For many congressional watchers, the bill is a non-issue.
Rep. Bruce Braley (D-Iowa), introduced legislation late last month that would make it unlawful for meatpackers to own or feed livestock intended for slaughter. According to Braley’s office, the proposed legislation, offered as an amendment to the Packers and Stockyards Act, is aimed at counteracting the trend of vertical integration in the livestock industry, which he claimed promotes anti-competitive behavior and hurts smaller family farmers and producers in Iowa.
The bill is similar to one introduced in the Senate last month by Iowa’s two senators, Republican Chuck Grassley and Democrat Tom Harkin.
“This bill is about protecting Iowa family farms,” Braley said in a statement. “The increasing consolidation of the meatpacking industry has put downward pressure on livestock prices, which in turn hurts Iowa farmers. Now, meatpackers have been looking toward vertical integration to stifle competition.”
Looking to vertical integration? In case Rep. Braley hasn’t been paying attention, vertical integration is a strategy that every industry has been “looking toward” for at least the last three decades. The question at hand is whether vertical integration has been overall a positive for industry, and whether there is, or ought to be, any limits to its ultimate conclusion: dominant control over an entire industry by a handful of mega-operators.
To be fair, Braley’s bill excludes packers so small they’re not required to participate in the Mandatory Price Reporting Program and exempts farmer-owned co-ops in which the members own, feed or control their own livestock.
More importantly, although I’m no legal expert, the bill appears to exempt forward contracting from the proposed new rules, as well. To quote from the bill:
“It is unlawful for a packer to own or feed livestock directly, through a subsidiary, or through an arrangement that gives the packer operational, managerial, or supervisory control over the livestock, or over the farming operation that produces the livestock, to such an extent that the producer is no longer materially participating in the management of the operation with respect to the production of the livestock.”
Agreeing to a forward contract obligating both parties to a pre-priced, pre-arranged sale doesn’t seem to fall under Braley’s proposed ban, as least as I read it.
That’s critical, because forward contracting has proven to be an important tool for both processors and packers. When earlier congressional efforts to restrict that option surfaced, the argument against it was simple and elegant: It takes both parties to agree to a contract. If it’s harmful to producers (or packers), then don’t sign the papers!