Bulled over, reform-minded cattle ranchers not hopeful about rule changes

2013-01-02T00:15:00Z 2013-01-02T18:08:43Z Bulled over, reform-minded cattle ranchers not hopeful about rule changesBy TOM LUTEY tlutey@billingsgazette.com The Billings Gazette

Ranchers like Ressa Charter, disappointed with the prices offered for cattle, had hoped President Barack Obama might ride to their rescue by reforming cattle markets after the 2008 election.

Instead, what they got was more like a six-second ride at the rodeo — a fast, furious round of hearings before getting bucked into the dirt.

Although voters have given Obama another term, ranchers expect they won’t be getting another chance.

“The water is so churned up with so many things. There’s a dozen life or death struggles between Republicans and Democrats,” Charter said. “I just don’t know how we would.”

What Charter and others wanted was better policing of the nation’s big meatpackers, of which there are only four. The companies — Tyson Foods, JBS, Cargill Meat Solutions and National Beef — control 80 percent of U.S. beef slaughtered.

With that kind of market share, the four companies set the price for American cattle. And that price, Charter and others contend, is sometimes just enough to cover the costs of feed, fuel and medicine with a small percentage of profit left over.

In the last four years, cattle prices have nearly doubled, essentially to keep pace with the cost of raising the animals. The ranchers' return on investment has been fairly flat, which leaves little cushion against risk from unexpected costs related to drought, a cold winter or fire, all three of which have visited Montana farmers in the last three years.

The prices consumers pay for beef has not doubled, which gives Charter pause. He interprets the disconnect between the two prices as evidence that his cattle are actually worth more than he’s normally getting paid. Otherwise, the prices that shoppers pay for hamburger would have to shoot up to cover the difference whenever ranchers are paid more.

“I certainly think it isn’t fair. It’s manipulated,” Charter said. “The prices, to me, show the packers have a lot of margin to give up.”

What ranchers, at least some, were asking for in 2010, was a better look at the meatpackers’ profit margins. Ranchers like Dan Tiegen, who raises cattle in central Montana, suspected that the meatpackers were selling cattle among themselves for $50 to $60 more per head than Tiegen was being paid. For a rancher selling 1,000 or more calves every fall, the difference was worth the fight.

Recently, Tiegen said the markets could be reformed considerably if the government required all sales prices be reported. There’s voluntary price reporting now, which hasn’t satisfied Tiegen.

“If you’re going to have price reporting at least make it mandatory,” Tiegen said. “You might even think you’re getting a good price, but how do you know? That’s my first question.”

Many of Tiegen’s neighbors disagree with him. Prices are high right now, and ranchers have ways of boosting their profit margins by conditioning and tracking the animals in ways that meatpackers are willing to pay more for. Many say the best way to profit is by working with the system, not challenging its fairness.

But when the Obama administration began asking ranchers for examples of unfair trade practices in 2010, there was no shortage of complaints. The U.S. Department of Agriculture, the Justice Department and state attorneys general, like Montana’s Steve Bullock, conducted hearings across the country to craft market reforms two years ago. The meetings attracted thousands of ranchers demanding reforms.

Ranchers like Gilles Stockton, of Grass Range, recommended breaking up the relationships between meatpackers and major feedlots, where tens of thousands of cattle are parked and fattened before being shipped for slaughter.

Each feedlot is normally aligned with just one packer, which creates a take-it-or leave-it arrangement when it comes to sales price. The packer then sells meat into a relatively small number of chain grocery stores, limiting competition right to the consumer’s shopping cart. The relationship also has a chilling effect on the price paid to ranchers selling into the feedlot, Stockton said.

“You have no public price discovery mechanism for the meat, because that’s the decision between Tyson and the Wal-Mart and no market for fat cattle because that’s a decision between Tyson and a small number of feedlots,” Stockton said recently.

Speaking to the USDA in 2010, Stockton found a willing listener in J. Dudley Butler, the federal government’s top antitrust enforcer as administrator of the Grain Inspection, Packers and Stockyards Administration. GIPSA was created to deal with the monopolistic practices of the meatpacking industry 90 years ago.

Stockton and others say the law that formed GIPSA, crafted to handle packers with just 40 percent market share, has been watered down over the years and is no longer effective. Butler agrees.

“When the Packers and Stockyards Act was passed, you had five companies controlling 40 percent of the beef market. Now you have three that control 80 percent,” Butler said recently. “You have to know something is wrong.”

In 2010, Butler gathered the information ranchers offered at hearings across the country and crafted proposed rule changes for the way market fairness is enforced. On Jan. 19, 2012, Butler resigned after watching his rules politically euthanized.

A lawyer once again in private practice, Butler had proposed reforms forcing market transparency and making it possible for ranchers to sue meatpackers. There seemed to be support for the rule changes early, but as the process wore on, opposition to the changes organized.

In November 2011, Congress barred the USDA from funding Butler’s proposed changes, which effectively removed the teeth from what market reform critics had dubbed a rabid dog. The call for reform was embedded in the 2008 farm bill passed by Congress. But House lawmakers supporting the packing industry said Butler had gone too far.

“The rule making went well beyond the intent of the 2008 farm bill and threatened livestock and poultry marketing as we know it,” said Rep. Michael Conway, R-Texas, when making the amendment to defund the rules.

All that’s needed today, to revive the market reforms, Butler said, is an amendment authorizing their funding. No one thinks that’s likely to happen, though Butler said the U.S. Senate could resurrect the issue if it had the will.

“We were putting parameters on the term ‘unfair.’ Part of it deals with bad faith. Bad faith actions are unfair. Fraud is unfair. Denial of due process is unfair. If you support that rider, you’re against the farmer,” Butler said. “They have a great opportunity to help rural America. Nobody is going back to rural American if they can’t get a fair shake on the farm or ranch,” Butler said. “If you aren’t being treated fairly and the playing field is not level, who wants to play?”

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