Packers and Stockyards Act In-Depth

Missouri Rural Crisis Center's Tim Gibbons explains why the P&S Act is so important in taking on corporate power in livestock markets.

Corporations dominate livestock markets. That makes life difficult for many family farmers, particularly the nation’s 800,000 independent cow-calf producers. Fortunately, the federal government can intervene to help keep markets more fair and more open. Unfortunately, in recent years political leaders have rarely used those federal powers and concentration has soared.

The Missouri Rural Crisis Center’s Tim Gibbons explains the dire situation of corporate power in livestock markets, and explains what a recent rule drafted by the U.S. Department of Agricutlure (USDA) can achieve in addressing that challenge.

For more information on this topic, see our previous story, “USDA Announces New Rule to Protect Farmers and Ranchers from Meatpackers.”

The following exchange was conducted by email.

—Bryce, The Cocklebur

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The Cocklebur: First, tell me about what's happening in livestock markets. What's the situation like, and why are family farmers concerned about corporate concentration and control over markets?

Tim Gibbons: For far too long, U.S. livestock markets have been dominated by just a few multinational meatpacking corporations. For example, 4 corporations control 85% of the U.S. beef market (JBS, Cargill, Tyson and Marfrig; JBS and Marfrig are Brazilian corporations); 4 corporations control over 70% of the U.S. pork market (Smithfield, JBS, Tyson and Hormel; Smithfield is a Chinese corporation). 

This type of hyper concentration and foreign control of U.S. livestock markets has resulted in hyper extraction of wealth from farm families, our communities and economies (both rural and urban). What's the result? Nearly 90% of U.S. hog producers went out of business in just one generation, and, per the 2022 USDA Census of Agriculture, the U.S. lost 150,000 cattle operations in just 5 years (2017-2022). And, consumer prices are at an all time high.

How and why has this happened? Corporate ag wants us to believe that this happened out of inevitability and efficiency, i.e. that the current state of our food and ag markets came out of natural cause and effect. The truth is, and what they want us to forget and not talk about, that very specific policy decisions were made (and not made) that allowed corporations to take over our markets by controlling our laws, democratic process and where and how taxpayer money is used. The corporate takeover of livestock markets would not look like it does today without a huge amount of taxpayer money.

One important and pervasive example is the federal government choosing to not enforce antitrust laws like the Packers and Stockyards Act, which became law in 1921, but has not been adequately strengthened to meet today's market conditions or sufficiently enforced. That’s one of the main reasons 4 corporations control huge swaths of U.S. food and ag markets. To make matters worse, as if that was possible, some of those corporations are the same, e.g. JBS controls a high percentage of all the beef in the U.S., is #2 in pork production just behind Smithfield, and owns Pilgrim's Pride poultry. When you're set up like this, in multiple protein markets, you can’t lose—but you know who does lose? Farmers lose, consumers lose, our local economies lose, our water and air lose, our climate loses and our national security loses–the list goes on and on.

You don't have to take my word for it. According to a recent report by the USDA “From 1921 to the early 1980s, the Government more vigorously regulated the merchandising of meat from packing through to retail meat merchandising. The period was characterized, in general, for robust competition and market access for smaller producers, meat processors, and retailers alike.” The report goes on to state that “Beginning in the 1980s, however, policies prioritized efficiency and leveraging scale in the short term, even if in the longer run the change to a more consolidated market structure led to inefficiencies. DOJ and the FTC prioritized other areas of enforcement than meat, and abandoned enforcement of the Robinson-Patman Act almost entirely, and USDA also reduced its P&S Act enforcement in meat merchandising. Thus, meat markets became more concentrated due to a series of mergers and potentially anticompetitive conduct during this period of time”. 

The good news is, there have been some recent rules introduced by the Biden Administration to curb corporate concentration, and they stem from Biden’s July 2021 “Executive Order on Promoting Competition in the American Economy”. We’ll get to that in the following questions.

The Cocklebur: What does the Packers and Stockyards Act do about it?

Gibbons: The Packers and Stockyards Act (PSA) was an important piece of antitrust legislation passed in 1921, and one of the most important federal statutes for our nation’s independent family farm livestock and poultry producers. The purpose was, as stated by Congress, "to assure fair competition and fair trade practices, to safeguard farmers and ranchers...to protect consumers...and to protect members of the livestock, meat, and poultry industries from unfair, deceptive, unjustly discriminatory and monopolistic practices..."

