USDA created a lot of heat the past few weeks, and for good reason. The Ag department, through its proposed GIPSA reforms, wants to turn the meat packing industry completely on its head.
As stated in a letter to Sec. Vilsack signed by U.S. senators in support of the new regulatory proposals, “Market consolidation has done a severe disservice to our livestock producers, and it is critically important that we maintain market access and price discovery options for independent farmers and ranchers.” USDA is hoping to boost market transparency by proposing changes to its Grain Inspection, Packers and Stockyards Administration rule proposals.
Most of the effort is focused at trying to stop the big corporate packers from getting bigger, and shift bargaining power back to producers.
Here’s news that most of us in production Ag probably already know: Any effort by the government to stop consolidation will be wasted time and money. Trying to throw roadblocks in front of the packers will do nothing for the livestock industry, including producers.
Supporters of GIPSA argue that if we stopped packers from contracting cattle or establishing private marketing agreements, that would open the door for more competition in the industry and create new, smaller packers who would create upward bidding pressure on cattle resulting higher cattle prices.
Sounds like the perfect, flawless plan to put money back in the pockets of producers.
But there’s a kink in the plan: GIPSA does nothing to increase actual beef demand among consumers. Not to mention, the marketing agreements they want to dispose of allow ranchers to manage risk while earning higher premiums for high-quality cattle.
By punishing the packers, many producers would end up losing, too.
Long term, increased regulation decreases efficiency of the marketplace, which raises the cost of doing business. That increased cost ultimately gets passed on to the consumer. And with higher beef prices at the grocery store, consumer demand invariably will suffer.
That doesn’t do anyone any good, be it packer or producer.
But all that logic seems to be missing in this debate. It’s fueled instead by the desire to punish the big guys and make the little guy feel like he’s on top.
The smart producer, though, knows that cattle prices are high and are forecast to go even higher due to smaller calf crops and lower beef production. And all the analysts are calling for profitability to increase for at least the next couple of years across the industry.
Those increased profits won’t occur by impeding relationships with packers. It all goes back to plain old efficient production and marketing. And producers don’t need GIPSA to do that.