Proposed Bills Would Generate Additional Competition
The cattle industry and policymakers agree – we need to increase U.S. beef packing capacity, ideally by adding new competitors to the marketplace. The Livestock Marketing Association is leading the charge to change an outdated rule keeping livestock auction owners from investing in small and regional packing plants. LMA is pleased to have great congressional partners in this effort, as well as the support of the National Cattlemen’s Beef Association, United States Cattlemen’s Association, American Sheep Industry Association, National Pork Producers Council and many state-based groups.
Livestock auction markets like mine are in the competition business. We take pride in working for our consignors. It is our job to get the top dollar possible for the livestock our customers trust us to sell on their behalf.
However, auctions can only serve the best interests of their consignors if there are multiple active bidders and buyers. Many auctions have fewer packer buyers than they once did due to consolidation. Some want to be part of the solution by investing in new or expanding packing facilities that can compete with other packers for livestock. In an auction, an additional buyer drives up competition and prices.
Unfortunately, an outdated regulation (9 CFR 201.67) prohibits livestock auction owners from owning or investing in meat packing businesses.
In today’s environment, where the cattle industry is focused on wanting more packers to compete for livestock, we should be encouraging investment in packing businesses, not prohibiting it. In fact, the public nature and competitive environment of a livestock auction makes procurement of cattle through the auction an ideal scenario, although unlikely to be the main procurement method for a large fed cattle plant.
The Amplifying Processing of Livestock in the United States Act (H.R. 7438) would help address this issue by allowing livestock auction owners to also own or invest in small and regional packing plants. The Senate companion bill is the Expanding Local Meat Processing Act (S.4709).
To understand why the prohibition existed in the first place, you need to think about the industry structure at the time. The Packer & Stockyards Act, which turned 100 last year, dates back to the terminal stockyards of the early 1900s and issues with a lack of separation between buying and selling agents in this environment. At that time, many producers sent livestock to terminal markets on railcars and were not present when they were sold. The market agency selling on commission in that context was an individual who represented livestock to the big packers, who all had slaughter facilities located alongside the terminal stockyards.
This predates the current, transparent method of selling livestock at an open auction to the highest bidder. Unlike the terminal stockyards of days gone by, sales at livestock auctions today occur in a sale ring with an auctioneer driving price up between competing bidders. Sellers and buyers both attend the auction and can raise concerns if they do not like the way the sale is conducted. In many cases, these auctions are also broadcast online for viewers and recorded.
In addition to the natural openness an auction environment brings, P&S Act regulations, such as 9 CFR 201.56, further require transparency. For example, P&S mandates livestock auctions sell consigned livestock openly, at the highest bid. The same regulation also requires disclosure to the seller when someone affiliated with the auction buys livestock out of the sale. These rules function well in other classes of livestock, such as calves or feeder cattle, where it is common for a buying business to have a common owner with the livestock auction and often the result is higher prices for the consignors.
Allowing livestock auction owners to invest in small and regional packers will create competition against large packing entities that already exist. Large packers will not be able to operate livestock auction markets as there is a threshold cutoff of 2,000 head of cattle/day or 700,000 head of cattle/year in the bills. This would keep the prohibition so livestock auctions could not invest in a packer greater than that size. At the same time, the current 10 largest beef packers would be prohibited from also owning or investing in an auction market. We’ve had LMA member auctions interested in owning local locker plants or being part of an investment group building a regional facility. In the case of a regional facility, we need to allow it to be a large enough scale to be successful. Balancing this with the desire to keep the largest packers from growing in market share is how the threshold cutoff was developed.
At the end of the day, perhaps the fundamental question is whether the government should control who is permitted to invest in packing capacity. Under current rules, USDA excludes a large group of knowledgeable and passionate livestock industry participants from creating more competition for slaughter livestock. I know many livestock auction owners who would rather not get involved in the packing industry, which is fine. The problem is they do not currently have a right to choose how to invest their funds and knowledge back into the industry.
It does not seem right that this prohibition exists and, at the same time, packers can currently buy and shut down livestock auctions and then use the facility as a buying station, which is a fixed facility drop off point for livestock in the country. These buying stations lack the benefit of a transparent auction setting to arrive at true price discovery. Producers are paid what that packer is willing to give that day, and that price becomes less competitive over time. Packers are also able to buy packing facilities from others and continue to operate them as packing plants, subject to DOJ review, whether or not these bills pass.
Regardless of how you feel about it, packers today can also legally own, finance or align themselves with feed yards. However, a livestock auction owner or manager cannot own or invest in a packing facility regardless of size, scope, if the auction owner is active in packer business decision making, or if the livestock processed are procured at the auction business or not. In one situation, we had a LMA member auction that also had a local meat marketing business. They were having cattle custom harvested in an unrelated facility and selling the meat.
