COWBOYS VERSUS MEATPACKERS: THE LAST ROUNDUP - Foodopoly: The Battle Over the Future of Food and Farming in America - page 100

“unethically twisted” by the meatpackers. He went on to say, “I carefully reviewed the taped conversation
. . . and there is no way any ethical person could draw such a perverse conclusion.” 23
Advocates had been cheered by Butler's appointment, because he made clear that he was going to en-
force the PSA, and the meat industry knew that they were in for a fight. He was instrumental in starting
a process to make GIPSA regulations more protective of livestock growers and for holding hearings on
agriculture and antitrust issues. During 2010 five hearings were held in Iowa, Alabama, Wisconsin, Col-
orado, and Washington, D.C. Thousands of farmers, ranchers, and contract poultry growers traveled long
distances to tell USDA and DOJ officials—at the first-ever joint agency hearings—about the need to im-
plement the GIPSA rules.
Ranchers testified repeatedly about how the concentration in the industry had pushed down the price
that beef producers receive at auction because there is no competitive pressure to bid up prices. In many
cases only one, sometimes two, of the major beef packers will attend a feedlot auction, and sometimes only
one buyer actually bids. Nearly three out of five feedlots sell auction cattle to a single beef packer, which
keeps prices low. 24
USDA-commissioned studies in the 1990s also found that concentration drives down the price beef pro-
ducers receive. These prices have fallen steadily over the past two decades. Cattle producers receive only
a small and declining amount of the auction price: the net return has fallen from $36 a head between 1981
and 1994 to $14 a head between 1995 and 2008. 25
Meatpackers supply their slaughterhouses with a combination of cattle they buy at auctions, some they
already own, and others secured with contracts with feedlots or producers. The contracts, which are drawn
up by the meatpackers, are known as “captive supply arrangements.” Beef producers or feedlots will
agree—via a marketing contract—to deliver cattle to meatpackers in the future. Often the agreements al-
low meatpackers to lower the agreed-upon price upon delivery. The USDA estimates that two fifths of
slaughtered cattle are obtained through captive supply.
These cattle producers receive lower prices than they might get at auctions and receive worse terms
than a more favored supplier. The meatpacker often manipulates the price, since it is dominant in both buy-
ing and selling. Captive supply arrangements also favor some producers with special premium prices and
terms. They are often the giant feedlots that can provide many heads. This disadvantages smaller sellers,
who must rely on the cash market that meatpackers dominate. And these arrangements are all confidential,
creating a market that is so opaque that one supplier has no idea what prices others are receiving.
Ranchers said loudly and clearly that the captive supply reform proposal, which has been sitting at the
USDA since the 1990s and has been part of debates during the last two Farm Bills, should be adopted.
They would allow contracting only if they were based on prearranged, set prices and firm dates of delivery,
and if the contracts are transparently and publicly offered. Meatpackers would be prohibited from using a
pricing system that could provide unfair advantages to some producers and disadvantage others.
Allan Sents testified at the Fort Collins, Colorado, DOJ/USDA hearing about the power and leverage of
the packers. Sents operates a ten-thousand-head commercial feedlot in central Kansas and has been work-
ing in the industry for forty years. He explained to agriculture secretary Tom Vilsack that one of the pack-
ers he deals with had offered captive supply arrangements to some of his competitor feedlots even though
he is closer to the slaughter facility, and they would often take no cattle from his operation. He went on to
describe the situation:
So I told the buyer [packer], I said, “Well, if you're going to discriminate . . . against using that way, I'm going to
allow the other packer buyers first opportunity to buy our cattle.” I thought it was a turn about—a fair play-type
of thing. Well, the original buyer then didn't like that kind of response and told his buyer [representative] to quit
coming into our yard. So for three months we didn't get a representative from that major packer into our yard