USDA Contemplates Fomenting More Packer Lawsuits, Wrecking Value-Added Beef Programs
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 02/23/24
We apologize for the length of this column but the issue is critical, Congress comes back into session next week and the appropriations discussions involved need attention from your member of Congress pronto.
The last major supply chain that was perfect -- delivered exactly what consumers wanted, when they wanted, adjusted when they changed their mind and pleased them with low prices was -- well, can’t think of one. There are some that do a great job for a while, then their clientele changes, their supplier changes, the product changes -- American consumers are a moving target for many products.
So, it’s to be expected that our beef supply and production chain is not perfect. What counts is that consumers are generally happy -- and in many cases -- very happy, with our product. That’s because we are constantly improving the product. Because the breeding, feeding, processing, new product development, merchandising and the efforts of retailers and food service outlets are constantly innovating, paying attention to quality, food safety and, more than it used to, staying cognizant of the fact everyone in the chain has a role to fill. And they all need to make money most of the time for a stable, successful production chain to survive.
So, we get really frustrated with the activists whose mission is to tear everything built up over decades to serve the consumer so that the beef production chain -- especially sectors they are fixated on -- can be re-made to their liking. And usually, their re-making focuses not on free market principles, but on socialist, restrictive, big government ideas.
So, when we heard the Biden administration was going to examine competition in agriculture, our ears perked up. We have been to lots of meetings of these “only more big government will fix this problem” reactors. We say reactors, because many of these folks react to shortcomings in our production chain but they don’t do a very good job of analyzing the many facets of many links in our production chain and what everyone brings to the table.
Ironically, we are at a point in history where, in the processing sector, we have more responsive big players; more government support for smaller players and more ranchers, farmers and consumers utilizing small and very small processors than ever before.
Visionaries in feeding, processing, retailing and restaurants started pioneering joint ventures, branded beef programs, controlled production programs and various cooperative projects in the ‘70s. There were no government programs to hatch these projects. They were done by free market capitalists.
It is critical to understand what everyone brings to the table. The Big Four provide processing capacity at volume and price points smaller processors can’t match, to satisfy the quality and food safety needs of a great majority of consumers at the most affordable price point. They are the ones with the capital to research new production techniques, new pathogen interventions, new preservation methods, quality control and the huge capital requirements necessary to keep their supply chain moving when beef is in their cooler, in reefer trucks all over the highways, in purveyor and further processing plants, retail coolers and the food service coolers.
We’ve been in the product development and quality control centers at Cargill and Tyson, for example. They are constantly checking how the processing and packaging is holding up chemically and for palatability, how their pathogen interventions are working and also developing new recipes, cooking methods and flavors with retail and foodservice chefs.
The labs and testing the Big Four are doing have progressed in speed and accuracy. A JBS plant we were in a while back surprised us with how testing methods and times have improved and speeded up, so that holding times for ground beef can be minimized and food safety supported.
Only major corporations can afford these efforts.
The pathogen interventions done by the big plants was proven to eliminate the subcellular precursor for antibiotic resistance by university and medical facility research (checkoff funded).
But the big plants with their scale and procuring power can’t be everywhere. We’ve said for years the Big Four can’t be blamed for geography. The cow is a marvelous creature, able to survive and convert grasses and forage of varying quantities and qualities all over the country. But their numbers are quite spread out in dry country, do not hang out in big numbers in metropolitan and suburban locales and are not always where lots of high-quality concentrate feeds are grown.
So regional and smaller packers are essential to help fill in those gaps in processing capacity and often satisfy niche markets in the process. Plus, there are more ranchers and feeders marketing direct to consumers or smaller groceries than we can ever recall. The backlog in very small locker plants is very long in some places, stretching out many months in advance.
The interest of retailers like Walmart in the production and processing sectors is part of that innovative drive for better quality more consistently that is necessary for supply chains to maintain themselves. But it’s not new. Retailers have explored and done some of that before.
And government wasn’t doing it then either.
None of these realities support any attempt to break up or damage the big packers.