USDA went after them, claiming the definition of packer is so broad that they were in violation of the rule having these two complementary businesses. In that case, the family had to separate the two businesses.
You can’t tell me that doesn’t feel like a double standard, with livestock auctions being subject to a different set of rules than other businesses in our industry.
This bill may not fix every issue the industry has with packing capacity and fed cattle marketing. It does not claim to. However, it is a big step in the right direction. In today’s environment, where the cattle industry is focused on additional shackle space and wanting more packers to compete for livestock, the benefit of new packers entering the marketplace far outweigh the risks contemplated by the dated regulation currently on the books.
Anyone with questions or ideas about these bills is encouraged to reach out to Livestock Marketing Association Vice President of Government and Industry Affairs and Legal, Chelsea Good, at firstname.lastname@example.org or 816-305-9540.
Source: Livestock Marketing Association
Environmental Footprint Research Discussed at Lamb Summit
The American Lamb Board’s benchmark research on the environmental footprint of the American lamb industry is within months of completion. Michigan State University researchers Richard Ehrhardt, Ph.D., and Erin Recktenwald, Ph.D., gave American Lamb Summit participants a preview of the study.
The focus of this research – funded by the mandatory American Lamb Checkoff – is collecting data from representative American sheep farms/ranches and feedlots related to greenhouse gas emissions. The four types of operations represented are: intensive production, intensive grazing, extensive grazing and range.
From this data, MSU researchers will compare the amount of greenhouse gases required to produce 1 kilogram of lamb from each production type.
“We must have solid, actual data on American lamb’s environmental footprint,” says ALB Chairman Peter Camino. “We need to have science to accurately tell our U.S. lamb story instead of the assumptive data that has put a black eye on our entire industry. Plus, as an industry, it’s time we have benchmark data so we are able to work on specific weaknesses and build on strengths.”
Major food production industries in the United States have completed research to establish GHG emissions per 1 kilogram of product, points out Ehrhardt. American lamb is grown and marketed in a variety of ways. The MSU project is the first of its kind, so extra care is being taken to develop measurements that can be used over time, he added.
Even though the research isn’t complete, ALB has increased its communications about sustainability during 2022. For example, earlier this year outreach on the benefits of grazing sheep for forage control in solar fields was popular.
“Grazing is a real benefit sheep bring, but consumers and influencers aren’t going to know that until we share our story,” says Camino.
ALB is completing a new documentary-style video on the benefits of grazing, featuring actual producers covering topics such as fire suppression and regenerative soil practices. In addition, food influencers from urban areas have been taken on sheep farm/ranch tours and information on sustainability will be collected in the upcoming National Lamb Quality Audit.
Idaho Offers Free Testing for Treasure Valley Producers
Calling all Treasure Valley (Idaho) sheep producers. The Idaho Sheep and Goat Health Board is offering free Scrapie Geno Testing for Idaho Sheep Producers in the Treasure Valley on Saturday at the Treasure Valley Livestock Auction Parking Lot, starting at 8 a.m.
Do you know your animal’s genetic code and why it’s important? Here is your opportunity to find out and help keep the Idaho flock safe and healthy for FREE. Normal cost would be more than $15 per head. All sheep breeds – aged 18 months to 5 years – are eligible to participate, and up to 30 per flock can be tested.
This will be an easy process. Pull in with your trailer and get in line. Your animals will not be unloaded from their trailer. Veterinarians from the Animal and Plant Health Inspection Service, along with staff from the Idaho Sheep and Goat Health Board and the Idaho Wool Growers Association will safely and quickly draw blood samples and you’ll be on your way.
Results will be given to you when the test is complete. Results are essential to help make management decisions for your flock.
Source: Idaho Wool Growers Association
Australian Wool Market Halts Early-Season Slide
The Australian wool market stopped its run of downward movements this week, recording an overall unchanged series. The national offering reduced by 10,577 bales to 44,786 bales. This reduction was due in part to the large falls of last week, which discouraged some sellers from the market.
Four sales into the new season and the total amount offered is tracking well above the previous season. There have been 204,219 bales put through the auction system for an increase of 20,350 bales – 11.1 percent more than the corresponding sale of last year. From the start of this series, the market quickly found a level similar to the previous week and generally traded within 30 cents of these levels throughout the week.
This was reflected in the individual Micron Price Guides for Merino fleece, which across the country ranged between -16 and +30 cents. These movements, combined with minimal movements in the crossbred section (the MPGs ranged from -3 to +5 cents), the oddments (the three Merino Carding Indicators fell by an average of just over 4 cents) and general losses in the skirtings of between 10 and 20 cents had the net result of an overall fully firm market.
After falling for the previous four selling series, the EMI finished the week unchanged at 1,342 Australian cents. The last time the EMI recorded no movement for the series was back in September of 2017. In an opposite trend to the previous week, a weakening AUD meant when viewed in USD terms, the EMI finished 18 cents lower.
