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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

The Administration’s Misdirected War on Intensive Livestock Production

11/23/2023

The initiatives directed against intensive livestock production focusing on the chicken segment of the poultry industry were evident during the Obama Administration.  Secretary of Agriculture, Tom Vilsack, together with then Attorney General Eric Holder, arranged a series of staged regional listening sessions to create a groundswell for regulations to shift the balance of interaction between contractors and integrators.  In the event, although regulations were framed, their implementation was cancelled by the intervening Republican Administration.

 

With every prospect of a change in Administration, a two-pronged attack on protein production has been intensified jointly by the Department of Agriculture and the Department of Justice. Secretary of the USDA, Tom Vilsack, citing the July 2021 Presidential Executive Order on Promoting Competition, has issued a rule under the Packers and Stockyards Act to force intended transparency and ‘fairness’. Notwithstanding the absence of evidence to the contrary the policy of the Department appears to be to shackle integrators with onerous reporting requirements and overt intervention into the basis of contract relationships between integrators and growers.

 

The intended rule will retroactively amend as many as 25,000 grower contracts according to the National Chicken Council.  The requirement that contracts should specify minimum annual placements and stocking densities will prevent integrators from responding to market pressures.  The intended final rule will impose additional costs that will ultimately be borne by a wide range of stakeholders including shareholders and consumers. 

 

Andy Green, a Senior USDA Advisor responsible for “fair and competitive markets”, stated “It is high time that poultry growers get the benefit of robust transparency-upfront and ongoing-to clean up the broiler chicken market of deceptive practices.”  He added, “This Poultry Transparency Rule lays down a powerful marker that the USDA stands on the side of marketing integrity and fairness for farmers.” The USDA will appoint a Chief Competition Officer working within Agricultural Marketing Services to implement policy, establish priorities and support enforcement of the Packers and Stockyards Act in collaboration with states Attorneys General.

 

Mike Brown, President of the National Chicken Council, responded to the “Poultry Transparency Rule” that he characterized as “specifically designed to chum the water for lawsuits”.  He further stated, “This is the latest example of Bidenomics pushing increased regulations, red tape and costs onto businesses causing record inflation and input costs and threatening food security and potentially raising grocery bills even further for Americans.”

 

The Department of Justice has been active in attempting to restructure the protein industry.  David Hamilton and colleagues at DLA Piper reported on a presentation by Michael Kades, Deputy Assistant Attorney General in the DOJ Antitrust Division.  Kades addressed inherent Administration concern over concentration across agricultural markets.  Consolidation and economies of scale have developed as rational economic realities in a competitive environment.  Kades expressing his personal opinions on markets and competition and the role of government in addressing with real or perceived inequities is naturally, a strong supporter of antitrust enforcement.  He considers that the prevailing economic thought during the 1980s relating to free market enterprise “opened the door to rising concentration across agricultural markets”.  He considers that the government has a role, if not an obligation, to suppress market power especially if created through exploitation of farmers and livestock producers. 

 

Kades draws on history by noting that between 1920 and 1980, the then five largest meat packers responding to anti-trust legislation, experienced a decline in market share from 80 percent to 25 percent following DOJ intervention in 1920.  Subsequently, through a process of acquisitions and consolidations, four major companies now control 80 percent of beef packing capacity reverting to the situation pertaining in the early decades of the previous century.  Kades is also concerned over the concentration in the corn seed market with four companies controlling 85 percent of output. Kades attributes consolidation to the loss of 100,000 family farms between 2011 and 2018. 

 

The Department of Justice under the present Administration has been active in enforcing compliance with the 1921 Packers and Stockyards Act.  The Department filed a civil complaint against Koch Foods relating to termination penalties for contractors.  The Antitrust Division of the DOJ intervened in the merger of Wayne Farms and Sanderson Farms for alleged failure to disclose risks relating to contract penalties.  In Little v Cargill, the Defendants agreed to improved transparency and other conditions to enable the transaction to proceed.         

 

Kades pointed to a consent decree negotiated with the Department of Justice concerning restitution of pay to workers deprived of fair wages as a result of alleged collusion and suppression of competition over a 20-year period.

 

The Department of Justice has filed a complaint alleging that AgriStats through its benchmarking reports encouraged integrators in pork, turkey and chicken to manipulate production with the intent of increasing prices.  This contention is contested by financial reports released by Tyson Foods and Pilgrim’s Pride that fail to demonstrate super profits that would conceivably arise from diminished competition. Enigmatically both companies have recently posted losses attributed to falling prices in response to overproduction.

 

Deputy Attorney General Kades emphasizes that the “whole of the Government is committed to promoting competition in agricultural markets and through litigation will attempt to reverse long-term coordination and exclusionary conduct”. The Department of Justice will allocate attorneys and staff to evaluate the actions of major protein producers with the objective of intensifying antitrust enforcement in this sector of agriculture.

 

Intensive livestock producers will be hard pressed to deploy appropriate, defensive responses to a combined initiative by the USDA and the Department of Justice intent on dismantling intensive livestock production. The combined actions of USDA and the DOJ will ultimately be to the detriment of farmers, consumers and other stakeholders.


 
Copyright © 2024 Simon M. Shane