Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 1 WORKSHOP ON AGRICULTURE AND ANTITRUST ENFORCEMENT ISSUES IN OUR 21ST CENTURY ECONOMY WEDNESDAY, DECEMBER 8, 2010 U.S. DEPARTMENT OF AGRICULTURE JEFFERSON AUDITORIUM 1400 INDEPENDENCE AVENUE, S.W. WASHINGTON, D.C. 20250 (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 2 1 P R O C E E D I N G S 2 SECRETARY VILSACK: Good morning, everyone. I 3 certainly want to welcome everybody to the USDA for the 4 fifth and final in a series of competition workshops 5 held jointly by the USDA and the Department of Justice 6 to explore the appropriate role for antitrust and 7 regulatory enforcement in American agriculture. 8 I want to welcome the panelists who I will 9 introduce in a few minutes and my good friend, the 10 Attorney General, who I will also introduce in just a 11 second. 12 In my travels across the country I've heard 13 from producers who are concerned about the future of 14 American agriculture. In these workshops we've been 15 looking at a wide range of issues regarding competition 16 in agriculture and today we look at the dynamics and 17 the interplay between each segment of the food 18 marketing chain, margins in the livestock, poultry and 19 dairy industries, and issues in the retailing sector. 20 The Obama Administration is committed to 21 being the most open and transparent in history, which 22 is why we look forward to this dialogue with a diverse (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 3 1 group of stakeholders regarding the agricultural 2 marketplace. I want to welcome all of you to this 3 workshop and to this hearing. 4 Today we intend to focus on a number of 5 issues. We will explore and better understand how 6 livestock and other agricultural commodities move 7 through out system and the dynamics and challenges 8 within each segment of the food marketing chain. And 9 we hope to explore margins in the livestock, poultry 10 and dairy industries. And, lastly, we'll focus on the 11 potential implications of consolidation in our 12 retailing sector. 13 I want to say these workshops have been very 14 beneficial to me and to USDA in helping us understand 15 the issues that are of most concern and deserve close 16 attention. I acknowledge that the issue of 17 agricultural competition is extremely complex. The 18 ever-changing nature of the sector suggests the need to 19 ask questions and shed light on issues that frankly 20 have not seen much light in many years. President 21 Obama has provided a clear direction; the government 22 should be open and transparent, which is what these (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 4 1 workshops are designed to do and be. 2 We want to, and we have had a public dialogue 3 on these issues. We've held workshops across the 4 country to explore the appropriate role of antitrust 5 and regulatory enforcement. In March we had a workshop 6 on seed concentration and hog market issues in Ankeny, 7 Iowa. In May we traveled to Normal, Alabama to discuss 8 poultry issues. In June we discussed dairy issues in 9 Madison, Wisconsin. And in August we explored 10 competition in livestock markets in Fort Collins, 11 Colorado. 12 In these workshops in my travels across the 13 country, a number of themes have emerged. Producers 14 want to have or maintain marketing options. They want 15 transparency. They want access to markets. They have 16 fewer buyers with whom to do business and they struggle 17 with debt and face challenges accessing capital. And, 18 lastly, they just want to be treated fairly and with 19 respect. 20 Most importantly of all, they care about the 21 future of agriculture and want it to succeed, which is 22 why we've seen such an overwhelming response and (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 5 1 attendance at these workshops. 2 I for one am optimistic about the future of 3 agriculture and I think our best days are indeed ahead. 4 For this to happen, we simply need to ask the right 5 questions and not ignore warning signs. And there are 6 warning signs that we should consider. America's mid- 7 sized farms are barely profitable, and not always 8 profitable enough to sustain a family. 9 At the Iowa workshop, Jim Foster, a pork 10 producer from Missouri summarized his concerns as 11 follows: He said, "My concern is not for me, but for 12 my kids and grandkids, make sure they can pursue the 13 American Dream as my wife and I have." 14 He compared what he saw driving through the 15 rural roads of Iowa and Missouri in the 1960s to today. 16 "I saw home-built hog shelters and lots of rolling 17 hills with sows with new litters. I saw barns across 18 Iowa with concrete pads out front with 50 to 100 calves 19 on feed. I saw veterinarians at work with their catch 20 chute, feed trucks delivering feed, implement dealers 21 delivering a new manure spreader or feed grinder." 22 Today, he sees: "Very little human activity around (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 6 1 what was once a thriving economic model." 2 We all realize that agriculture can't be 3 exactly like it was 40 years ago, but the warning signs 4 shouldn't be ignored either. In the past 40 years, the 5 United States has lost 800,000 farmers and ranchers, 6 and our remaining farmers are aging. From 2002 to 7 2007, the average age of a farmer increased from 55 to 8 57 years. And the number of farmers age 75 years or 9 older increased by 20 percent over the same period, 10 while the number of operators under 25-years-of-age, 11 decreased by 30 percent. More than half of our rural 12 counties, based on the 2000 census, lost population. 13 At today's workshop, we will ask more 14 questions. We'll explore more into margins and why the 15 retail value to producers is shifting away from them 16 and what that all means. In 2009, a hog producer 17 received 24.5 percent of the retail value of a hog. And 18 it was over double this percentage, nearly 50 percent, 19 in 1980. Last year, 13.6 percent went to the packer 20 and 61.9 percent went to the retailer. 21 The cattle producer gets 42-1/2 percent of 22 the retail value of a steer in 2009, which compares to (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 7 1 62 percent in 1980. Last year 8-1/2 percent went to 2 the packer and 49 percent went to the retailer. 3 Today we'll also explore what effects, if 4 any, retail consolidation has had on the marketplace 5 across all marketing sectors. And there are warning 6 signs to pay attention to there as well. The four 7 largest retailers account for 37 percent of U.S. 8 grocery store sales in 2009, compared to 34 percent in 9 2004, 28 percent in 1999 and 17 percent in 1994. And 10 we know that concentration can be much higher in 11 certain regions of the country. 12 There can usually be an explanation as some 13 to aspects of these complex issues, but we must also 14 ask if everything is fine, why aren't we seeing more 15 young people getting in agriculture and why are people 16 leaving our rural counties? 17 At USDA, we take these warning signs very 18 seriously, and have taken a number of steps to assist 19 producers in rural communities. The USDA and the 20 Department of Justice have established the Agriculture 21 Competition Joint Task Force to explore new 22 opportunities for harnessing each other's expertise and (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 8 1 improving enforcement of laws designed to produce and 2 protect producers. 3 In particular, USDA and the Department of 4 Justice have established a new process to handle 5 complaints for unfair and deceptive practice in the 6 poultry industry to more effectively and timely resolve 7 cases, something we feel will further facilitate 8 addressing concerns we heard at the Alabama workshop. 9 Enforcement of the Packers and Stockyards Act 10 was mentioned many times at the workshops. And in the 11 past few years, the President has increased GIPSA's 12 budget to improve enforcement over unfair and deceptive 13 practices in the marketplace. And the Department is 14 hiring new attorneys and field investigators to handle 15 complex competition investigations and other 16 violations. 17 The USDA's Grain Inspection, Packers and 18 Stockyards Administration (GIPSA) I know, proposed a 19 rule last summer for fairness in the marketing of 20 livestock and poultry. We know it has sparked 21 considerable interest and discussion. And now we have 22 the public comments, some of which we heard at the (866) 448 - DEPO www.CapitalReportingCompany.com © 2011 Capital Reporting Company Agriculture & Antitrust Enforcement Issues 12-08-2010 9 1 Colorado workshop.