Cattle Industry Spokesmen
Differ On Captive Supplies

DENVER — U.S. Department of Agriculture officials heard conflicting opinions from livestock industry spokesmen this month at a forum here concerning captive supplies.

A representative for Dan Glickman, Secretary of Agriculture, said USDA has heard a lot of concern over the issue of concentration, but the department needs facts.

USDA Under Secretary Michael Dunn said the question is whether or not captive supplies and forward contracting are unfair trading practices.

Shane Cole of the Western Organization of Resource Councils insisted the practice is unfair. George Hall, the president of the National Cattlemen's Beef Association, however, said some practices perceived as unfair are not.

"The cattle buying practices of the major packers are in violation of the Packers and Stockyards Act," Cole maintained, "and have destroyed our livestock markets. The mechanism packers use to exercise their market power is commonly known as captive supply."

The WORC petitioned USDA in 1996 to issue rules prohibiting forward contracting by packers and prohibiting packers from owning and feeding cattle unless the cattle are sold in open public markets.

The issue over concentration in agriculture, particularly in the livestock industry, is emotional and contentious, concedes USDA spokesperson Brenda Curtis.

"You have family ranchers on one side and the feedlot owners, packers and slaughter houses on the other," she said.

The program director for the Center for Rural Affairs, Chuck Hasbrook, said the issue is about more than money. He described it as a social issue.

"There's no social interest in protecting firms from vigorous competition," he said. "But there's a large body of evidence that supports the contention that there is a social interest in maintaining a large number of family farms and ranches. The decisions of the Packers and Stockyards Administration on whether to address price discrimination will be critical in determining whether a large number of family farms and ranches survive in livestock production."

Hasbrook said consumers have a profound social interest in a continued rural America that is not controlled by the wealthy elite.

Some in the cattle industry say that like all other businesses, the livestock industry is based on competition in the marketplace.

NCBA president Hall said more regulation of the livestock industry is not the answer.

"P&S has conducted several broad and focused investigations relative to industry structure and marketing practices and has taken enforcement action when necessary to address the infractions," Hall said. "However, repeated anti-trust investigations by P&S and the Justice Department have not uncovered broad industry-wide illegal activities."

Hall said that what are often perceived to be illegal practices simply are not. He said the key to continued prosperity in the cattle industry is strong oversight of mergers and acquisitions, favorable government policy and cattle producers' commitment to innovative marketing practices.

"It's clear the cattle industry is changing," Hall continued. "We're seeing an increased amount of our product going overseas. Even the way we market our product to consumers is changing.

"To ensure cattle producers have a fair shake in this changing marketplace, the government can implement policy that will help foster a business environment in which cattle producers can flourish."

NCBA, Hall said, has worked for labeling beef "Made in the USA;" permanent normal trade relations for China; interstate shipment of state-inspected meat; carousel retaliation in European Union trade disputes; stopping the marking of U.S. quality grades on foreign beef; and mandatory price reporting.

"We consider government acts such as these as the more practical option to ensuring fairness and competition in the cattle industry," Hall said. "More regulation and oversight could create a bigger problem."

Alliances between ranchers, feeders and packers through contracts and marketing agreements is a growing trend, allowing cattlemen to produce a more consistent product that consumers are demanding, Hall added, insisting that alliances have the ability to give producers a chance to gain a greater share of the consumer dollar.

"These types of business arrangements are new to the industry, "Hall said. "They are innovative, and they offer producers many options to improve profitability, animal quality and their bottom line."