By Travis Gulbrandson
Changes have to be made with antitrust laws to reverse the trend currently seen in many areas of agriculture, where production is controlled by the same few companies, who then use their stronghold to control the market price.
This was the consensus reached during the South Dakota Law Review 2013 Symposium, Antitrust & Competition in America’s Heartland, which was held March 15 at the USD School of Law.
As to how that change was to take place, however, answers were not as forthcoming.
Bill Bullard, CEO of the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, suggested a return to the implemented statutes of the early 1900s, which prevented meatpackers from owning critical elements of the marketing channel, such as feedlots.
In the 1980s, Bullard said many of these competitive protections were eliminated, and by 2010, 85 percent of all steers and heifers slaughtered were controlled by only four firms.
“In the last three decades, we saw a tremendous radical change in our cattle industry,” Bullard said. “What we have done is move our cattle industry closer to the industrialized production model, the model that has been successful in both the poultry and pork industries, in which the meatpackers themselves virtually capture the livestock supply chain leading up to these industries.”
Thanks to increased meatpacker control, approximately 2,100 feedlots now feed 89 percent of all fed cattle, Bullard said.
“(The meatpackers) know that if feedlot owner does not have timely access to the market, then the feedlot owner is going to be subject to price degradation because the animals are going to gain fat, not meat and muscle, and they’re going to degrade in quality,” he said.
As non-industrial producers do not have timely access to the marketplace, they have an incentive to give up revenues to ensure what access they do have, he said.
“The meatpackers that created the market access risk in the first place now provide a solution to the producers: ‘We will guarantee you market access risk if you will commit your cattle to us without establishing a price,’” Bullard said.
As the volume increases, the price decreases. Bullard said that since 2005, there has been a price reduction of approximately 50 percent in the cattle industry.
“The meatpackers have a huge incentive to manipulate this cash market because they know that the value of all contracted cattle is ultimately based on the price discovered in the cash market,” he said. “It’s because these cattle were never priced when they were removed from the cash market.
“After these cattle are called in by the meatpacker and slaughtered, the value is based on what the packer paid the previous week when it did bid in the cash market,” he said.
Peter C. Carstensen, professor of law at the University of Wisconsin, agreed that more regulation is necessary.
“We need rules, we need a statute that authorizes and sets the parameters so that we can define what is an appropriate marketing entity, what membership rights exist,” Carstensen said in relation to co-ops. “Right now, none of that is set forth anywhere.”
Diana Moss, vice president and director of the American Antitrust Institute, said antitrust laws alone may not be able to address some of these problems.
“These may not be your traditional, run of the mill exclusionary antitrust issues,” she said. “These may be really systemic, controlling, entrenched concerns which raise some issues about how we can fix it.
“I don’t think that … antitrust alone can solve this problem,” she said. “I really don’t. I don’t think the tools are there. I don’t think the political will is there.”
Bullard said a change needs to be made soon.
“In 1980 we had 1.3 million (cattle) producers. Thirty years later we’ve lost four out of every 10 producers,” he said.
The same thing already has happened with the hog and dairy industries, he said.
“This exploitation of the cash cattle market that can result in lower prices for producers is exploiting both producers and consumers,” Bullard said. “We need to establish again that we must maintain robust, competitive markets if we are going to ensure a viable economic community and economy for South Dakota.”