Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to johnc@cfra.org.

Monday, February 26, 2007

Battle in Congress Over Packing Contracts

Battle set in Congress over packing contracts

Such deals reduce prices paid to farmers, a new study reports

By PHILIP BRASHER REGISTER WASHINGTON BUREAU

Washington, D.C. - When Iowa hog producer Max Schmidt signed a three-year contract with a big meatpacker he knew he was taking a risk that he might not make as much money as he could selling pigs the old-fashioned way - on the spot market.

He sure didn't. Schmidt, who kept meticulous records of what he was paid under the contract vs. what prices were on the spot market, calculates that he lost a full $1 million on the deal. "We left a pile of money there," he said.

To Schmidt, that's the way business works. But critics of the meatpacking industry said processors are unfairly driving down the prices paid to farmers by increasing their control of livestock supplies through contracting and outright ownership of the animals.

Iowa's senators - Democrat Tom Harkin, chairman of the Senate Agriculture Committee, and Republican Charles Grassley - will lead an effort in Congress this year to impose a series of marketing restrictions on packers, including a ban on their ownership of livestock supplies.

Other measures would allow producers to challenge contracts in court and require the U.S. Department of Agriculture to set up an office to investigate allegations of anti-competitive actions by processors and other agribusinesses.

A new study that was required by Congress says that meatpackers' use of contracts and ownership of livestock reduces the prices that producers are paid for livestock, including hogs...

Packers "put their thumb on the farmer and see the family farmer as an employee of theirs, kind of an indentured servant of theirs," Grassley said. "They want to control everything.

"In addition to the ban on packer ownership of livestock, the senators want to stop processors from imposing arbitration clauses on contract producers. Requiring arbitration prevents farmers from taking packers to court over contracts.

Grassley said the ban on packer ownership has a good chance of passing the Senate, as it did in 2002, but faces an uncertain future in the House. Meatpackers argue that the legislation could even outlaw contracts between processors and farms, a claim disputed by lawmakers and legal analysts at Iowa State University...

... Read the full article at...
http://desmoinesregister.com/apps/pbcs.dll/section?category=BUSINESS01

Agree? Disagree? Post a comment here or contact John Crabtree, johnc@cfra.org

Center for Rural Affairs
Values. Worth. Action.

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2 Comments:

  • At 3:48 PM, Anonymous Anonymous said…

    USDA's report is crap, they report that only 11% of hogs are purchased in the spot market, and the remaining 89% are either owned by packers or secured through captive supply arrangements(contracts) - and of course they see nothing wrong with that, actually they go on and on about how much better "producers" do under such a system - but they offer little or no analysis of how captive supplies depress the market in the first place

     
  • At 4:56 PM, Anonymous Anonymous said…

    perhaps this is why?

    Hogs and Pork:
    􀂃 Tomislav Vukina, PhD, North Carolina State University
    (Pork Team Coordinator)
    􀂃 Nicholas Piggott, PhD, North Carolina State University
    􀂃 Changmock Shin, PhD, North Carolina State University
    􀂃 Michael Wohlgenant, PhD, North Carolina State
    University
    􀂃 Xiaoyong Zheng, PhD, North Carolina State University

    these are the principle contributors regarding hog markets for GIPSA's report... hmmm, perhaps having someone who is NOT from North Carolina would help?
    Dougherty, Iowa

     

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