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Making sure Montana farmers and ranchers get a fair shake when they sell their products to markets far and wide is crucial, Bullock said during a recent interview by phone. “My principle concerns are those impacting Montanans on the ground,” he said. “(Like) whether our grain growers can get a fair price for their product, get that product to the market and whether there’s sufficient competition and opportunity for our beef producers.” It’s an issue that can’t be ignored if rural Montana communities are expected to survive. “When you talk about small business in Montana, a third of our economy is based on agriculture. That’s where our small businesses lie,” Bullock said.

Montana Attorney General Works to Protect Farmers and Ranchers

When Montana Attorney General Steve Bullock looks across his home state’s vast rural landscape, he sees an economy still heavily dependent on farming and ranching jobs. From mountainous western Montana to the high plains at the edge of the Dakotas, roughly a third of the economy remains tied to traditional work in the fields and out on the range.

But this important segment of the Montana economy is increasingly beset by worries over consolidation and other anti-competitive concerns in related industries like meatpacking, rail transportation and seed production. These trends, which have been unfolding for decades, are putting the squeeze on the state’s small family farmers and ranchers.

The steady pace of consolidation in these industries is also hitting consumers’ pocketbooks, it’s argued.

Bullock’s concern with anti-competitive practices in the agricultural industry has prompted him to take a front-and-center role on the issue both within the state and nationally. Since he took the helm of the Montana Department of Justice in January 2009, the native-born Montanan has added two new attorneys to the Office of Consumer Protection. One of those attorneys is working exclusively on issues related to farmers and ranchers.

Earlier this year, Bullock traveled to Ankeny, Iowa, for a joint U.S. Department of Justice and U.S. Department of Agriculture workshop. The March 12 meeting included talks on antitrust issues in agriculture.

Following that meeting, Bullock took part in a follow-up workshop focused on anti-competitive issues in the cattle industry. The meeting was held Aug. 27 in Fort Collins, Colo. There, Bullock joined in a roundtable discussion with U.S. Attorney General Eric Holder, Secretary of Agriculture Tom Vilsack, Rep. Betsy Markey, D-Colo., Colorado Governor Bill Ritter, Jr. and other top-level agriculture and antitrust officials.

“There are core values each of us share,” Bullock testified at the Colorado workshop. “I’ve never heard a rancher say they didn’t want their children to have the viable option to carry on the family business. So, if nothing else, ensuring that family farming and ranching is viable for today’s and tomorrow’s producers should be the shared focal point as we move forward.”

DEATH BY A THOUSAND CUTS

Making sure Montana farmers and ranchers get a fair shake when they sell their products to markets far and wide is crucial, Bullock said during a recent interview by phone. “My principle concerns are those impacting Montanans on the ground,” he said. “(Like) whether our grain growers can get a fair price for their product, get that product to the market and whether there’s sufficient competition and opportunity for our beef producers.”

It’s an issue that can’t be ignored if rural Montana communities are expected to survive.

“When you talk about small business in Montana, a third of our economy is based on agriculture. That’s where our small businesses lie,” Bullock said.

Of course, this has been known for some time. For decades, farm and ranch families across Montana and the rest of the country have suffered death by a thousand cuts as large agricultural corporations have bought up more and more of the markets. As a result, profit margins in U.S. agricultural industries have dropped, causing the squeeze on regular farmers and ranchers to tighten.

For Montana’s cattle industry, issues related to less competition in the meatpacking and rail industries are at the forefront of Bullock’s concerns.

Consider this: There are about 750,000 beef cattle producers in all of the U.S. All of the cows raised by those producers are ultimately marketed to just four meatpackers that control well over 80 percent of the nation’s cattle market.

According to Bill Bullard, CEO of R-CALF USA, a Billings-based nonprofit organization representing the interests of the nation’s cattle producers, the sale of slaughter-ready cattle to these highly concentrated meatpackers determines the profitability of everyone in the industry. Any manipulation of price between the producers and the highly concentrated packers will permeate the entire cattle industry.

Bullard said it’s important to remember that market pricing for young cattle is set by the expected future price of that animal when it’s finally ready for slaughter. “Because it takes 15 to 20 months to bring that animal to slaughter our industry is highly sensitive to price volatility and market power that forces prices down,” he said.

The largest of the top four packers is Tyson Foods, he said. They’re followed by Cargill, JBS and National Beef Packing Co. Brazilian-based JBS is the world’s largest beef meatpacker.

Their significant market heft has given meatpackers the ability to control the supply chain for livestock. “We are seeing the largest of packers convert the feeding sector into a non-competitive subsidiary of the packer themselves,” Bullard said.

