Reexamining The Packers & Stockyards Act: Recent Congressional And USDA Attention On The Livestock Industry – Food, Drugs, Healthcare, Life Sciences

Summary

What’s next for processors, producers, ranchers, and other stakeholders in the livestock industry? Our Food, Beverage & Agribusiness team provides insight into the US Department of Agriculture’s latest announcement of upcoming proposed regulations under the Packers & Stockyards Act and a recent Congressional hearing to investigate the state of beef markets.

• Packers & Stockyards Act
• Hearing of the congress committee on the current state of the cattle market
• Regulatory and legislative horizon

In 1921, Congress passed the Packers and Stockyards (P&S) Act to ensure competition and integrity in the livestock, meat, and poultry markets. The P&S Act was enacted in response to concerns about what was then the “Big Five” meat packers and aimed to strengthen enforcement in the industry. A hundred years later, as part of its Executive Order to Boost Competition in the American Economy on July 9, 2021, the White House reported that four companies now dominate 80% of the beef market.

On June 23, 2021, the Senate Committee on Agriculture, Food and Forestry held a hearing on concerns of cattle producers and other interested stakeholders about the “Big Four” processors. As the title of the hearing – “Investigating Markets, Transparency and Prices from Beef Producer to Consumer” – suggests, some cattle producers are concerned about the lack of transparency and competition in the cattle markets. Chair Debbie Stabenow (D-MI) also noted that farmers and ranchers were concerned about “concentration in the packaging industry, potential market manipulation, [and] have no access to small and medium-sized facilities. “The USDA has also signaled that it plans to work on three proposed rules to strengthen enforcement under the P&S Act – proposals that the White House has encouraged action, such as in the Executive Ordinance.

Why the focus now?

The pandemic and other recent events have shown how the concentration of independent farmers and ranchers can take a painful toll, while at the same time working family consumers face higher prices and insecure production.
– Agriculture Minister Tom Vilsack

There are several factors that led to the recent USDA and Congress attention to the livestock industry. As a result of the COVID-19 pandemic, consumers have experienced a shortage of meat and meat products, which has created disparities between consumer packaging prices and market prices for cattle. In addition to shifts in supply and consumer demand, as Stabenow pointed out in the Senate hearing, other issues have also impacted the beef market industry, including inadequate protection of workers in meat processing plants and COVID-19 outbreaks in processing plants.

The Senate hearing focused on examining concerns about a lack of transparency and competition from ranchers and ranchers, touching on meat processors’ struggle with labor shortages, difficulties in recruiting staff due to increasing consumer demand for meat and the recent ransomware attack on JBS. which brought a fifth of the country’s meat processing capacity to a standstill. These vulnerabilities underscore the concern of many Senators about the current state of the cattle market and the need for a USDA review and the potential for future action by Congress.

USDA developments

In the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions, the USDA outlined its upcoming regulatory and deregulation plans, which included its intention to work on three proposed rules under the P&S Act:

1. Revised the criteria to be considered in determining whether a particular behavior or action by packers, pig suppliers or traders of live poultry is inappropriately or inappropriately preferred or beneficial. These revisions would also clarify conduct that the USDA deems to be unfair, unfairly discriminatory, or misleading and in violation of Section 202 (a) and (b) of the P&S Act.
2. A proposed new tournament system rule for poultry farmers. The proposed rule would lay down requirements that a live poultry trader must comply with when using a poultry farmer ranking system to determine producer remuneration and failure to comply would be considered an unfair, unfairly discriminatory and misleading practice.
3. Re-proposed a rule to clarify that parties do not need to demonstrate any interference with competition in order to bring a lawsuit under the P&S Act.

These proposals follow a similar proposed rule from 2016, which aims, among other things, to clarify unfair, unfairly discriminatory or fraudulent acts under the P&S Act, as well as to clarify that any conduct or act that harms or could affect competition, constitutes a violation of Section 202 (a). This rule was later withdrawn in October 2017.

However, this government appears ready to act. According to Vilsack, the purpose of these proposed rules is “to seek to strengthen the fairness and resilience of livestock markets on behalf of farmers, ranchers and breeders”. In a press release, the Department of Justice (DOJ) also announced its support for the proposed rules and commended the USDA for the steps it has taken “to strengthen enforcement of the Packers and Stockyards Act to improve competition in our agricultural markets” and recognizes that the DOJ stands ready to “work hand in hand with the USDA to use our joint enforcement agencies to pursue these common goals”. The White House is fully geared towards this endeavor; the executive order instructs the USDA to initiate rulemaking to strengthen its regulations to implement the P&S Act.

Whether these proposed rules will ultimately be implemented remains to be seen and while the USDA has not published a specific proposed rule language, the livestock industry is taking note. The North American Meat Institute – a trade association representing US packers and processors of beef, pork, lamb, veal and turkey meat – has criticized the USDA’s decision to propose new regulatory measures. Other trade groups, such as the National Cattlemen’s Beef Association, which represents cattle breeders and ranchers, have suggested that while the proposed rules were not explicitly worded, they would support provisions of the P&S Act that “do not limit the ability of cattle producers to make higher profits and make the decisions that are best for their business. ”

Legislative Agenda – Control by Congress

As demonstrated by testimony from senators from both parties in the Senate hearing, Congressional control over the consolidation of livestock markets and inequality in the market has reached a new high. A number of bills related to the U.S. beef market are also being passed through Congress, including:

Grassley Tester Spot Market Bill: Transparency in Cattle Market, p.949: This bipartisan bill, also known as the “50-14” law, requires that at least 50% of a meat processor’s weekly slaughter volume be purchased on the open or spot market. Legislation is supported across party lines, suggesting that this effort may have momentum in the future.

Fischer – Wyden: Cattle Market Transparency Act of 2021, p.543: According to co-sponsor Deb Fischer (R-NE), this draft law defines “regional binding minimum thresholds for negotiated bar and network transactions in order to enable pricing in cattle marketing regions”. Among other things, it also requires a publicly accessible database with marketing contracts between packers and producers and requires packers to report to the USDA the number of cattle that will be sent to slaughterhouses every day over the next 14 days.

Johnson – Spanberger: Butcher Block Act, HR4140: This bill provides standalone grants for small meat processors looking to add or expand shackle space. The bill aims to fund producers’ investments to encourage competition within the industry.

Regulatory and legislative horizon

With the attention of Congress, the White House and the USDA, the livestock industry should closely monitor policy and regulatory action in this area as it appears certain that increased enforcement of the P&S Act is in sight. Whether that gets a positive or negative rating depends on which side of the fence you are sitting on. Ranchers and producers are likely to welcome increased enforcement in an attempt to make the industry fair. Large processors and packers are likely to expect more control.

In addition to enforcement, interested stakeholders should also monitor developments in the USDA to increase investment in animal processing facilities. Following the signing of the Executive Order, the USDA announced that it would invest $ 500 million in funds under the American Rescue Plan to expand meat and poultry processing capabilities “to give farmers, ranchers and consumers more choice in the market.” Interested parties should expect further announcements from the USDA to implement this proposal.

The authors would like to acknowledge Krupa Zachariah’s assistance in researching and writing this notice.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.