For decades, Missouri Rural Crisis Center (MRCC) members and Missouri's independent family farmers have been organizing for strengthened and enforced antitrust laws. A critical role of the government is to ensure fairness in markets by facilitating and balancing power in the economic relationships among farmers/ranchers,consumers and food companies. Currently, inadequate federal legislation and the lack of antitrust policies and enforcement allow a handful of corporations to continue to consolidate market power, manipulate prices and create anti-competitive market structures. Open, fair and competitive markets are the foundation of real capitalism, and when you have a lack of antitrust enforcement and resulting hyper concentration ending fair and functioning markets, capitalism ceases to exist. 

As a result, we see hyper concentration and monopolistic control of U.S. food and agriculture markets (see percentages in question #1). Note: this is not limited to just livestock markets. For example, the seed and chemical market is controlled by the big four--BASF, Bayer/Monsanto (Germany), Corteva and Chem-China/Syngenta (China).

Strengthening and enforcing antitrust laws, if done all along, would be difficult enough, but attempting to enforce antitrust when they literally haven't been done in decades is A LOT more daunting. Stopping anti-competitive mega mergers from happening is easier than breaking up corporations that have already merged. 

The Cocklebur: What would the proposed rule accomplish?

Gibbons: USDA has written four updated Packers and Stockyards Act rules and just announced an “advanced notice of proposed rulemaking” for a fifth. The first three heavily concentrate on poultry markets and the tournament system. 

The 4th rule redefines "competitive injury". We have been demanding this update for decades, i.e. redefining "unfair practice" as conduct that harms market participants and/or conduct that harms the entire market. Currently and without this rule, in order for a farmer to make a legitimate claim of an unfair practice by a corporate meatpacker, they have to show that the unfair practice injured the ENTIRE MARKETPLACE, an obviously impossible threshold.

The draft proposed 5th rule called “Price Discovery and Competition in Markets for Fed Cattle” is an important policy change, and, again, something family farmers and family farm organizations have been demanding for decades. This proposed rule addresses the use of “captive supply” agreements, including beef meatpackers use of alternative marketing arrangements (AMAs), that keep fed cattle off the “spot market” (i.e. cash market) and allow the 4 meatpackers that control 80% of the U.S. cattle/beef market to suppress prices paid to fed cattle operations. These lower prices work through the system and also lower prices to small and medium-sized cow/calf operations. In the last decade, upwards of 80%-100% of cattle sales in some regions of the country are procured through AMAs. However, cash markets and, in particular, regional cash negotiated live markets, continue to serve as the primary price discovery vehicle for all cattle traded, feeding into the prices set by formula contracts. Therefore, it benefits meatpackers to artificially keep cash market prices low, lowering the prices they pay through formula contracts and depressing prices paid to Missouri cattle farmers. 

The Cocklebur: What other further steps should any Administration be taking to create fair and competitive livestock markets?

Gibbons: They need to do a lot more, as there is no silver bullet to get us out of monopolistic corporate control of markets. A few examples of laws that need to be passed include: 

• Stop taxpayer dollars from fueling industrialization, vertical integration and monopolization of U.S. livestock markets:

  • Suspend direct and guaranteed loans for concentrated animal feeding operations (CAFOs).

  • Stop funding CAFOs for manure management and biogas methane digesters through USDA’s Environmental Quality Incentives Program (EQIP) and Climate Smart Agriculture.

• Restore competition in livestock and poultry markets:

  • Require meatpackers to increase cash market purchases.

  • Reinstate mandatory Country of Origin Labeling (COOL).

  • Stop the use of captive supply arrangements and packer ownership of livestock that allow for market manipulation, driving down prices to family farm livestock producers.

  • Stop Commodity Checkoff dollars from funding organizations that also lobby.

  • Define and enforce undue preference language in the Packers and Stockyards Act that would help stop meatpackers from giving an unfair advantage to industrial producers over family farm livestock producers.

• Restore one of the purposes of the original Farm Bill by reinstating supply management. The farm economy has long been plagued with overproduction, whether of corn, soybeans or milk, driving down the price paid to farmers and, thus, requiring taxpayer safety nets. A modernized grain reserve program based on price levels that are tied to farmers’ cost of production would moderate prices at either extreme, ensure that farmers could generate viable incomes from the market when prices are low, and protect consumers from periods of damaging high prices.

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The Cocklebur covers rural policy and politics from a progressive point-of-view. Our work focuses on a tangled rural political reality of dishonest debate, economic and racial disparities, corporate power over our democracy, and disinformation peddled by conservative media outlets. We aim to use facts, data, and science to inform our point-of-view. We wear our complicated love/WTF relationship with rural America on our sleeve.