“In other words, they’re beginning to vertically integrate the cattle industry like they have already accomplished in poultry and hog industries where the packers essentially control the entire supply chain. Producers become contract growers for a particular packer as opposed to being independent producers that have numerous market choices.”

In effect, the meatpacking industry is swallowing the cattle feeding industry whole. Just two years ago, JBS purchased Five Rivers Cattle Feeding Company, the largest beef producer in the nation. Five Rivers had the capacity to feed up to 810,000 cows at a time. In 2010, JBS bought McElhaney Cattle Co., which had a feeding capacity of 130,000 head of cattle.

These are examples of direct ownership that give the concentrated meatpackers considerable market power and leverage over cattle prices, Bullard said. With the open market cut off at the knees, the packers control cattle prices. “The open market is shrinking at an alarming rate,” Bullard said. “As that open market shrinks and has fewer cattle and fewer sellers that market becomes unable to discover a competitive price.”

Ultimately, the four major meatpackers act as gatekeepers and decide who does and who does not have timely access to the market. This is no trivial matter, Bullard said. “It is the goal of the packers to capture complete control over the livestock supply chain,” he said.

THE LAST FRONTIER

So why does this matter to Montana cattle ranchers and ranchers throughout the Rockies?

The strategy now being applied to the cattle industry was first applied to the nation’s poultry industry back in the 1960s and 1970s, Bullard said. Today there is no longer an open market for poultry. A producer in the poultry industry must have a contract with a packer in order to participate in the industry, he said.

The hog industry was next. In 1980 the U.S. had 667,000 independent hog producers, Bullard said. Today, just 10 percent remain in business.

“The cattle industry is the last frontier,” Bullard said. “It’s the last major segment of the livestock industry that is not already captured by the dominant meatpackers.”

But can anything be done to stop this from happening? Bullard thinks so. He’s putting his money on the work Montana AG Steve Bullock is doing along with officials from the U.S. Department of Justice and Department of Agriculture (USDA).

Bullard has especially complimentary words for the antitrust efforts being waged by the Obama administration. He said they’ve recognized the importance of maintaining competitiveness in the nation’s agriculture industry. Cattle producers alone generate $50 billion in cash receipts each year, making this the largest segment of the nation’s agricultural industry.

“This administration is the first to recognize that the hollowing out of rural America that is occurring all across the nation is being accelerated by the loss of competition in agricultural markets,” he said. “It is the economic cornerstone for most rural communities. And it is the vehicle by which to revitalize the rural American economy.

“This administration gets it.”

Bullock’s efforts on anti-competitive practices in agriculture are also more than mere words, Bullard added. “He has been recognized nationally. He has become a leader in seeking reforms to restore competition in the cattle industry.”

Bullard’s organization is backing new federal rules meant to strengthen the Packers and Stockyards Act of 1921. The proposed GIPSA Rule, named for the USDA Grain Inspection, Packers and Stockyards Administration, was published in the federal register on June 22. The official comment period for the proposed new federal regulations ended Monday, Nov. 22.

The rules are in part the result of fears raised by livestock producers. In the 2008 Farm Bill, Congress directed that the GIPSA regulations be developed. If implemented, the proposed rules would improve market transparency and further define practices that are unfair, discriminatory or deceptive, including efforts by packers that would limit a producer’s legal rights, according to information from Bullock’s office.

“I think these proposed rules are a positive sign that somebody in Washington is listening and I applaud the administration for taking on this important issue,” Bullock stated in late June. “I’m confident that aggressive proposals like this are what we need to make sure that Montana’s top industry can compete fairly.”

Adds Bullard: “This administration is the first administration in decades to respond to the producers’ request that they take seriously the protections Congress mandated in that 90-year-old Packers and Stockyards Act.”

On Dec. 8, the departments of Justice and will hold a concluding workshop to weigh issues related to the livestock, dairy and poultry industries raised in previous workshops. Participants will also discuss discrepancies between the prices received by farmers and the prices paid by consumers. All of this will be incorporated into a national analysis of agriculture markets, the U.S. Department of Justice states.

Bullard says that now is the time to put a halt to anti-competitive trade practices in agriculture. “This right now is perhaps a once-in-a-lifetime opportunity,” he said.

Even more work remains to be done to protect Montana and America’s farmers and ranchers from anti-competitive trade practices, Montana AG Steve Bullock says.

Another major issue affecting Montana cattle producers more acutely than those in other states is the cost of getting cows to market. In a 2009 report titled “Railroad Rates and Services Provided to Montana Shippers,” the state AG’s office revealed that Montana shippers pay the highest rail rates in the country. It noted that Burlington Northern Santa Fe Railways controls 95 percent of rail freight transportation in the state. This lack of competition makes Montana shippers the most captive in the country, the report concludes.

