Wal-Mart. “There is no greather threat to our economic and social well-being than that company,” Callicrate said.

Where did the money go? Ranchers want to figure out the discrepancy between what consumers pay for beef and what they, the cattle producers, receive. As of last count, beef raisers wind up with only about 40 cents out of each dollar consumers spend in the store on beef.

More than 30 years ago, ranchers received more than 60% of that dollar. That shift in percentages has resulted in a $500 per head decline in income for ranchers.

Callicrate wants to know is who is getting that $500 and he has a suspect. He contends that Wal-Mart is the engine driving the ever-lower prices ranchers receive for their meat. Wal-Mart’s market power depresses prices all the way down the line, and since ranchers have the least power in the supply chain, from the pasture to the large meat packers to the Wal-Mart coolers, ranchers are the ones who are losing their share of each dollar paid for beef.

The demand for those lower prices is being driven by the American consumer. And that ticks Callicrate off. He wonders if Americans are “willing to run over their neighbor, willing to exploit labor (at packing plants) and extract resources, all to get a cheaper price at a Wal-Mart store,” as he puts it.

The decline in the number of ranches — remember 1,000 ranches a month are going under — has a real effect on rural communities, Callicrate continued. “Thirty years ago, we had a full school in St. Francis, Kansas,” he recalled. Now the school is half empty.

That is a direct result of how consumers are buying their food, Callicrate contends.

*******

9 p.m./Tuesday: Washington, D.C. writer Barry Lynn, OCM’s evening speaker, made an interesting point about America’s long-standing fear of monopoly.

The country was founded by people who wanted freedom from monopoly, Lynn said. They rejected the monopoly of faith that came with a state religion. They rejected the monopoly power of a monarch. And they fought against monopoly of commerce.

The original Tea Party wasn’t formed to fight against taxes but to protest the monopoly of trade in tea. “What they (the first tea partiers) were fighting was monopolization of commerce,” Lynn said.
And what they sought in their new government and country was to “distribute power as widely as possible.”

*******

4:30 p.m./Tuesday: A union representative said that his members, mostly workers in packing plants, are being asked by the companies to tell the USDA that they oppose the new Packers & Stockyards Act regulations. He asked those at the OCM meeting what he should say to men and women who are under pressure to comment on the regulations governing farmers and ranchers.
There wasn’t a good answer, except that monopoly in the food industry reduces competition for labor and, in turn, reduces wages.

*******

3:30 pm/Tuesday: Economist Neal Harl said the problems discussed at the OCM conference are really part of a larger trend that began more than 30 years ago with the deregulation of the airlines. Harl described how piece after piece of the economy was deregulated in the belief that market forces were more powerful — and beneficial — than government, law and bureaucracy.

“I believe we are looking at something that has been going on for 30 or 40 years, that started with airlines and really reached avalanche proportions after the 1994 elections,” Harl said. The effect of deregulation, according to Harl, was to give the strongest players in each deregulated market even greater power. It was true with the airlines, Harl said, and in minerals management and in commodities. The biggest companies do better in part, Harl said, “because they can spray money all over Washington, D.C.”

Antitrust activity has been in decline since 1981, in the rush to deregulate. And federal agencies that showed signs of being harsh regulators had their budgets cut in this era of great faith in the power of markets.

“Deregulation opened the gates of each (economic) sector to be dominated by the biggest company,” Harl said.

*******

Bill Bishop
Cindy Johnson, a lawyer from north Georgia, spoke on Tuesday, Aug. 10, to the Organization for Competitive Markets about suits brought under the Packers and Stockyards Act by poultry producers.
2:00 p.m./Tuesday: Cindy Johnson describes herself as a “chicken lawyer.” Working with her husband in a town in north Georgia, she has represented several small farmers who try to make livings as contract growers for large poultry integrators.

She talked to the OCM convention Tuesday afternoon about two of her clients — and how proposed regulations under the Packers and Stockyards Act might change life for them and the thousands of other people who raise birds.

Harold London had worked for a large poultry producer, raising chickens on contract. He had heard company employees say that they would never sign a contract with an African-American farmer.
Black farmers later sued the company saying they were being denied contracts because of their race. Harold London testified in the case, telling the court what he had heard company officials say.

After that case was decided — the black farmers won — the company told Harold London that his contract was cancelled. London sued under the Packers and Stockyards Act, saying the company had engaged in noncompetitive activities. The P&S Act appeared to prohibit this kind of behavior and the lower court sided with London.

Higher courts, however, reversed this decision. The federal Court of Appeals ruled that the P&S Act required a showing that the company’s activities harmed competition in the industry at large. Harold London lost.

In a second case, a Tennessee grower, Alton Terry, worked under contract for Tyson. The grower had a good record with the company, but he had questions about the industry. He began attending meetings of growers. And he started asking Tyson that he be allowed to witness the weighing of his birds. (Growers are paid by the weight of their birds.)

The company refused Terry’s request. He filed a complaint under the Packers and Stockyards Act.
Tyson canceled Alton Terry’s contract “because of his confrontational behavior.” He couldn’t sell his farm and so he sued Tyson, also under the P&S Act. Again, the Court of Appeals ruled that there was no violation of the P&S Act because Tyson’s activities had not harmed competition within the industry.

The proposed regulations now under consideration would provide a new interpretation of the Packers and Stockyards Act. Instead of having to prove anti-competitive activity that harms the entire industry, plaintiffs would only have to show that the activity harmed them.

“The reason we need these rules is because the federal courts have decied they aren’t going to enforce the P&S Act,” said Cindy Johnson.

Large meat producers contend that these proposed regulations will result in increased litigation.
That is undoubtedly true, said economist Robert Taylor, “but it’s because of the system they (the meat packers) created.”

 

x

News Briefs