Tomorrow, the USDA will announce the publication of a new draft rule regarding how meatpacking corporations must deal with farmers and ranchers in the procurement of livestock. The administrative rule establishes a definition for what constitutes an “undue or unreasonable preference.”
Background… The Packers and Stockyards Act specifically prohibits price discrimination by meatpackers against smaller, family farmers and ranchers. Specifically, the Act makes it unlawful for packers to “… make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever.”
“It’s been a long time coming. The Center for Rural Affairs has been after USDA to write this rule for almost 15 years. Family farmers and ranchers have asked for decades for nothing more than fair access to livestock markets that treat them equitably,” said John Crabtree of the Center for Rural Affairs.
According to Crabtree, USDA has not effectively enforced the Packers and Stockyards Act for decades. For example, packers routinely pay five, six or even ten cents per pound – even more in some cases – in purely volume-based premiums to the largest hog producers just because they are large.
“These sweetheart deals for large volume producers have become commonplace, but no less a violation of the Act,” said Crabtree. “Six cents per pound may not sound like much of a discount, but, for a family farmer with 150 sows in a farrow-to-finish operation it amounts to receiving $56,000 less annually for hogs of the same quality, simply because he markets fewer hogs.”
The draft rule was written with the authority granted Secretary of Agriculture Tom Vilsack under the Packers and Stockyards Act. The Secretary was required to write the rule by a provision in the Livestock Title of the 2008 Farm Bill.
“That is precisely why the Center for Rural Affairs worked so diligently during the last farm bill debate to secure the provision compelling the Secretary of Agriculture to define what constitutes an ‘unreasonable preference,’” Crabtree explained. “It became obvious that USDA would never make this move unless Congress forced the issue. However, to Secretary Vilsack’s and Director Butler’s credit, they had the courage to take that farm bill provision and run with it, resulting in a strong draft rule.”
The following is a short guest opinion that was distributed by the Center for Rural Affairs on Monday, June 14, 2010.
A Reasonable Hope
By John Crabtree, firstname.lastname@example.org, Center for Rural Affairs
Meatpackers have given huge volume-based premiums to the largest hog and cattle producers for decades, helping them drive smaller, family farm and ranch livestock producers out of business. USDA has been lackluster in holding packers accountable for this price discrimination and other “sweetheart deals” they provide to the largest livestock producers, despite such treatment being a clear violation of the Packers and Stockyards Act.
That is precisely why the Center for Rural Affairs worked so diligently during the last farm bill debate to secure the provision compelling the Secretary of Agriculture to define what constitutes an “unreasonable preference.” There wasn’t much attention to that provision back then, and the Center for Rural Affairs didn’t have many allies on the issue, but we prevailed.
Unofficial USDA public comments indicate that the draft rule will be released in mid-June. The USDA – Justice Department antitrust workshops have a lot more people paying attention now. And once USDA publishes their new rule, the packers will complain a lot, if it’s any good. Stay tuned at www.cfra.org/competition to find out more.
Overseeing America’s livestock markets is the most thankless of jobs. However, family farmers and ranchers have learned that the absence of leadership in this role leaves governance to those who pursue power for their own narrow ends over the common good.
Progress comes when people of hope and vision put good ideas on the table of governance. I hope and expect that Secretary Vilsack will pick up this good idea and carry it forward.
Posted by Kaci Switzer