Cattlemen look to Trump for help with Big Beef

Wednesday, Jan. 18, 2017 3:20 AM
A farmer dumps a load of corn silage at a feedlot operated by JBS in Wiley, Colorado. JBS is one of the Big Four meatpackers that has grown since the “merger mania” that started in the 1980s.
Taylor Haynes, a cattle rancher from Laramie, Wyoming, speaks during a Fort Collins panel discussion on agriculture and antitrust issues in 2010. Haynes says he’s seen a number of small cattle operations go out of business because of Big Ag.

In 2008, when Barack Obama was first campaigning for the presidency, his platform for rural Americans in agriculture was pointed: “In an era of market consolidation, Barack Obama and Joe Biden will fight to ensure family and independent farmers have fair access to markets ... (and) strengthen anti-monopoly laws.”

At the time, four meatpacking companies controlled 83 percent of the industry, which kept livestock prices low and sometimes forced small ranchers out of business. Between 1980 and 2008, 516,000 beef cattle operations, or about 40 percent, folded. By the end of Obama’s first term, that number would climb to over 43 percent. His efforts to help small ranchers overall fell short or were blocked by Congress, and consolidation continued.

Now, as Obama leaves office, his U.S. Department of Agriculture has finally made progress on a series of rules to help. One of those rules, which would help ranchers speak out against unfair industry practices, was published in the Federal Register in December.

Many ranchers, meanwhile, suffering from the kind of economic anxiety that helped propel Donald Trump to the presidency, are hoping that Congress, now freed from the need to fight Obama, will support the final implementation of those rules and help make the U.S. cattle industry great again.

In many ways, cattle ranchers are the holdouts. The hog and chicken industries have already undergone vertical integration: Massive meatpacking companies own the animals that farmers raise, as well as some of the infrastructure they depend on, such as feed. As a result, the meatpackers have much more power over the entire process, including pricing. Chicken farmers were the first to be integrated, in the 1960s and 1970s. Hog producers were next; between 1980 and 2012, their industry saw a 91 percent loss in the number of operations. Sheep were also impacted by meatpackers’ consolidation: The industry is less vertically integrated, but a third of its operators have opted out since 1980.

“We’re trying to stop the chickenization of our cattle industry, and it is happening fast,” says Bill Bullard, rancher and CEO of the Ranchers-Cattlemen Action Legal Fund, or R-CALF, a Billings, Montana-based national trade association that supports cattle producers and has led the fight against the “Big 4” meatpackers – Cargill, Tyson, JBS and National Beef.

“It’s the last major livestock industry that has not yet been fully captured from birth to plate by the multinational corporations,” Bullard said.

Ranchers have faced significant consolidation of beef packers since the 1980s, during what the USDA called “merger mania.” From 1980 to 2010, the number of packing plants nationwide dropped 81 percent. During the same time, nearly a third of all feeders – the companies that purchase cattle from ranchers, fatten them for a few months, and sell them to meatpackers – left the industry.

Wyoming rancher Taylor Haynes says he noticed the difference on his drives to pick up equipment in Colorado.

“When I started in this business in ’87, driving between Cheyenne and Denver, there were a number of small family feedlots,” he said. “One or two, every two or three years at first, went out of business. Now those are gone, all the small people feeding a couple thousand head or less.”

He says the Big 4 packers now act like kingmakers, choosing which feeders to work with and which to let wither. Once many of the feeders were gone, so went competitive bidding for cattle, and ranchers along with it.

Now, there are so few feeders, sometimes a rancher gets just one bidder on his or her cattle going to the feedlot. “There used to be 20 or 30 bidders,” Haynes says. Now, the bidder is usually a feeder who has a contract with a major meatpacker. Many packers now also own some of the cattle they slaughter, which means they don’t always need to buy from ranchers.

As the Obama-Biden platform described it: “When meatpackers own livestock, they bid less aggressively for the hogs and cattle produced by independent farmers. When supplies are short and prices are rising, they are able to stop buying livestock, which disrupts the market.”

Jay Platt, a third-generation rancher from the high desert of St. Johns, Arizona, says he has to take whatever offer he gets.

“There’s not a negotiation to say, ‘I need another 2 cents more on these calves.’ You reject or take the bid.”

