İçeriğe geçmek için "Enter"a basın

Livestock and Poultry Competition Reform on the Horizon

Livestock consolidation and concentration have been gaining traction in Washington, D.C. Last month, President Biden signed an Executive Order on Promoting Competition in the American Economy, signaling a whole of government effort to address concentration and consolidation in US markets. Several initiatives announced could have a far-reaching impact on agriculture, including the intent to strengthen enforcement of the Packers and Stockyards Act (P&SA) to protect farmers and producers from anticompetitive practices. In addition, a bipartisan bill introduced in the Senate and the House of Representatives could complement these rules by adding capacity to enforce P&SA violations.

Background

NSAC applauded the Executive Order on Promoting Competition in the American Economy as a significant step in the right direction, as did our members (including the Land Stewardship Project), given that agricultural markets have become increasingly concentrated in recent decades. 

Today, just four corporations are responsible for 65 percent of sales in the global agrochemicals market, 50 percent of the seed market, and 45 percent of farm equipment sales. In the US, just four companies represent 73 percent of beef processing, 67 percent of pork processing, 54 percent of chicken processing, and 45 percent of the retail grocery market. This concentration hurts farmers and consumers while returning maximum profits to corporations. This inflates the prices that farmers must pay for inputs, drives down commodity prices, and restricts the ability of farmers to compete in the marketplace

These issues have gained traction in recent months in Congress, specifically the consequences of concentration in cattle markets. Hearings were conducted to assess the state of the beef supply chain in the Senate Agriculture Committee, the Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights, and the House Subcommittee on Livestock and Foreign Agriculture. These hearings explored the inherent risks of a supply chain built on the pursuit of efficiency maximization at the expense of resilience and we have seen the consequences of this system in the wake of the COVID-19 pandemic. 

Yet these consequences have reverberated far beyond the meat and processing industries, too, in the poultry and produce sectors. Supply chain disruptions are only one of the many harms generated by unchecked concentration and consolidation across the U.S. food system during the last half century. Now is the time to act to redress all harm to farmers, ranchers, and rural communities created by the corporate capture of the food system. The recent Executive Order, as well as complementary legislation recently introduced in Congress, are posed to begin the process of restoring fair competition to our livestock and poultry industries. 

Agriculture Provisions in the Executive Order

The Executive Order on Promoting Competition in the American Economy (EO) specifies a number of actions that the Administration will take to address anticompetitive practices in the agriculture industry. The EO included the intent to strengthen the P&SA, define when meat can bear the “Product of USA” label, and limit the ability of farm equipment manufacturers to deny farmers the “right to repair” machines. In addition, the EO includes general provisions to strengthen the mandate and capacity of the Department of Justice (DOJ) and Federal Trade Commission (FTC) to enforce antitrust and fair competition laws. 

Packers and Stockyards Act Rules

The P&SA was passed a century ago to combat anticompetitive practices in the livestock and poultry industries as corporate meatpackers and processors (also known as integrators) consolidated and amassed substantial power over producers. The commitment to begin a new rulemaking process to strengthen the P&SA follows on the heels of an announcement from the United States Department of Agriculture (USDA) earlier this summer, and we expect the proposed rules to be issued this Fall. 

Together, according to the EO, these new rules will make it easier for farmers to bring and win claims under the P&SA, stop chicken processors from exploiting and underpaying chicken farmers, and adopt anti-retaliation protections for farmers who speak out about bad practices. 

To do this, the proposed rules will include language which clearly identifies practices in the livestock and poultry sectors that are unfair, unjustly discriminatory, or deceptive and thus in violation of the P&SA. This will counter the harmful final rule issued in the final weeks of the Trump Administration, which would effectively offer legal safe harbors for corporate integrators to perpetuate anticompetitive practices.

Just this week, in line with the spirit of the EO, USDA under the Biden Administration announced guidance to mitigate potential harm in its implementation of this rule, by specifically stating that the criteria outlined therein are not safe harbors.

