P.O. Box 6486
Lincoln, NE 68506
Web site: www.competitivemarkets.com
Date: January 29, 2002 For Immediate Release
Contact: Fred Stokes: 662.476.5568
Michael C. Stumo: 860.379.6199
Land Grant Law and Economics Professors Support Packer Ban
OCM praised a report released late last week by three university lawyers and economists from three different land grant universities in favor of the packer feeding ban. (see OCM’s Academic Reports Section for McEowen, Harl, Carstensen report). The report clearly rebutted the unfounded assumption made by eight agricultural economists in a prior opinion piece that the packer feeding ban would eliminate most all livestock contracts and joint venture. This rebuttal report was written by Roger McEowen, an agricultural law professor in the Kansas State University ag economics department; Peter Carstensen, an antitrust law professor at the University of Wisconsin; and Neil E. Harl, a lawyer and ag economist at Iowa State University.
The background is as follows. On December 13, 2001, the Senate adopted a bipartisan provision in the Farm Bill prohibiting packers from owning, feeding or controlling livestock. The amendment was sponsored by Senators Johnson (SD), Grassley (IA), Wellstone (MN), Harkin (IA), Thomas (WY) and Dorgan (ND). On December 18, 2001, Senators Johnson and Grassley recorded testimony in the Senate record stating that the word “control” covers instances where packers effectively control the livestock production operation although the producer may hold mere title to the livestock. They were clear that the amendment did not include forward contracts, marketing agreements, or joint ventures where the packer did not own the livestock. The amendment also exempts cooperatives and packers with less than 2% of the national market.
Despite this clarification, the packer lobby – including the American Meat Institute and the National Cattleman’s Beef Association – began claiming that the packer feeding ban also prohibited all contracts and most joint ventures for niche or branded products. The packer lobby induced eight university ag economists, most or all of whom have received packer money in the past but failed to disclose it in their report, wrote an opinion article assuming that the packer feeding ban prohibited all contracts. Based on that assumption, the economists went on to claim that the amendment would cause a wide variety of problems in the marketplace.
Unfortunately, those economists failed to seek information as to the true meaning of the bill language. They failed to acknowledge that packer feeding bans are in effect in Iowa and Nebraska and produced no such dire consequences in those states. They failed to acknowledge that packer feeding and captive supplies can have market distorting impacts. Additionally, they failed to acknowledge that there are other methods to achieve the benefits from contracts and captive supplies – methods that cause less harm to competition, price, access and fairness.
Professors McEowen, Carstensen and Harl wrote to point out many of these deficiencies. “Unfortunately,” they wrote, “[the eight economists’] interpretation constitutes a manifest misreading of the proposed statutory language. We write to correct the erroneous legal analysis of these economists.”
McEowen, Carstensen and Harl went on to state, “In their paper, the economists base their entire analysis, without any supporting documentation, on the assumption that the statutory prohibition of “control” of livestock will prohibit all types of marketing contracts, including forward contracts. They then focus their entire argument against the proposed legislation based on claims of harm to various kinds of contractual arrangements used in the livestock industry. Never once do the economists suggest that packers need to actually own or control livestock in order to accomplish any of the specific objectives that they identify as crucial to achieving economic efficiency and a competitive market. The clear implication of their argument is that the prohibition of actual packer ownership of livestock does not raise any significant efficiency or competition concerns.”
The Organization for Competitive Markets is a multidisciplinary, nonprofit group of farmers, ranchers, academics, attorneys, and policy makers dedicated to reclaiming the agricultural marketplace for independent farmers, ranchers and rural communities.