It goes without saying that most of the disgruntled farmers and ranchers who are working with activists on dismantling our present system haven’t been very successful, or at least, not as successful as they think they deserve.
That doesn’t mean they are not smart about some things, don’t work hard, maybe even deserve better luck.
But there is something wrong with people working so hard to destroy a system that is satisfying the overwhelming majority of American and global citizens. Striving for improvement is one thing. Working to destroy, with the dubious potential for coming up with something better nearly overnight is wrong.
Which is where government too often comes in. Big government can sometimes listen more carefully to the loud, disgruntled participants or to those not directly involved but certain they can make things better than those folks already making things work.
So what’s USDA up to? The GIPSA rule that has intelligently been beaten back time after time has as many lives inside government and activist heads as mCOOL. One has been ruled illegal by eight appellate courts and the other been ruled illegal by international trading rules but the activists won’t give up.
Texas A&M coordinated an extensive and intensive analysis of the effects of Alternative Marketing Arrangements (AMAs) on the beef production and marketing system in 2021.* The data and complicated, sophisticated economic modeling backed up what cattle feeders and packers have experienced first hand for years. AMAs -- a primary target for USDA-GIPSA, anti-meat industry activists and anti-trust activists for years -- provide benefits for all segments all along the production chain and for consumers.
But the cow/calf and backgrounder segment would suffer twice as much as cattle feeders and everyone else falls in the line of damages behind them, the report found. That’s because the ability to reward the production of high-quality carcasses provides the incentive for that production. And consumers depend on that value-added chain for consistently palatable beef.
As folks are fond of saying, “Follow the money.”
USDA has tried to prohibit packers paying premiums and discounts for carcasses, the principle at the heart of value-added programs, from branded beef to antibiotic free beef.
Another money trail is the attempt by some to make money, and punish those they don’t like, by suing them in federal court. Eight circuit courts have ruled that an entity claiming they didn’t get a fair deal from a business -- say a big packer -- is not enough to award millions of dollars to someone.
This has held for many industries and many corporations. Key to USDA’s attack on the beef production chain is allowing one dissatisfied customer to sue processors for millions, as opposed to having to prove that a whole class of customers have been wrongly abused and mistreated, as the law has held. USDA wants to change that legal holding, known as the “Harm to Competition standard.”
In short, trial attorneys would be empowered to impose a regime of regulation by litigation, rather than allowing the industry participants themselves to set marketing standards.
USDA and the trial lawyers (remember David Domina and J. Dudley Butler) want to foster a herd of lawsuits against meat processors neither the processors nor the industry needs to spend money defending. The trial lawyers want to go after the big packers because that’s where the money is.
The beef industry does not need to have to fight the destruction of the quality and safety production chain producers proposed and producers and packers have profited from. Especially enabled by our federal government.
Just protesting to USDA isn’t necessarily enough. They don’t always pay attention to industry representatives, see the big picture or understand the complex workings of a production chain.
So jerking their funding chain, pulling them up short, can be the only way to stop catastrophic consequences.
Defunding has become a popular term lately. Inserting activity prohibitions by defunding them, or threatening to defund contemplated activities, is a sure way to head off disaster.
A letter from the “Barnyard Coalition,” a group including NCBA, pork and poultry associations, the North American Meat Institute (NAMI) and state affiliates was sent to the leadership of the Appropriations Committee, to express “strong support of Section 737 of the Fiscal Year 2024 Agriculture, Rural Development, Food and Drug Administration appropriations bill.”
That is the section of the current version of the appropriations bill that prohibits USDA from proposing and finalizing rules to foster lawsuits and damage value-added programs. That section needs to stay in the final version of the bill.
The groups are asking cattlemen to contact their member of Congress to put pressure on the Appropriations Committee to keep Section 737 in the bill.
Edi. Final Note: If you really want to venture into the legal or legislative weeds of the Appropriations Bill, contact Tanner Beymer at NCBA: Tanner Beymer
House contact info:
House Appropriations Committee Chairwoman:
Chairman Rep. Kay Granger (R-TX)
Ranking member Rep Rosa DeLauro (D-CT)
Senate contact info:
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