In addition, the proposed rules are expected to prohibit unfair grower ranking systems, namely the poultry tournament system. This system pits farmer against farmer, ensuring that half of all farmers in the tournament will always lose, and bases the selection of winners and losers on factors outside the control of contracted producers and determined solely by big chicken companies (e.g. the quality of feed and chicks). Integrators have been known to manipulate these two variables in order to punish contract growers who have spoken out against industry abuses, almost systematically against farmers of color, which exemplifies the need for the proposed rule to prohibit retaliation against growers.

Finally, the proposed rules are expected to reinforce a longstanding position of both Republican and Democratic Administrations, and what the underlying law plainly says: that the P&SA does not require proof of competitive injury to the entire livestock or poultry industry in order to find that a multinational corporation violated the P&SA in a way that harms an individual farmer. Not only is this a ludicrous standard that no one should have to meet in order to see justice served, it is not written anywhere in the law despite courts in recent years reinterpreting the statute to require that elevated standard.

NSAC strongly supports these new rules that will make it easier for farmers to bring and win claims, stop chicken processors from exploiting and underpaying chicken farmers, and adopt anti-retaliation protections for farmers who speak out about bad practices. This has been more than a decade in the making, and this time it must be done right. 

Product of USA Label

Under current labeling rules, meat can be labeled “Product of USA” if it, at a minimum, passes through a U.S. processing plant. For example, this label may be applied to meat raised overseas and then merely processed into cuts of meats in the United States.

In addition to economically harming farmers by creating unfair competition, such a policy misleads consumers. Consumers are increasingly looking for locally, regionally, and domestically produced food and farm products, including meat and meat products. When consumers purchase meat products with the “Product of USA” label on it, they expect the product or its primary ingredients were domestically produced. To allow meat and meat products that were not domestically produced to carry such a label is clearly misleading. 

NSAC supports the Administration’s directive in the EO for USDA to consider issuing new rules defining when meat can bear “Product of USA” labels, so that consumers have accurate, transparent labels. 

Right to Repair

Similar to the livestock and poultry industries, the farm equipment sector is highly consolidated. Four companies, chief among them John Deere, control at least 45 percent of global farm machinery sales. They exert this market influence in a number of ways: by using patents to prevent farmers from repairing their own heavy machinery through independent repair technicians, or from continuing to maintain equipment that is no longer supported by the manufacturer. This multiplies the profit streams for companies and perpetuates the need for farmers to continue to invest in the newest available equipment. 

In recent years, farmers have launched a “right-to-repair” movement to combat this practice, though until now its advocates faced a significant uphill battle. However, thanks to the EO, farmers will soon have the right to repair their tractors. The EO directs the FTC to limit powerful equipment manufacturers from restricting people’s ability to use independent repair shops or do DIY repairs. This will impact not only the agriculture industry, but all industries where this practice is common, including the technology industry. 

General Antitrust and Competition 

Beyond specific directives which will promote the restoration of fair competition across the agriculture industry, the EO includes a number of general provisions to strengthen the enforcement of antitrust laws and the promotion of fair competition across the American economy. Though these are not all specific to the agriculture industry, they will prove pivotal to mitigating the rapid consolidation and concentration of corporations in the agriculture industry.

The EO calls on the DOJ and the FTC, as the leading antitrust agencies, to enforce antitrust laws vigorously. The EO also recognizes that the law allows them to challenge prior bad mergers that past Administrations did not previously challenge. In addition, it establishes a White House Competition Council to monitor progress on finalizing the initiatives in the EO and to coordinate the federal government’s response to the rising power of large corporations in the economy. These are significant directives which elevate the mandate of these agencies to act, for the first time since their respective authorities were eviscerated during the Reagan Administration.

The White House Competition Council will, among other priorities, be charged with completing a number of reports to determine what future actions may be necessary beyond the scope of this EO to promote fair competition – including reports that are specific to agriculture. This will include a report to review the intellectual property system, with the aim of building a system which incentivizes innovation but does not reduce competition in seed and other input markets. In addition, the group is charged with writing a report to improve small farmers’ and processors’ access to retail markets and to ensure they receive a fair return for their products.

The Executive Order on Promoting Competition in the American Economy represents a pivotal opportunity to advance reforms which mitigate the harmful impacts of rising consolidation and concentration across the U.S. food system on farmers, ranchers, and consumers. 

