Grassley reintroduces rule banning packers from owning, feeding or controlling livestock
April 28, 2017
The reintroduction of Sen. Chuck Grassley's, R-Iowa, amendment to the Grain Inspection Packers & Stockyards Act is being met with mixed reactions in the cattle industry community.
Grassley, an elder statesman of the U.S. Senate, is proposing a rule making it unlawful for a packer to own, feed or control livestock intended for slaughter. This is a reintroduction oa an amendment that didn't pass in previous votes. At the same time, however, the Trump administration has placed a hold through Executive Order, to allow time to reexamine the Farmer Fair Practices portion of the GIPSA.
Gerald Schreiber, R-CALF region 2 director and a cow calf operator from Last Chance, Colo., is hopeful about the measure and the protection it could afford independent cattle feeders, a group he has seen dwindle in recent years.
R-CALF, Schreiber said, has a policy on the books staunchly against packer ownership of cattle.
"It's been in our policy for years and been updated," he said. "It's voted on by the membership and we're very firm on it. We feel it's detrimental to the industry."
Despite objections to packer-owned cattle their importance to the idustry is undeniable, especially given the end points of cattle before profits peak and possibly decline.
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"Packers are very necessary to the whole scheme of our business and they serve a function," Schreiber said. "In the 80s when they were allowed to start feeding their own cattle, it's morphed and evolved."
While he admits it might be tough finding enough support for the legislation to pass, and that the legislation isn't perfect, Schreiber is happy to see Grassley, whom he calls a champion for agriculture, keeping the issue at the forefront.
Grassley's piece of legislation is recurring but offers only a vague definition of packer-owned cattle. Part of the legislation Colorado Cattlemen's Association Vice President Terry Fankhauser finds troubling is its failure to take into consideration that some packers take possession of cattle prior to slaughter, to share cost and risk. The incidences in which packers go with an order buyer to purchase cattle, to eventually move them through a finishing phase, is rather insignificant according to Fankhauser.
Losing the independent feeders and their replacement with captive supply feeders, Schreiber said, is part of the problem. Captive supply feeder systems are based upon a cash market and, according to Schreiber, the cash market has become thin. Fankhauser agrees with Schreiber's analysis of the cash market.
"Most of the packer-owned cattle are owned in part for a very short period of time prior to slaughter," he said. "They do that to maintain supply into their market niche programs."
This practice also adds to price discovery. Superior's fed cattle auction is gaining numbers of cattle sold through it and, with it, more price discovery. The growth of the program benefits feeders and the packers who are purchasing the cattle offered.
"They say an auction is the fairest price origination tool out there because you look at the animals phenotypically, you do as much research as you want and you can keep raising your hand all day long and if you can bid it high enough, you can buy them if you can afford them," Fankhauser said.
This price then, becomes what producers hope would become the cash basis price that is then paired with various value-added programs.
"The cash base price, or the basis, is almost non-existent," he said. "That being said, there is movement to establish a better cash price."
There is no benefit to a return to the days of hauling cattle to a stockyards for auction especially in the era of trusted video technology.
"Now that we have that technology, we're able to do banking terms on those cattle and the Packers and Stockyards Act oversees those auctions to ensure they're fair," Fankhauser said. "With that technology, we also have a really willing set of feeders who want to see this be successful. I'm hopeful and somewhat optimistic that they'll be able to reestablish that cash basis."
Fankhauser doubts that Grassley's amendment will succeed, but does hope to see the removal of the newest part of the GIPSA rule, likely under this administration.
"He's looking for a statutory change whereas the existing GIPSA rule that has been delayed for further evaluation by the USDA is a standing rule that will have to go back to the rule-making process to determine if it will continue or not," Fankhauser said.
Fankhauser anticipates that Grassley's assumption is that the rule will be withdrawn.
"The administration put a delay on the implementation of the rule to go back and reconsider the implications of that rule and determine if there are pieces of it they would keep and move forward with, change, or do away with," he said
The Executive Order puts a hold on the GIPSA Farmer Fair Practice Rule, meant to encourage fair treatment in the marketplace and to do away with anti-competitive practices.
In reality, though, Fankhauser said, the rule would do away with value-added programs integral to many beef producers.
"One of the things Grassley's bill has never been definitive on and never thoroughly dived in to is the nuances of these business practices," Fankhauser said. "The supply, demand, timing, partnership when it comes to feeding those animals are all things he's never been able to dig into."
As the two decade-long debate over packer owned-cattle lurches on, Fankhauser is confident that the beef industry will not go the way of the long-suffering poultry industry. Captive supply feeders hoping to steady cattle supply into their plants dates back to the 1950s. Hoping to purchase high-quality cattle like those offered in the Rocky Mountain West, the need to own feedlots emerged.
"We make more money selling into those feedlots because they're local, there's less transportation cost, and we get a consistently higher price," he said.
The GIPSA rule in question, he said, does contain some items that the poultry industry supports but, at the end of the day, the beef industry is not the poultry industry.
"They don't look the same, it doesn't function the same, so to say we're going to be one is nothing more than absolute, irresponsible fear tactics," Fankhauser said. "Our industry is so independent and so different in how we produce animals in different stages, they're completely different businesses."
The GIPSA rule in question can be read at https://www.gipsa.usda.gov/psp/farmerfairpractices.aspx. ❖