071221 Senate Considers Additional Livestock Regulation

Livestock producers are closely following proposals in the Senate that would bring added regulations to the livestock industry. These don’t involve animal or food safety, animal identification or labeling of meat, they involve competition in the industry. One side claims meatpackers have too much control and are manipulating prices. The other side says things are working pretty well and government involvement would muck things up.

Proposals include a ban on packer ownership or contracting 14 days before slaughter and reforming the Captive Supply Act, which guides formula pricing for alternative marketing arrangements such as forward contracts, production contracts and custom feeding.

We think there’s middle ground to be found on the issue.

A ban on packer ownership — which is negligible at present — or contracting would not only harm packers and processors in their ability to procure supply, it would also hurt producers in their ability to market when, where and to whom it benefits their operations the most.

As for strengthening fair-price safeguards for producers in alternative marketing arrangements, that seems valid. We agree that at least a base price of some sort should be negotiated at the time the arrangement is made. This could protect producers from contracts that lack specific terms and rein in packers and processors from squelching price rallies by meeting demand with unpriced livestock.

A ban on packers makes no sense in our book, but neither does being contractually obligated to sell livestock without even a negotiated base price.

We think the Senate should ditch the ban and reform the Captive Supply Act to provide a means by which the industry would institute sensible and reasonable pricing formulas.

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