Commentary...

2007 Farm Bill must address
competition and concentration

By the Organization for Competitive Markets

September 1, 2005

The Organization for Competitive Markets (OCM) is launching the effort to include pro-competition provisions in the next U.S. Farm Bill. OCM joined, in a letter to Congress, more than 200 other organizations representing farmers, ranchers, consumers, labor, and faith-based groups to launch this effort.

"The federal government needs to establish and enforce the rules of the marketplace," said OCM President Keith Mudd. "Congress should focus upon increasing choice, price, and entrepreneurship for America's independent farmers."

The USDA is now holding hearings around the country seeking comments about the next Farm Bill. Agriculture Secretary Mike Johanns has not included competition and market fairness among the topics of USDA concern.

Mudd continued:

"Today, a small handful of corporations dominate the nation's food supply, and the concentration continues to accelerate. Price manipulation risks increase accordingly. Livestock producers, in some areas, have only one packer available, and no competition. Poultry growers are forced into deceptive, changing contracts which take away their Seventh Amendment right to a jury trial in a dispute. Smithfield Foods is buying cattle feedlots with enough production to supply 90 percent of its needs, if it buys the Swift Foods cattle processing plants."

OCM is urging Congress to enact the following legislation in the 2007 Farm Bill:

• Prohibition on Packer-Owned Livestock: Packer-owned livestock is a major market tool for large meat packers. This practice fosters industrial livestock production, and freezes independent farmers out of markets. Prohibiting packer-owned livestock addresses the problem of captive supplies, which packers use to manipulate markets.
• Producer Protection Act: This legislation would set minimum standards for contract equality in agriculture, by addressing the worst abuses of production contracts. The legislation would include:
  1. clear disclosures of producer risks;
  2. prohibit confidentiality clauses;
  3. prohibit binding arbitration in contracts of adhesion;
  4. recapture of capital investment, so that contracts that require a significant capital investment by the producer cannot be capriciously canceled without compensation; and
  5. a ban on unfair trade practices including "tournament" or "ranking system" payments.
• Captive Supply Reform Act: This legislation would bring secret, long-term contacts between packers and producers into the open, and create a market for these contracts. The Captive Supply Reform Act would restore competition, by making packers and livestock producers bid against each other to win contracts. Currently, forward contracts and marketing agreements are negotiated in secret, in a transaction where packers have all the information and power, with the end result that these contracts and agreements depress prices, and shut small and independent producers out of markets.
• Closing Poultry Loopholes in the Packers & Stockyards Act: The USDA does not have the authority to bring enforcement actions against poultry dealers. The P & S Act omits this authority. This legislation would clarify that USDA's authority over poultry applies not only to broiler operations, but also to growers raising pullets, or breeder hens.
• Mandatory Country of Origin Labeling (COOL): COOL was passed as a provision of the 2002 Farm Bill. This measure allows consumers to make informed food purchases, as to where the products were grown and processed. It also showcases U.S.-grown-and-processed food products. This legislation would limit the ability of global food companies to source farm products from any country, while passing them off as U.S. in origin. Meat packers and retailers have, thus far, successfully stymied efforts to implement the law. Congress should immediately implement COOL, to benefit both domestic producers and consumers, as intended in the current law.

"The upcoming Farm Bill represents a new chapter for America's agricultural producers," noted Mudd. "This is an opportunity to correct the imbalance of market power and influence. We ask Congress for nothing more than fair, competitive markets, which can be easily achieved, by incorporating certain mechanisms into farm bill legislation. OCM will lead this effort in the upcoming farm bill debates."

The Organization for Competitive Markets is an independent, nonpartisan, nonprofit public policy institute working for American food producers, consumers, and rural communities.