Market System Isn't Always Favorable
A few months ago, I commented in this column that packer
margins and producer prices have become positively related in recent
years. That contrasts with pre-2000, when the two values were clearly
negatively related – high packer margins were associated with low hog
prices. I still think the positive relationship is a good thing, but the
past six weeks has seen the reemergence of the negative relationship,
and that has caused some conflicts for pork producers.
I’m looking forward to today’s deadline for submitting comments on
GIPSA’s proposed rules that will have major impacts on livestock and
poultry production and marketing practices. Many (and I think most) pork
producers have fallen on the “Stay out of our markets and let us work
this out!” side. Some of those same producers, however, have
complained that packers are just making too much money at a time when
producers are hurting.
Sorry, but you can’t have it both ways. Winston Churchill, apparently
quoting an unknown author, once famously quipped, “It has been said
that democracy is the worst form of government except for all the others
that have been tried from time to time.” So it is, I think, with free
markets. They don’t always treat us the way we like, or the way we
think we deserve, but they are better than the alternatives.
the Time for Costly Rules
I am writing from an ag lenders’ perspective to express
my concerns regarding the economic analysis for the proposed rule by the
Grain Inspection, Packers and Stockyards Administration (GIPSA) on the
marketing of livestock and poultry under the Packers and Stockyards Act.
For an organization that has a congressionally mandated purpose to
strengthen America’s agricultural industry and revitalize rural
communities, the United States Department of Agriculture’s (USDA)
recent proposal to limit livestock marketing agreements is perplexing to
those of us working in America’s agricultural industry. While the USDA
argues that the rule will help the livestock industry, the reality is
this policy could limit the availability of many common food products,
increase consumer prices and cost tens of thousands of jobs across the
Now is not the time for costly rules. The livestock industry has seen
historic volatility in recent years. In fact, the pork industry alone
lost $6 billion in equity from 2008 to 2009, causing many pork producers
nationwide to struggle to survive. Dramatic daily shifts in livestock
market values make it difficult for producers to provide high-quality
animals at affordable prices, and make it difficult for ag lenders to
provide critical operating capital to these farmers.
Commission Calls for Cuts in Agriculture
The co-chairmen of the National Commission on Fiscal
Responsibility and Reform released their recommendations of what steps
need to be taken on the federal deficit and for debt reduction. They
made recommendations on discretionary spending cuts, tax reform, health
care savings, social security adequacy and solvency and mandatory
spending cuts. The following recommendations were made for agriculture:
“Reduce farm subsidies by $3 billion per year by reducing direct
payments and other subsidies, Conservation Security Program funding and
funding for the Market Access Program.” The report also recommends
that user fees be charged to meat and poultry processing facilities to
finance food safety and inspection services. The co-chairs’
recommendations will be considered by the full commission and presented
to Congress in December.
Charges GIPSA Lacks Authority for Rule
A U.S. Department of Agriculture (USDA) agency lacked or
exceeded its authority to promulgate a proposed rule on buying and
selling hogs, says the National Pork Producers Council in comments filed
USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA)
also failed to support the need for the regulation with evidence of
problems in the pork industry and didn’t consider its own studies
showing that restricting contracts could harm the industry, NPPC said.
The GIPSA rule was issued June 22, 2010 and a public comment period on
it ended today, Nov. 22, 2010. The rule, prompted by the 2008 farm bill,
would amend the Packers and Stockyards Act (PSA), which regulates
livestock and poultry contracts and marketing practices.
Nov. 23-24, 2010:Pork Industry Symposium,
Saskatoon Inn, Saskatoon, Saskatchewan for more information contact:
Symposium Coordinator Kim Browne at (306) 244-7752 or email@example.com or www.saskpork.com.
Nov. 30, 2010 : Annual Animal Welfare Symposium,
Ohio Farm Bureau 4-H Center Columbus, OH for more information contact:
Naomi Botheras at (614) 292-3776 or firstname.lastname@example.org or Candace
Croney at (614) 292-0974 or email@example.com or visit http://vet.osu.edu/preventive-medicine/AnimalWelfareSymposium
Dec. 3-4, 2010: International PRRS Symposium,
downtown Marriott Hotel Chicago, IL for more information contact: www.prrssymposium.org.
Dec. 8, 2010: Workshop on Margins, Jefferson
Auditorium, on Independence Avenue between 12th and 14th Streets, S.W.
Washington, DC for more information contact: firstname.lastname@example.org.
The proposed USDA GIPSA ruling will impact contract terms,
restrict marketing arrangements, create legal uncertainty and limit the
ability to negotiate prices — a recipe for chaos for U.S. pork
to send comments to GIPSA.
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