As quantities in the West do not warrant a sale next week, the national offering reduces for the following series. Currently, there are 40,116 bales on offer, with only Sydney and Melbourne in operation. Next week is also host to the annual Wool Week, giving industry stakeholders the opportunity to come together at a series of events held in Melbourne.
Click Here for the Full Australian Wool Market Report.
Lenders Announced for Heirs’ Property Relending Program
The U.S. Department of Agriculture announced this week that Akiptan, Inc., the Cherokee Nation Economic Development Trust Authority and the Shared Capital Cooperative have been approved or conditionally approved as intermediary lenders through the Heirs’ Property Relending Program.
Once HPRP loans with these lenders close, these lenders will help agricultural producers and landowners resolve heirs’ land ownership and succession issues. Additionally, USDA encourages more intermediary lenders, including cooperatives, credit unions and nonprofit organizations to apply. Currently, more than $100 million of HPRP funding is available for these competitive loans.
Heirs’ property is family land that has been passed down to descendants without a will or deed to prove ownership. Without proof of ownership, it may become difficult for heirs to obtain federal benefits for farms and could force partition sales by third parties. Heirs’ property issues have long been a barrier for many producers and landowners to access USDA programs and services, and this relending program provides access to capital to help heirs find a resolution.
“Through this opportunity, heirs can formalize land ownership and succession issues, which have long prevented so many from accessing USDA programs and services,” said Zach Ducheneaux, administrator of USDA’s Farm Service Agency. “USDA is committed to revising policies to be more equitable and this program is an instrumental part of the effort to provide opportunities to bring and keep agricultural land in agriculture and allow producers nationwide to create generational wealth.”
USDA Looks to Level the Playing Field for Producers
The COVID-19 pandemic brought home to farmers, workers and consumers the harms caused by bottlenecks in the center of America’s agricultural and food systems. The pandemic exposed the risks and dangers created by many of today’s production systems, which value hyper-efficiency over competition and resiliency. Moreover, longstanding challenges of market concentration and unbalanced market power – which have been part of the agricultural sector for decades – have in many cases worsened. This report highlights the United States Department of Agriculture’s robust and aggressive plan to decrease concentration and increase competition in the agricultural sector and to safeguard against future harm to our nation’s agricultural and food systems.
Concentration undermines economic resiliency and robust price competition. It lowers farmers’ and ranchers’ earnings, hamstrings their ability to compete and limits the ability for rural economies to secure, robust, self-sustaining prosperity. President Joe Biden’s Executive Order on Promoting Competition in the American Economy puts competition at the core of the Biden-Harris Administration’s economic agenda and calls for a “whole-of-government approach” to promoting competition.
The historic Executive Order directs 72 specific actions across the federal government and includes important directives to USDA to support competition and fairness in livestock and poultry markets, seeds and other inputs, retail food markets and more. The steps are complementary to and supportive of the goals of the Executive Order on America’s Supply Chains.
Since President Biden issued the Executive Order on Competition in July, USDA has taken a range of actions to tackle competition issues in agricultural markets. To address these large and complex problems, USDA is using all of the tools available, including working in concert with the rest of the administration.
Among other USDA initiatives, the order included the following directive: to ensure that farmers have greater opportunities to access markets and receive a fair return for their products, not later than 180 days after the date of this order, submit a report to the Chair of the White House Competition Council, with a plan to promote competition in the agricultural industries and to support value-added agriculture and alternative food distribution systems.
This report responds to that directive and lays out USDA’s approach to promoting competition in agricultural markets.
Highlights of USDA’s efforts include:
- Launching an unprecedented multibillion dollar investment plan to directly incentivize competition in food processing and fertilizer, creating more market opportunities and input options for producers.
- Reinvigorating USDA’s century-old fair and competitive market laws to establish a regime that counters unfair and anti-competitive practices and empowers producers and growers.
- Partnering with the Department of Justice to enforce antitrust laws vigorously. This includes standing up a new one-stop shop at FarmerFairness.gov to make it easier to report complaints of potential violations, with confidentiality protections and whistleblower protections against retaliation for reporting criminal antitrust concerns.
- Working in concert with the White House and other agencies to call out bad actors and firms that are padding their profits at the expense of farmers, ranchers, workers and consumers.
- Partnering with the Federal Trade Commission to enhance access to retail markets for farmers and smaller food processors.
- Working with the Department of Commerce’s United States Patent and Trademark Office to promote access to affordable seeds, fertilizer and other inputs.
- Reviewing USDA programs to encourage fair competition and ensure that they are not inadvertently supporting systems and relationships that are prone to abuse.
- Providing technical assistance and support as Congress considers legislation to modernize and improve transparency and price discovery in livestock markets.
- Enhancing value-added market access and protecting those markets from consumer confusion.
- Promoting competition in transportation networks that producers depend on.
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