Some ranchers see this consolidation as a possible opportunity for those who are able to grow with it. University of California-Davis agricultural economist Tina Saitone says that many complex factors beside packer consolidation are fueling the rancher exodus. Packers who own their own cattle or use contracts rather than an open bidding process know that those cattle will be sold, Saitone says, as do the ranchers. “It’s not because the packers are somehow evil, but it’s economically efficient to do that.”

Nevertheless, R-CALF and similar groups want to chip away at the market power of the Big 4. Bullard says that ranchers currently have little legal recourse if they believe a meatpacker is intentionally disrupting the market.

In 2009, Obama tried to remedy that. The Department of Agriculture took on more field investigators and auditors to regulate unfair practices. Mississippi cattle producer and attorney J. Dudley Butler was hired to head the Agriculture Department’s Grain Inspection Packers & Stockyards Administration (GIPSA), with the express purpose of holding Big Ag accountable. Butler worked with his staff to create a rule to clarify the 1921 Packers and Stockyards Act. It would have protected chicken farmers and allowed cattle producers to speak out about unfair practices by packers, without needing to prove harm to the industry as a whole.

In 2010, Secretary of Agriculture Tom Vilsack and U.S. Attorney General Eric Holder led five widely attended workshops nationwide to discuss antitrust issues in food and ag. Close to 2,000 people went to the Fort Collins event, including Bullard and Haynes, who say that many of the ranchers were anxious, yet cautiously optimistic that change was imminent. Holder told the crowd that he understood that packer consolidation was a “primary concern”: “Let me assure you that administration leaders … understand that having a fair and competitive agricultural marketplace is critical.”

But Butler’s rule faced powerful opposition. Groups like the National Cattlemen’s Beef Association and the North American Meat Institute, whose boards include meatpackers, called it “fatally flawed” and said it would create unnecessary lawsuits. Some rancher groups, including the Colorado Cattlemen’s Association, said prohibiting packers from selling to other packers would reduce competition instead of increase it.

In 2011, Big Ag’s congressional supporters included an amendment, or rider, with the appropriations bill that blocked the Department of Agriculture from implementing the majority of the GIPSA rule.

“It was a battle we could have won had the leaders at the USDA and the White House had the intestinal fortitude to fight,” Butler said.

In late 2011, he heard from Secretary Vilsack’s office that they were giving up.

“I think they made a decision that there wasn’t enough political capital for the fight.” In 2012, Butler left the Ag Department and moved back to Mississippi. For the next four years, members of Congress used riders to thwart the majority of his rule.

This year, ranchers see a glimmer of hope: USDA is attempting to implement new GIPSA rules, including the one set out in December. The 2016 fiscal year appropriations bill didn’t include an anti-GIPSA rider, thanks to groups like R-CALF, U.S. Cattlemen’s Association, and the National Sustainable Agriculture Coalition, and senators like Jon Tester, D-Mont., and Jeff Merkley, D-Ore. It is unclear whether these “Farmer Fair Practices Rules” will survive in the long term; members of Congress like Maryland Republican Rep. Andy Harris, whose state has a $1.5 billion poultry industry and who offered a rider to a House 2017 agriculture budget bill, could still block funding for the rules during next year’s budget process.

Obama’s supporters are quick to point out that his administration followed through on creating a rule to crack down on anti-competitive practices, only to have Congress block it several years in a row. Yet if the rule doesn’t get implemented, again because of Congress, Obama will likely be remembered as failing on his grand promises for rural America.

Western ranchers now have their sights set on how to work with the next administration. In November, R-CALF leaders presented a plan they want President-elect Trump to use, which includes a GIPSA rule. They called the presentation “Making the U.S. Cattle Industry Great Again.”

“There’s a lot of hope for the Trump administration in rural America,” Haynes said. “(Trump) promised to renegotiate NAFTA and to fix trade deals.”

Current trade agreements support imported beef from places like Latin America that competes with domestic products. He hopes the new president will follow through on his promises to change that, and also deal with market consolidation in meatpacking.

Trump’s anti-establishment campaign made sense to Haynes. The cattleman’s distrust of the feds is manifest in his support for Nevada rancher Cliven Bundy’s battle with the Bureau of Land Management, and a recent run for Wyoming governor, where he was endorsed by the West’s most prominent Constitutional sheriff, Richard Mack of Arizona.

Even though Haynes doesn’t care much for Obama, he sees Congress as the ultimate culprit, beholden to the meatpacking industry and failing on GIPSA.

“Our only hope,” Haynes said, “is for Congress to wake up.”