Senate Cattle Market Hearing
Elicits Conflicting Comments

WASHINGTON — A U.S. Senate hearing here last week on the cattle market’s woes drew comments from both producer and packer interests.

Several ranchers said Wednesday that Congress should require meatpackers to disclose the prices they are paying to producers if the companies won't release the information voluntarily.

Economists representing both the government bureaucracy and investment brokers blamed the last several years of poor cattle prices on oversupply, low consumption and weak exports, but producers contended that the dominance of four beef packers also has played a role.

They pointed to undisclosed trades and formula contracts as vehicles with which packers have been able to manipulate markets in their favor.

"Comprehensive collection and reporting of marketing information is critical," Richard Kjerstad, who ranches near Quinn, S.D., told the Senate Agriculture Committee.

USDA has tried with little or no success to get packers to release their pricing data voluntarily. Now Congress is considering legislation for a pilot project requiring the release of the numbers.

Agriculture Secretary Dan Glickman backs the legislation, but the Agriculture Department's chief economist expressed misgivings about it.

While requiring the data might help producers, it could make it harder for USDA to get companies to release other market information voluntarily, opined Keith Collins, describing himself as "agnostic" toward the bill.

Packers contend their private contracts should stay private.

An investment analyst told the committee that market domination isn't the cause of low beef prices, anyway. Consumers have turned away from cheaper cuts of meat and are buying convenience foods instead, said David Nelson, an analyst with Credit Suisse First Boston.

"People don't make pot roasts anymore," he said. "Consumer lives are different."

Beef demand has declined by 44 percent since its peak in 1979 and 18 percent since 1990, according to a Virginia Tech study.

Not noted in that study, however, is the fact that during the same period of time, the "big four" packers went from a little more than a third of the fed cattle market to more than 80 percent. Cattle that 20 years ago were routinely priced and purchased according to quality are now bought almost entirely on an "average" price, giving producers no incentive to improve quality. In addition, packers seldom age beef anymore to take advantage of what quality potential exists.

Finally, at least part of the decline in beef demand could be attributable to the fact that the relatively small amount of quality beef which emerges from the "commodity"-oriented approach to procurement and processing ends up in export channels or the restaurant trade; retail consumers are left with the indifferent product of an indifferent process, and it shouldn’t take a clairvoyant to divine what that does to demand.

Leland Swenson, representing the National Farmers Union, noted that packers could improve beef quality — and hence, demand — with a variety of practices ranging from electric stimulation and aging to sorting out and further processing tough cuts. He blamed a lack of competition for their inaction.

Decades ago, when packers competed aggressively, they marketed their own brands of beef, which made them accountable for quality.

That theme resonated with Herman Schumacher, co-chairman of USDA’s Concentration Committee. Schumacher charged that packers today "tend to cooperate rather than compete," pointing to a recent case in which two of the
three largest packers traded cattle between themselves at a price well below the going market, reported the "sale" at the trumped-up price, "and broke the live cattle trade almost $60 per head."

Schumacher wanted to know why beef producers were losing money on a supposed "oversupply" when the level of imports indicates that today’s domestic production fills "less than 85 percent" of demand, and retail, hotel, restaurant and export beef prices are record-high.

He likened packer demands for pricing confidentially to secret trading on the New York Stock Exchange, and asked how long a practice like that would be allowed.

Another producer-backed bill, aimed at curbing imports, would require meat to be labeled by country of origin. "It seems strange to me that we require our clothing to be labeled, but we don't require our meat to be labeled," Kjerstad said.

Packers have so far declined to label meat voluntarily because they don't think it would improve sales enough to justify the cost, Collins said.

The National Cattlemen’s Beef Association endorsed labeling of imported beef and mandatory reporting of most post-packer sales, but stopped short of requiring disclosure of packer purchases. Instead, NCBA president-elect George Swan outlined a variety of recommendations that concentrated mostly on increasing export sales.

Swan also encouraged producers to enter into "cooperative efforts," as well as "new marketing strategies, coordination, risk management and retained ownership."

NCBA’s reluctance to address packer concentration and captive marketing has generated hostility among producers who consider the group too cozy with the processing sector. Those stockmen are unlikely to favor such a focus on improving export markets and increasing "cooperative efforts," inasmuch as the former would tend to benefit packers first and producers only indirectly, and the latter implies still more captive trading.

Some 82 percent of beef is processed by IBP Inc. of Dakota City, Neb.; Monfort Inc., of Greeley, Colo., owned by ConAgra Inc.; Excel Corp. of Wichita, Kan., owned by Cargill Inc.; and National Beef Packing Co. of Kansas City, Mo., part of Farmland Industries Inc.

Eighteen years ago, those companies controlled only 36 percent of beef packing.

Sen. Conrad Burns, D-Montana, lectured packer representative Patrick Boyles, of the American Meat Institute. "The problem," Burns said, "is that producers aren’t receiving their fair share of the consumer meat dollar, and you better talk to the packers about increasing the dollars at the farm gate, or you won’t have any cattle."