D.C. – U.S. cattle producers asked Congress to correct the deficiencies in the U.S. livestock market that presently give the nation's largest meatpackers a distinct pricing advantage over domestic cattle prices and have resulted in an erosion of competition for livestock producers. This was the message contained in testimony given today by R-CALF USA Region VII Director Eric Nelson during today's Senate Committee on Agriculture, Nutrition and Forestry Committee hearing on competition issues, titled “Economic Challenges and Opportunities Facing American Agricultural Producers.” Nelson is an Iowa cow/calf producer and feedlot owner.
“Independent livestock producers cannot match the economic or political power held by the nations' largest meatpackers,” Nelson said. “We cannot expect to level the playing field by correcting the deficiencies within our industry's framework through negotiations with the meatpacking sector. Ironically, we are in an intense competition to win back competition.”
Nelson also told the committee that the producers' success in winning back competition depended on Congress.
“Due to the radical changes that occurred within the structure of the U.S. cattle market – including the unprecedented consolidation of the meatpacking industry and the introduction and increased use of non-traditional contracting and marketing methods – the U.S. cattle market is producing results that are inconsistent with a competitive market,” Nelson said.
“Consumers are now paying nearly twice the value for fresh cuts of beef than what the cattle producer receives for each animal sold to a meatpacker,” he explained. “The price the consumer is now paying for fresh cuts of beef have more than doubled since 1990, and while the cattle producers' price increased by only $89 per carcass by 2006, the price the consumer paid for beef had increased $580 per carcass during the same period.
“The enlarged gap between the farm-gate price and retail price suggests that the meatpacking and retailing sectors have become less efficient at processing and/or selling beef, or they have acquired sufficient buying power to leverage down the price of cattle – or both,” Nelson noted.
“A competitive market would not have predicted this result, and these facts reveal that the current market structure -- from the early '90s on – is breeding inefficiency and windfalls for intermediaries at the expense of both producers and consumers,” he continued.
Nelson provided the committee with recent examples of how the largest meatpackers used their pricing advantage to leverage down domestic cattle prices.
“In February 2006, all four major packers – Tyson, Cargill, Swift & Co., and the National Beef Packing Co. – withdrew from the cash market in the Southern Plains for an unprecedented period of two weeks,” he cited. “As a result of the packers shunning the cash market, cash prices fell for fed cattle, replacement cattle and in futures markets.”
To correct the deficiencies in the present cattle market, R-CALF USA is asking Congress to incorporate its member policies into the 2007 Farm Bill. This includes a competition title that would immediately implement mandatory country-of-origin labeling, limit packer ownership of livestock, end the packers' use of certain anti-competitive captive supply contracts, strengthen and enforce the Packers and Stockyards Act, improve price transparency, and allow interstate shipment of state-inspected beef.
Note: To view Nelson's testimony on behalf of R-CALF USA, please visit the “Competition Issues” link at www.r-calfusa.com. Or, contact R-CALF USA Communications Coordinator Shae Dodson at the e-mail address or phone number above.
R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) is a national, non-profit organization and is dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA represents thousands of U.S. cattle producers on both domestic and international trade and marketing issues. Members are located across 47 states and are primarily cow/calf operators, cattle backgrounders, and/or feedlot owners. R-CALF USA has more than 60 affiliate organizations and various main-street businesses are associate members. For more information, visit www.r-calfusa.com or, call 406-252-2516.