Seeking a return to competition in U.S. livestock markets, the letter identifies increased packer concentration, the thinning of the competitive cash market and attendant increase in Alternative Marketing Arrangements (AMAs) as key factors in threatening producer profitability and resulting in fewer producers participating in livestock markets.
Pointing out that the packer concentration problem of today is worse than it was when the PSA was passed over 100 years ago, the letter explains the uniqueness of the PSA – that it is “antimonopoly legislation, separate and apart from the nation’s antitrust laws.” The attorneys general then suggest the PSA may be able to address the effects of past packer mergers, which have enabled concentrated packers to charge higher prices to consumers, while paying producers less for their livestock.
They further suggest that Vilsack should appropriate money from the American Rescue Plan Act of 2021 for a grant that would enable state attorneys general to both investigate and bring actions in agricultural markets. They explain that while state attorneys general can have a significant impact on market concentration, the lack of resources available to them in their respective states currently limits what they can do.
Urging greater enforcement of the PSA to address what the letter describes as the “troubling trend that AMAs and vertical integration pose” to markets, the attorneys general explain that the introduction and promotion of AMAs, which are exclusive contracts that create captive supply chains, is one of the “most notable effects of market power” in livestock markets. The letter states that AMAs “deplete packer and processor demand in cash markets, which suppresses prices and makes producers more beholden to packers and processors.”
The attorneys general urge Vilsack to consider whether the AMAs are tools that distort price discovery and other market conditions in violation of the PSA.
Of all the suggested reforms for which to improve competition in livestock markets, the attorneys general make clear that none are a “substitute for maintaining a vibrant and open spot market, especially to the extent the AMAs tie pricing to a cash market.” They explain that if the cash market is suppressed by captive supplies like AMAs, “then even the AMA producers lose in comparison to a robust and active cash market.”
The letter reinforces this concern by stating that AMAs create a problem for all producers because moving demand away from the cash market, “not only decreases the market prices but also reduces the eventual price paid to the producers who entered AMAs tied to the cash market price.”
R-CALF USA CEO Bill Bullard said the significance of this letter signed by 16 state attorneys general cannot be overstated. “It confirms concerns our organization has expressed to Congress and the executive branch for many years and it counters the call to maintain the status quo espoused by leading industry-oriented agricultural economists and packer-aligned producer groups.”
The congressional letter called on Garland to take action to protect the nation’s cattle farmers and ranchers from going broke due to inexplicably low cattle prices and protect American consumers from paying over-inflated beef prices at their grocery stores.
“If ever there was a time that meaningful and lasting cattle market reforms could be accomplished, it is now!” Bullard said adding, “We greatly appreciate the leadership of the state attorneys general and members of Congress who have stepped up to help provide lasting relief to cattle producers and consumers.”
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February 04, 2022 at 08:04PM
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