Sen. Chuck Grassley of Iowa, a longtime advocate for fair markets, is reintroducing a bill to make it unlawful for meat packers to own livestock more than seven days prior to slaughter. Similar legislation has come up before, but the powerful packer lobby has always succeeded in killing it.
Aside from whether the bill has a chance this time, there's another question: If Congress bans meat packers from owing livestock, who will be left to buy ranchers' calves and stockers' and backgrounders' feeder cattle?
When packer ownership first became an issue in 1994 — a crisis during which the market fell $17 per hundredweight ($220 per head) in just six weeks — few understood the negative impacts of packer-owned livestock, also known as captive supplies. Well, now we know. The lack of price discovery is on everybody's radar screen, underscored by one of the most egregious market failures of all time: the 2015 cattle market meltdown, which saw billions of dollars of equity transferred from the independent cattle-feeding sector to the powerful meat packers and food retailers. With losses exceeding $600 a head, already crippled cattle feeders were essentially wiped out in 2015 — the largest capital drain ever experienced by the cattle industry.
Even by historic standards, the 2015 free-fall was a watershed. And history has been brutal: 1994 was particularly punishing. When market leader IBP (now Tyson) stepped out of the market for six weeks, other big packers no longer had a "boss cow" to follow for price leadership. More than 1,500 enraged cattlemen gathered in Omaha to protest the destructive price decline. Prices recovered $12 per hundredweight, but what was obvious to many sellers of finished cattle was confirmed in 1996 by a former IBP vice president: The biggest packers had agreed to basically cooperate rather than compete.
Then came the late summer of 2015 and the wrenching 30 percent drop in cattle prices. Even when the market hit record levels in 2014, producers were still short of their 1975 share of the consumer beef dollar by about $200 per head. It was a much-needed improvement, but it proved short-lived. While consumers continued to pay essentially the same for beef, cattle producers got shafted. Tragically, there weren't enough independent-thinking cattlemen left to even organize a protest. At least the feisty R-CALF organization stepped up and called for a congressional hearing.
While the plundering of producers ensued, Agriculture Secretary Tom Vilsack was asleep at the wheel by failing to enforce the 1921 Packers and Stockyards Act, intended to prevent another meatpacker monopoly. Instead, he celebrated lifting import restrictions on South American beef, giving greedy packers and retailers the leverage they needed to drive down U.S. prices to far lower South American values while inflating their own profits.
Banning packer ownership of livestock now isn't the solution it would have been had it been enacted when it was sorely needed. Years of de-regulation and antitrust neglect have allowed the biggest, most aggressive companies to gain monopoly control of our food supply. Competition is dead, and, without competitors, a true market can't exist.
Our founding father Ben Franklin described family farm agriculture as "... the only honest way [to acquire wealth], wherein man received a real increase of the seed thrown into the ground, in a kind of continual miracle, wrought by the hand of God in his favor, as a reward for his innocent life and his virtuous industry." Today's environment is more akin to Jurassic World. Rather than creating wealth from the land, the winner-take-all super-predator corporations are running a giant mining operation. No new processors, feeders or producers can succeed, even though new players are what we critically need to revive competition, restore market access and keep cattle prices honest.
If food security is important to Americans, we need far more than a ban on meat packer ownership of livestock. We must break the monopoly power of big retail, big meat packing and big food in general and create a pathway for family farmers and ranchers to re-establish their traditional connection with consumers.
An all-out effort must be made to rebuild a healthier family farm food system all the way from soil to table, giving new life to the most important sector in our economy — American agriculture.
Mike Callicrate owns Ranch Foods Direct in Colorado Springs.