muses of the moment

May 3, 2010

Meat packing industry under investigation

Filed under: Economic Crisis, Odds 'n ends — totallygroovygirlfriday @ 9:32 am

Here is an Associated Press article by Nate Jenkins about the meat packing industry. Just like the financial industry, most people do not understand how the meat industry works in this country or the systemic risks involved.

This is just one aspect of this industry: the relationship between farmer and meat packer.

Groovygirl has highlighted some interesting quotes from the article:

The federal government is conducting its first investigation into whether the handful of large meatpackers that slaughter most of the nation’s cattle are illegally or unfairly driving down cattle prices, according to an official representing independent beef producers nationwide.

The investigation is under way as the Justice and Agriculture Departments hold a series of antitrust hearings on competition in agriculture, and the USDA is expected to release sweeping antitrust rules covering the meat industry this spring.

“They appear to be doing a very comprehensive investigation of the overall behavior of meatpackers in the cattle market,” Bullard said, adding he believes a main reason for the investigation is to gather information to help craft new rules.

The administrator of GIPSA wouldn’t say whether the agency was investigating the so-called “Big Four” meatpackers — Tyson Foods, JBS, Cargill and National Beef — who together slaughter about 80 percent of U.S. beef.

That may be changing under the Obama administration, which named Butler to head the agency a year ago. The agency requested and received court documents from a landmark 2004 case in which a jury awarded 30,000 cattlemen a total of $1.28 billion after concluding that Tyson Foods, the country’s largest meatpacker, used unfair marketing agreements to suppress cattle prices. A judge overseeing the trial overturned the decision.

The 89-year-old Packers and Stockyards Act is meant to ensure fair competition and protect farmers and ranchers from discriminatory, monopolistic practices by meatpackers. But ranchers say it has long been ignored, and a 2006 federal audit concluded GIPSA had avoided complex investigations.

But longtime rancher Jim Hanna, who lives near Mullen, Neb., said ranchers make much less on each cow now compared to 30 years ago and the deals with large meatpackers are partly to blame. He was skeptical things would change, but said if GIPSA increases enforcement, it could help ranchers and smaller feedlots.

“Only under certain circumstances do the packers go into the open market and actually bid for cattle they have no hold on,” he said. “Enforcing the (Packers and Stockyards Act) would certainly shape that up.”

(Are you noticing a theme of late? The laws are on the books but no one enforces them…in any industry, banking, finance, real estate, meat packing.)

Bet you didn’t hear about the 1.2 billion award that was overturned by a judge? Why has the cost of meat to the consumer doubled and tripled in the last 30 years, but the profit for the farmer (or cattle price) is the lowest in 30 years? Where did that money go?

Groovygirl’s conclusion, like many other modern systems, we have a major negative feedback loop telling us that the system is broken in its current form. What started out as a good system has changed into a cannibalistic system. (Groovygirl’s definition of a cannibalistic system is a system that takes so much from itself that it ceases to be productive and dies.)

If farmers can not sell their cattle to get enough to live on, they will not be in business. No cattle farmers means no cattle. Meat from abroad (which already is imported) means longer transit times and less oversight capability.

This is one of the many reasons that groovygirl buys beef directly from local (organic and free-range preferred) farmers as much as her limited freezer space will allow. Groovygirl loves to cut out the middle Man. This is what is called a direct feedback loop system.

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