Livestock Workshop Transcript
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1 1 UNITED STATES DEPARTMENT OF JUSTICE UNITED STATES DEPARTMENT OF AGRICULTURE 2 Public Workshops Exploring Competition Issues in 3 Agriculture Livestock Workshop 4 A Dialogue on Competition Issues Facing Farmers in Today's 5 Agricultural Marketplaces 6 Colorado State University - Lory Student Center Fort Collins, Colorado 7 August 27, 2010 8 __________________________________________________________ 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Javernick & Stenstrom, LLC 3131 South Vaughn Way, Suite 224, Aurora, Colorado 80014 (720) 449-0329 FAX (720) 449-0334 2 1 SECRETARY VILSACK: Good morning. I just want 2 to welcome everyone to the fourth joint competition 3 workshop between the Department of Agriculture and the 4 Department of Justice. I want to take this opportunity to 5 thank Colorado State University for the help that they 6 have provided in setting up this workshop, allowing us to 7 use their facilities, and accommodating an overflowing 8 crowd. We know that this workshop has generated a lot of 9 interest, and Colorado State University has done a great 10 job in making it possible to have the space to accommodate 11 folks here today. 12 Today, we intend to focus on the livestock 13 industry and whether there is proper competition to ensure 14 producers are getting a fair shake. These workshops will 15 help us understand the issues that are of most concern and 16 deserve closer attention and to explore the appropriate 17 role, if any, for antitrust or regulatory enforcement in 18 the agricultural industry. 19 In March, we held a workshop on general farm 20 issues in Hinton, Iowa. In May, we gathered in Normal, 21 Alabama, to discuss poultry issues. In June, we discussed 22 dairy issues in Madison, Wisconsin. Moving forward, we 23 intend to hold one final workshop on December the 8th in 24 Washington, D.C. President Obama provided a clear 25 direction that government should be open and transparent, Javernick & Stenstrom, LLC 3131 South Vaughn Way, Suite 224, Aurora, Colorado 80014 (720) 449-0329 FAX (720) 449-0334 3 1 and these workshops are designed to do just that. We want 2 to have a public dialogue on these very complex but 3 important issues. 4 As I travel across the country, I hear a 5 consistent theme. Producers are worried. They're worried 6 whether there's a future for them and for their children 7 in agriculture. There are many ingredients needed for 8 someone to get into farming and ranching. He or she needs 9 to have access to capital to get the land equipment and 10 livestock, they need to be willing to take significant 11 risks and work very hard, and they need to know that 12 there's an open and competitive market for their livestock 13 and for their commodities. 14 Livestock producers are extraordinarily 15 innovative, despite enduring some very difficult times. 16 The USDA is designed to support producers' ability to join 17 together, to market their products, to find value-added 18 opportunities, and to enter into contract arrangements. 19 Additionally, we look to support producers in their 20 efforts to work hard and to receive a premium for their 21 efforts. 22 Now, there are troubling statistics concerning 23 the livestock sector. The top four cattle packers control 24 roughly 80 percent of steer and heifer procurement, and 25 the top four hog packers control roughly 65 percent of hog Javernick & Stenstrom, LLC 3131 South Vaughn Way, Suite 224, Aurora, Colorado 80014 (720) 449-0329 FAX (720) 449-0334 4 1 procurement. In 1994, the spot market for hogs was 62 2 percent. Today, it is only roughly 5 percent nationally. 3 And new figures just recently developed are showing it 4 dipping below 4 percent for the first time ever. 5 In cattle, depending upon what part of the 6 country you live in, the spot market is also rapidly 7 declining. In 1999, the spot market for cattle was 68 8 percent. Today, it's closer to 52 percent nationally. 9 And we know in some parts of the country, it's less than 10 30 percent. This thinning spot market is a concern 11 because it sets the base prices in marketing contracts. 12 In the retail sector, the top four retailers 13 now control 37 percent of the market up from 17 percent in 14 1992. And consolidation in this sector can have a squeeze 15 on the packing sector and have ripple effects all the way 16 down to the producer. Some have argued that the status 17 quo is better for livestock agriculture and that the 18 current system has resulted in efficiency and innovation. 