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Consolidation In The Livestock Industry May Get A Boost Since Proposed USDA Rule Won’t Take Effect (Nov 08, 2017)
Between the time a cut of steak or pound of hamburger goes from cattle farm to grocery shelf, it more than likely passes through one of three companies: Tyson Foods, Cargill or JBS.
 
According to the U.S. Department of Agriculture, the top four beef processors hold 85 percent of the market share, controlling the beef market to the point that some farmers believe the companies’ clout unfairly influences livestock prices.
 
Last month, the USDA withdrew a rule proposed in the final weeks of the Obama administration that would have made it easier for cattle producers to raise objections if they thought meatpackers weren’t giving them a fair price.
 
For example, beef producers would have been able to raise a red flag when they felt they were being frozen out of the market. Hog and chicken farmers could have sought protection from abusive contracts.
 
“If you’re only one of two or three buyers as contrasted with thousands of sellers, all you have to do is just blow a gentle breath on that market and you can knock it down,” said Dave Domina, a Nebraska lawyer who represented cattle producers in a lawsuit against Tyson.
 
The Trump administration has pledged to ease regulations on the agriculture industry — and has done so by killing this proposed rule.
 
“My fear was it would just have been a windfall for litigators and lawyers who wanted to take these court cases and would’ve been very disruptive to the markets and disruptive to the fair competition among producers there,” Agriculture Secretary Sonny Perdue said of not letting the rule go forward.
 
The work would have fallen to the USDA’s Grain Inspection, Packers and Stockyards Administration, or GIPSA, which oversees data sharing in grain and livestock markets and investigates alleged violations of fair marketing rules.  
 
Even without the rule, Perdue says the agency will still be watching to see that the livestock industry is fair and competitive.
 
“I understand those who are disappointed, but I believe that commerce is the answer, not litigation, in the economy,” Perdue said.
 
Without the rule, Domina says, the top meatpackers will be able to further control the supply and price of cattle and other livestock.
 
“This is as though, in the industries affected by the rule, the police force has just been fired,” he said.
 
His reasoning: There is a small window each week where meatpackers bid on cattle. If a farmer doesn’t take that offer, Domina says, there may not be another one.
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