New antitrust rules awaited by industry
April 14, 2010
by Bryan Salvage
KANSAS CITY, MO. — Potentially altering the balance of power between meat companies and the farmers who raise their animals, the most sweeping antitrust rules covering the meat industry in decades could soon be released by federal regulators, according to The Associated Press.
Meat industry officials, activists and farmers have been anxiously awaiting the new rules, which will be released this spring for public comment and are set to take effect this summer. The regulations are seen as a litmus test for the Obama administration and how far it will go in regulating competition in the meat industry.
How much power farmers have as they produce cattle, hogs and chickens for large companies such as JBS SA, Smithfield Farms and Tyson Foods is at issue. The new rules will govern how meatpackers buy their cattle on an open market and what demands poultry companies can make on the independent contractors who raise their chickens.
The 2008 Farm Bill required updated rules but left the specifics to the U.S. Department of Agriculture. Farm state lawmakers, such as Sen. Tom Harkin, D-Iowa, had long been concerned a lack of competition among meat companies was driving down prices farmers were paid for their cattle and poultry.
Four companies buy and slaughter 80% of all U.S. beef, limiting competition in the meat industry, AP relays. Meanwhile, big poultry companies dictate chicken prices and can demand farmers take on debt to upgrade their chicken houses for the companies' benefit.
Some poultry farmers think the new leaders in the U.S.D.A.'s antitrust division will push for tougher and more far-reaching regulations than previous administrations. Some believe the new rules could be the strongest antitrust protections imposed since the Great Depression. However, there's also a risk they will drive up the cost of meat, diminishing meatpackers' profits or pushing up prices at grocery stores if companies pass on the expense.
The Farm Bill requires new regulations be in place by this summer. The bill lays out a broad outline of what the rules must address, but the details won't be known until a proposal becomes public.
These regulations come at a time when the Obama administration has begun a series of meetings across the country to examine competition in agriculture. Officials with the Agriculture and Justice Departments, who are conducting the hearings, have said they don't know what kind of action could result, but it's clear the meat industry is under more scrutiny than it has been for years.
One issue expected to be addressed in the new rules is when it's illegal for companies to choose one producer's cattle or hogs over another's. Ranchers have complained that meatpackers make their choices in attempts to keep prices low. For example, meatpackers might pass by independent ranchers to buy cattle raised under contracts that guarantee processors a lower price, AP points out.
The new rules also would determine when poultry companies could require farmers to take out additional loans and improve chicken houses by adding new equipment. Farmers resist the investments because although they might earn more money after the upgrades, the extra income doesn't offset the extra debt and cost of operating the houses.
Richard Lobb, a spokesman for the National Chicken Council, said farmers and poultry companies share the benefit when farmers upgrade a house. Birds grow faster, which can allow more flocks a year to be grown on a farm, he said.
Companies such as Tyson Foods, which produces beef, chicken and pork, are expected to challenge rules they consider too strict.