19 But I think we need to take a look at where we are. 20 Under the status quo, there has been a 21 significant exodus from agriculture and a depopulating of 22 rural America. In the past 40 years, the United States 23 has lost 800,000 farmers and ranchers. And those that 24 remain are aging. From 2002 to 2007, our last ag census, 25 the average age of a farmer increased from 55 to 57. The Javernick & Stenstrom, LLC 3131 South Vaughn Way, Suite 224, Aurora, Colorado 80014 (720) 449-0329 FAX (720) 449-0334 5 1 number of farmers age 75 and older has increased by 20 2 percent over the same period. Meanwhile, the number of 3 operators under 25 years of age has decreased by 30 4 percent. The sad fact is that young people find it very 5 difficult to get into this important occupation and 6 calling we call farming. 7 Fifty million people now live in rural 8 America, urban areas are growing at a much faster pace, 9 and more than half of rural counties have lost population. 10 Today, if you consider all family-farm operations, only 11 roughly 10 percent of family-farm income comes from 12 farming. And more and more of our farmers are looking 13 elsewhere for a primary source of income. Rural 14 communities have higher poverty rates than the rest of the 15 country. And the average per capita income of rural 16 residents is approximately $11,000 below their urban and 17 suburban counterparts. 18 In 1980, there was 666,000 hog farms. Today, 19 it's roughly one-tenth of that; 67,000. A similar 20 situation exists in the cattle industry. In 1980, there 21 were over 1.6 million farms. Today, there are roughly 22 950,000 cattle farms. In 2009, a hog producer received 23 24.5 percent of the retail value of the hog, and it was 24 over double that percentage in 1980 at near 50 percent. 25 Last year, 13.6 percent went to the packer and 61.9 Javernick & Stenstrom, LLC 3131 South Vaughn Way, Suite 224, Aurora, Colorado 80014 (720) 449-0329 FAX (720) 449-0334 6 1 percent went to the retailer. A cattle producer gets 42.5 2 percent of the retail value of a steer in 2009, which 3 compares to 62 percent in 1980. Last year, 8.5 percent 4 went to the packer and 49 percent went to the retailer. 5 While the causes of decline in farm numbers is 6 complex, it's no secret that livestock and poultry 7 marketplaces have become more consolidated and vertically 8 integrated. And although there can be efficiencies found 9 with these trends, there is also the potential for unfair 10 practices and limited transparency which increases risk 11 for producers. We continue to seek answers and solutions. 12 And under our watch at USDA, we take a number of steps in 13 an effort to improve competition in agriculture. 14 The USDA and the Department of Justice, as a 15 result of these hearings, has established the Agricultural 16 Competition Joint Task Force to explore new opportunities 17 for utilizing each other's expertise. These workshops 18 will also help inform the work of that task force. 19 To improve the efficiency and enforcement 20 under the Packers & Stockyards Act, we've increased 21 GIPSA's budget to improve enforcement over unfair and 22 deceptive practices in the marketplace. And the 23 Department is hiring more attorneys and field 24 investigators to handle complex investigations and other 25 violations. GIPSA recently published a proposed rule for Javernick & Stenstrom, LLC 3131 South Vaughn Way, Suite 224, Aurora, Colorado 80014 (720) 449-0329 FAX (720) 449-0334 7 1 fairness in marketing of livestock and poultry. And in 2 December, GIPSA published a final rule to establish basic 3 fairness in poultry contracts. So it is in this broad 4 context that we have a conversation today. 5 I want to take this opportunity to thank all 6 who have traveled here today from near and far. I 7 especially want to thank the panelists, who will be 8 introduced in a few minutes, for their willingness to 9 participate in this workshop. And I look forward to 10 hearing what everyone has to say on these very important 11 issues. Just as a note, those who are in the overflow 12 rooms will also have an opportunity to make their thoughts 13 known. We have computers and staff in each of the 14 overflow areas to take comments. 15 Now I'd like to take the opportunity to turn 16 the podium over to the attorney general of the United 17 States, Eric Holder. You need to know that during his 18 impressive career, General Holder has served in private 19 practice as U.S.