That said, the actions outlined in the EO are not a panacea – but merely a first step. The implementation of these provisions will need to be monitored and defended from bad actors in the years to come, and additional legislation will be needed to enhance the enforcement capacity of the USDA, DOJ, and FTC to see results. 

Special Investigator on Competition Matters

If passed, the bipartisan Meat Packing Special Investigator Act (S.2036) introduced in the Senate by Senators John Tester (D-MT), Chuck Grassley (R-IA) and Mike Rounds (R-SD) and the Meat and Poultry Special Investigator Act (H.R.4103) introduced in the House of Representatives by Reps. Abigail Spanberger (D-VA) and Mariannette Miller-Meeks (R-IA), could complement the upcoming Packers and Stockyards Act proposed rules and additional commitments from the Administration by increasing its capacity to enforce P&SA violations.

The Act, in both the House and Senate versions of the bill, will create the “Office of the Special Investigator for Competition Matters” within the USDA Packers and Stockyards Division, which oversees P&SA implementation. The USDA Special Investigator will have a team of investigators, with subpoena power, dedicated to addressing anticompetitive practices in the meat industry and enforcing antitrust laws. They will work in coordination with, and act in consultation, with the DOJ and the FTC.

In addition, in light of the recent ransomware attack against the country’s largest meat supplier, JBS (which further exposed the vulnerability of a meat processing industry that is reliant on a few multinational corporations), the newly created office will build a new bridge between USDA and the Department of Homeland Security, to ensure the continuation of the food supply, protect critical agricultural infrastructure, and safeguard national security. With a team of dedicated staff, USDA will have the ability to deeply investigate issues facing producers, safeguard producers by enforcing the P&SA, and protect our country’s food supply chain and national security. 

The only meaningful difference between the House and Senate versions of the Act is in its scope, and it comes down to the exclusion of two words: “by packers”. The Senate Meat Packing Special Investigator Act limits the authority of the Office of the Special Investigator for Competition Matters to issues concerning meat packers, thereby excluding the poultry industry, which is historically not included in that definition. In contrast, the House Meat and Poultry Special Investigator Act removes this limitation, effectively empowering the new office to address all competition issues relevant to the P&SA, including in poultry markets. 

We are optimistic that both chambers will be able to reconcile this difference in a way that protects all of our country’s livestock and poultry farmers and ranchers. 

NSAC helped to draft the first iteration of this bill, introduced in the Senate in 2007, to be included in the livestock title of the 2008 Farm Bill. It did not make it into the final version of that Farm Bill or any since, but the idea remained alive – and now its implementation would prove as critical as ever. The belief was then, and continues to be – especially in light of the Biden Administration’s recent commitments to strengthen the Packers and Stockyards Act – that new rules will ultimately make no difference if USDA does not build a team of professionals and lawyers dedicated to implementing and enforcing those rules. 

What’s Next? 

The Packers and Stockyards Act was passed in 1921 to protect farmers, ranchers, and consumers from unfair, deceptive, discriminatory, and monopolistic practices in the face of rising consolidation in the meat industry. Yet today, the size and influence of these corporations far exceed those conditions which inspired this Act and compelled Upton Sinclair to write “The Jungle,” thus introducing the American public to the horrors of the industry. 

The recent announcement of a deal between private protein and grain trading giant, Cargill, and agriculture-investment firm, Continental Grain, to acquire Sanderson Farms, the third-largest chicken processor in the United States, makes clear that the unprecedented consolidation plaguing agricultural markets has yet to even reach its peak – if it is allowed to continue unchecked. 

That is why NSAC strongly believes that it is past time to amend the 100-year old Packers and Stockyards Act and otherwise give USDA and additional agencies charged with antitrust enforcement the tools and capacity they need to keep pace with the rapid evolution of these industries and the plight of farmers, ranchers, and consumers in the modern day. 

To learn more about the need for competition reform in agriculture, read NSAC’s ongoing competition and antitrust blog series.

The post Livestock and Poultry Competition Reform on the Horizon appeared first on National Sustainable Agriculture Coalition.