Crusading for Marketplace Safeguards, Then and Now

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GUEST AUTHOR: Joe Maxwell | Organization for Competitive Markets | @ocm_tweets
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Joe Maxwell is a fourth generation hog farmer and former lieutenant governor of Missouri.

Today, 71% of America’s poultry growers live below the federal poverty level; since 1980, 90% of U.S. hog farmers and 41% of U.S. cattle producers have gone out of business, and nearly one million U.S. family farmers have been driven off the land. At the same time, consumers have fewer choices at the grocery store, and the largest multinational food companies and retailers are in position to charge consumers much more for their food than what is reflected in the price the farmer is paid.

With cattle producers seeing the price they are paid for a calf dropping by $500 – nearly half what it was a little over a year ago – and the majority of poultry growers being paid amounts that keep them living below the poverty level, rural communities suffer. When the farmer is paid less than market value, they have far less money to spend at the local hardware store, feed mill, local car dealership and retail stores. The large multinational food companies that have taken over the food system do not do business with local merchants, leaving less money those small business women and men can make and less their rural schools, fire districts and other vital services will receive.

A huge contributor to this marketplace reality is the heavy concentration of the U.S. markets by the top four meat packing and processing companies operating in the U.S. The practical outcome of heavy concentration is that independent family farmers and ranchers have only one or two processors in their market area with which to do business and sell their agricultural goods. This results in a lack of a competitive market that would normally ensure fair pricing to the farmer and for the consumer. These large companies can dictate all of the terms and conditions of the market: unfair prices, unfair contract systems that pit farmers against each other, and practices that are predatory and retaliatory for those who speak out.

However, this is not the first time in America’s history U.S. consumers and farmers have seen this abuse of the marketplace. Over a century ago, the former Roughrider, Teddy Roosevelt, became a populous president by taking on the big companies. In the early 1900s, the largest companies were controlled in trusts by very wealthy Americans. Because these wealthy individuals used various predatory market practices and employed their influence with government, they became known as the Robber Barons. To curb these abuses, Teddy Roosevelt signed the Sherman Act, which later led to the adoption of the Clayton Act. These acts established the first two market safeguard legislative packages. Addressing the meatpacking industry (those that slaughter, process, package and distribute meat products), the Meat Inspection Act and the Pure Food and Drug Act were passed in 1906. Because of his hard line against those who abused the market and its consumers, history has named Teddy Roosevelt the “Trust Buster.”

Following up on Roosevelt’s successes, President Woodrow Wilson ordered an investigation of the entire food system. His action was in response to an outcry from American farmers as well as his own concerns that the increased cost of living for all Americans was the result of actions of the five largest meatpackers – Armour, Cudahy, Morris, Swift, and Wilson (Big 5). Wilson feared the Big 5 were manipulating the market and causing artificially higher prices for consumers and lower payments to farmers. Wilson ordered an investigation, which determined in 1919 that the Big 5 were indeed manipulating the market and defrauding consumers and farmers.

In response, Wilson and the Congress acted by passing the Packers and Stockyards Act of 1921, a legislative package that provided for market safeguards within the food system. It provided for basic anti-trust protection, addressing anti-predatory and retaliatory market practices. This act prohibited packers from engaging in unfair and deceptive practices, manipulating prices, creating monopolies, and engaging in other anti-competitive behavior. By 1976, the Big 4 meat companies only controlled about 25% of the market, and it was functioning as a fair and transparent marketplace.

So, how have we now returned to the same place we were when Teddy Roosevelt started his crusade? Through a series of court decisions, the Packers & Stockyards Act has been weakened, and the past several presidential administrations have failed to enforce the remaining marketplace safeguards. Today, in the beef industry alone, four companies control over 80% of the market. This excessive control has allowed a few companies to abuse the marketplace through collusion and retaliatory and predatory practices, just like they did in the early 1900s.

Farmers and consumers deserve a market that delivers consumers choices of healthy and safe foods at a fair market price, while paying farmers the value of their risk and labor. But until consumers and farmers demand such a food system, we will not have one. Through a populous movement that began with Trust Busting Teddy Roosevelt to the fair-minded Wilson administration, Americans demanded and achieved positive change. We need to do the same today by joining together to demand that the Trump Administration enact and implement new Farmer Fair Practices Rules that would re-strengthen the Packers & Stockyards Act. The P&S Act is administered by the Grain Inspection, Packers and Stockyards Administration (GIPSA) of the United States Department of Agriculture.

These three rules, one an interim final rule and the other two proposed rules, address today’s most egregious marketplace abuses:
1. The interim final rule, Clarification of Scope, will clarify the position of the Department of Agriculture that a farmer does have the right to go to court to make a claim a big packer has caused him harm through anti-competitive acts.
2. Proposed rule, Poultry Grower Ranking Systems, establishes criteria that GIPSA may consider when determining whether a company has used a poultry-grower ranking system to compensate a poultry grower in an unfair, unjustly discriminatory, or deceptive manner, or in a way that gives an undue or unreasonable prejudice or disadvantage. This will stop the practice of pitting one farmer against others when both deserve a fair contract.
3. Proposed rule, Unfair Practices and Undue Preferences in Violation of the Packers and Stockyards Act, would establish criteria to protect the legal rights of farmers.

The Organization for Competitive Markets is calling on every supporter of family farmers, consumers and open and fair markets to visit www.competitivemarkets.com/supportgipsa to take action in support of the Farmer Fair Practices Rules.

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