In June 2010, the U.S. government provided some simple clarifications to the law that governs the relationship between livestock producers and the meatpackers and processors who buy their animals. This proposed change, known as the Grain Inspection, Packers and Stockyards Administration (or GIPSA) rule, would help to ensure fairness and bargaining rights for individual producers and restore competition to agricultural markets. Predictably, it prompted immediate and vigorous backlash from meat processors.
These critics of the GIPSA rule claim it will “kill jobs” and often cite one of several flawed economic analyses commissioned by the American Meat Institute, which represents companies that process 95 percent of red meat and 70 percent of turkey in the U.S., according to its website. These so-called economic data are laughable. Anyone who has been paying attention to what has been happening to livestock production in this country over the past 30 years must ask the question, “Kill jobs? Compared to what?” More than one million beef and hog farms have gone out of business since 1980 due to the current anti-competitive and abusive practices by processors. In 1980, there were 1.3 million beef cattle operations. Today, only 740,000 remain. The decline in hog operations has been even more dramatic. Thirty years ago, there were 660,000 hog farms. Today, there are only 67,000. Last year alone, 2,300 hog producers went out of business. The GIPSA rule is one of the few ways farmers can begin to reverse this trend.
Market concentration is a large reason why packers are able to impose their will on small producers. Economists agree that any market is harmed once concentration of the top four companies in an industry reaches around 40 to 60 percent. Currently, the top four beef packers command control over 81 percent of the sales of cattle for slaughter in the U.S., and the top four swine processors control about 65 percent of hog sales. Clearly, livestock markets have become uncompetitive. These levels of concentration give an unfair advantage to large packers, who use their leverage to force producers to accept unfavorable terms during business negotiations, reducing their already-slim margins and ultimately driving them out of business.
The proposed GIPSA rule gives America’s family farmers and ranchers the opportunity to participate in a fair and open market. This rule would protect farmers and ranchers by ensuring that they will no longer have to prove that the abusive business practices employed by a processor against a farmer or rancher causes competitive injury to the entire livestock marketplace. The proposed rule would simply require the producer to prove that the abuses damaged his operation.
We are losing more and more of these small businesses every day. The job loss numbers cited above do not even take into account the number of beginning farmers who are being prevented from entering the livestock industry because they simply cannot compete. It’s time to implement the GIPSA rule without delay, both to protect the few remaining independent farmers and ranchers who have survived, and to ensure the future of family agriculture.
Roger Johnson is the 14th President of the National Farmers Union. Prior to his post at NFU, Johnson held the position of Agriculture Commissioner in North Dakota for 12 years and his family farms in Turtle Lake, N.D.
The opinions expressed in this commentary are solely those of Roger Johnson.