Concentration in the meatpacking industry has been especially troublesome to outlying spots like Montana, which has lost many cattle producers. This adds to transportation burden felt by Montana’s ranchers. “As the packers concentrated, they concentrated geographically,” R-CALF’s Bullard said. “They are now located in the high plains region of the United States.”

In 2009, Bullock sent a letter to Congress in support of The Railroad Antitrust Enforcement Act. The legislation would repeal existing antitrust exemptions that protect freight railroads from competition and lead to higher prices for shippers and consumers. The bill hasn’t come up for a full vote yet.

Rail issues are just as important for the state’s wheat industry. Montana is the number three wheat producing state in the nation. For organic wheat, the state is number one. “It’s about a $1 billion industry here in Montana,” Bullock said.

The declining number of Montana grain elevators is also a concern for Montana’s grain growers. In 1984, the state had nearly 200 grain elevators, Bullock told federal officials in March. Despite an increase in production, there are fewer than 50 today.

“At the end of the day what we’re trying to make sure is that prices are reasonable for our producers,” he said. “A big piece of the overall Montana economy is making sure that our producers and our grain growers have a way to get their grain to market at a reasonable price.”

ARE GENETICALLY MODIFIED CROPS NEXT?

One other issue Bullock is keeping an eye on, though his office says it’s not as much of an immediate concern for now, is the looming introduction of genetically engineered wheat. A related concern is the purchase of independent seed producers in Montana by major corporations. In 2009, Monsanto—the world’s largest seed company—bought WestBred LLC, a Montana-based cereal grain company that breeds seed products for markets throughout the U.S.

Not only have purchases of seed companies like WestBred facilitated consolidation in the seed industry, but it has also restricted innovation by plant breeders who don’t have access to as much germplasm as they once did. Consolidation in the seed industry is also having a chilling effect for individual growers, said Kristina Hubbard, Montana-based Advocacy and Communications Director for the Organic Seed Alliance.

Farmers who for years have saved the seeds from their best plants from one season to the next now face possible violation of patents placed on individual seed genetics, Hubbard said. It’s a trend that’s been witnessed elsewhere in the corn and soybean industries, and it’s one she fears could ultimately make its way to Montana’s wheat industry.

“Farmers are not able to save patented seed for replanting on their farm, which is a form of competition,” she said. “When a farmer is forced to find new seed every year, instead of saving some from his or her harvest, that’s again eliminating a form of competition.”

Another concern is the marketability of genetically modified wheat. “Foreign markets don’t want these varieties,” Hubbard said.

To combat these changes in the seed industry, she’d like to see the Department of Justice take a “hard look” at mergers and acquisitions that many would call anti-competitive.

With respect to the genetic seed issue, Hubbard would like to see Congress clarify that the “Plant Variety Protection Act” of 1970 should be the sole intellectual property protection for plant breeders of sexually reproducing crops like corn, soybeans and wheat. The statute provides protection for plant breeders so that they could recoup value from their time and research into new plant varieties by giving them marketing rights over the variety of plants they produce for up to 20 years. Right now, companies like Monsanto are able to place “utility patents” on seeds because of a 2001 Supreme Court decision.

But it has two important exclusions, she said. “One, farmers can save seed that are protected by plant variety protection certificates to replant year to year. And plant breeders can access these protected varieties to use the germplasm to further innovation and create new varieties.”

Hubbard’s third recommendation would provide new publicly developed seed varieties that farmers could access for their use. “We really need to reinvigorate our public plant breeding programs,” she said. “Right now a lot of our public programs at land grant universities have seen funding for developing new varieties of plants dramatically reduced.”

About Jason D. B. Kauffman

Comments

  1. lfehl says:

    I sincerely hope these efforts are successful. It will be a sad day for Montana and the rest of the nation if they fail. Watch the movie Food Inc…it will disgust you, but it covers many of the same issues and digs deeper into what happened to the poultry industry.

    When farmers no longer control our food supply and corporations do, they will eventually be purchased by China, India or some other country who will then control our food supply.

    I don’t know why our federal government still resists labeling on food so we know what we are eating…if it is genetically modified or not, country of origin for the ingredients, etc. We have opted out of the industrialized meat supply chain and now buy directly from small farmers. Vote with your dollars.

    Good for the folks in the Montana government for their efforts. This is an important article.

  2. Elizabeth says:

    Important article. Important information. As rural communities and a rural state, let’s start here to protect our freedom and independence. We have seen the corporate takeover of too many small businesses. Food sources affect all of us.

    These issues–the GMO takeover of wheat genetics, the way Monsanto ran roughshod over legislation protecting MT farmers last legislative session working against local industry advocates, the stronghold of large corps buying & consolidating all beef production–ought to be common knowledge in every household in MT.

    We need to pay attention to these issues and support the work these guys are doing for all of us.