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Farm Press Release

For immediate release -- September 16, 1998.
Contact: Eric Tabor (515-281-5191)

State Attorneys General Urge Congress to Protect Farmers and Consumers by Requiring Public Disclosure of Key Information in Livestock Marketing

"We are particularly concerned with the rapidly increasing level of concentration in the livestock industry and the impact of this on prices paid to producers for livestock and prices paid by consumers for food," the Attorney Generals say.

Des Moines -- Twenty State Attorneys General are urging the Congress to require meatpackers to provide much more public information on the prices they pay to livestock producers.
"This measure is needed to guarantee free and open competition -- and fair prices for both farmers and consumers -- in an industry that is rapidly becoming highly concentrated," said Iowa Attorney General Tom Miller, who with the Minnesota Attorney General's Office spearheaded the project.

"With a depressed farm economy and low livestock prices, it is more important than ever to have open and fair markets. Farmers must have good and ample market information in order to get a fair shake," Miller said.

The Attorneys General argued for Congressional approval of a program that would allow livestock producers to compare prices and terms offered by packers on cash sales and on forward contracts. They cited the fact that the top four beef packing companies account for over 87 per cent of the cattle slaughtered and that the five largest pork packers account for over 60 per cent of hogs slaughtered.

The program "would make the market transparent and would help reveal any anti-competitive practices or behaviors occurring in the packing industry," the Attorneys General wrote to House and Senate conferees who are about to consider final action on the FY99 Agriculture Appropriations Bill.

The letter urged the conferees to include livestock improvement provisions that were offered by Sen. Bob Kerrey (NE), Sen. Tom Harkin (IA) and others and approved in the Senate version of the bill passed July 16, 1998. Harkin and Iowa Rep. Tom Latham are members of the conference committee.

The letter, which was delivered to the conferees Tuesday afternoon, was signed by the Attorneys General of AZ, AR, ID, IA, LA, MA, MN, MS, MO, MT, NV, ND, OK, PA, SD, UT, VT, WA, WV, and WI.

The provisions supported by the Attorneys General call for the U.S. Secretary of Agriculture to conduct a three-year pilot program requiring livestock packers to report to the Secretary information relating to the prices and terms of all livestock sales, including forward contracts. The Secretary in turn would publicly report the information in a form that did not disclose which companies submitted the information nor other proprietary business information.

The letter called the program "an effective, yet measured" approach. "This pilot program would allow livestock producers to compare prices and terms offered by packers on cash sales and forward contracts. At the same time, it would shield confidential packer information and impose minimal costs of compliance on packers," the letter said.

"Unfortunately, accurate price discovery is increasingly difficult in livestock markets," the Attorneys General wrote. "A growing percentage of sales of fed cattle and slaughter hogs are made through forward contracts, the terms of which are not publicly reported. In certain places and at certain times it is estimated that over 80 per cent of cattle are acquired under these so-called captive supplies," they wrote.

"Concerns have been raised that the disparity of information and bargaining power between packers and producers may lead to anti-competitive practices and behaviors," the Attorneys General wrote.

The letter also supported other measures to foster competition that are contained in the Senate version of the Ag Appropriations bill, including provisions to require the Ag Secretary to define by regulation what constitutes noncompetitive practices by packers relating to price and other terms of livestock sales, to provide protection for livestock producers against retaliation by packers on account of any statements made by producers regarding actions of packers, and to provide for a review of the effect of federal agriculture credit policies on concentration in agriculture.

"This legislation is in the best interest of producers and consumers in our states and across the nation," the Attorneys General said.

Additional background:

Iowa Attorney General Miller's office has been actively involved in concentration issues. Miller spearheaded a multi-state effort in the fall of 1996 to ask USDA to take several actions to improve competitiveness in the livestock business. Twenty State Attorneys General asked USDA to foster greater public disclosure of key livestock market information; to closely examine mergers and consolidations in the livestock industry in order to protect competition; and to protect "whistle blower" producers from retaliation by packers.

In April 1997 Miller organized several state attorneys general to issue a comment on the rule-making petition drafted by the Western Organization of Resource Councils (WORC). The comment urged USDA to take several actions to improve reporting of forward contracts on cattle (so-called "captive supplies.")

In addition, Miller's Farm Division has done extensive work on livestock production contracting, which is an avenue to allow some smaller producers to compete with larger firms. A "Livestock Production Contract Checklist" was developed by a statewide task force assembled by Miller and has been disseminated to about 5000 farmers. The checklist provides information on how to enter fair livestock production contracts.

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The following letter was faxed Tuesday, September 15, 1998, to House and Senate Members of Congress who are members of the conference committee for the FY99 Agriculture Appropriations Bill. The conference committee is about to consider final action on the bill.

Dear Conferee:

We, the attorneys general of Iowa, Minnesota, Arizona, Arkansas, Idaho, Louisiana, Massachusetts, Mississippi, Missouri, Montana, Nevada, North Dakota, Oklahoma, Pennsylvania, South Dakota, Utah, Vermont, Washington, West Virginia, and Wisconsin write to strongly urge you to include the livestock improvement provisions of the Agriculture FY99 Appropriations Bill as passed by the Senate on July 16, 1998, in the final conference report on that bill. The provisions were offered by Senator Kerrey and others as amendment No. 3161 to S. 2159.

State attorneys general play an important role in promoting competition in the marketplace through the enforcement of state and federal antitrust laws. We are particularly concerned with the rapidly increasing level of concentration in the livestock industry and the impact of this on prices paid to producers for livestock and prices paid by consumers for food. Recent statistics illustrate this trend: the top four beef packers account for over 87 percent of the cattle slaughter, twenty cattle feedlots account for over 50 percent of fed beef, and the largest five pork packers slaughter over 60 percent of the hogs.

To guarantee free and fair competition in an industry with this degree of economic concentration, there is a critical need for public disclosure of key market information. Unfortunately, accurate price discovery is increasingly difficult in livestock markets. A growing percentage of sales of fed cattle and slaughter hog are made through forward contracts the terms of which are not publicly reported. In certain places and at certain times it is estimated that over 80 percent of cattle are acquired under these so-called "captive supplies."

Although cash prices for livestock are publicly reported, the volume of cash sales is so small that the prices quoted are questionable indicators of true price. Moreover, concerns have been raised that the disparity of information and bargaining power between packers and producers may lead to anticompetitive practices and behaviors.

The livestock industry improvement provisions approved by the Senate address this issue in an effective, yet measured approach. The provisions call for the Secretary of Agriculture to conduct a 3-year pilot program under which livestock packers would report to the Secretary information relating to the prices and terms of all livestock sales, including forward contracts. In turn, the Secretary is to publicly report this information in a form that does not disclose the identity of persons submitting information nor confidential, proprietary business information.

This pilot program would allow livestock producers to compare prices and terms offered by packers on cash sales and on forward contracts. It would make the market transparent and would help reveal any anticompetitive practices or behaviors occurring in the packing industry. At the same time, it would shield confidential packer information and impose minimal costs of compliance on packers.

Additionally, the Senate version contains several other livestock provisions that we believe would foster better competition. These provisions would (1) require the Secretary by regulation to determine noncompetitive practices of packers relating to price and other terms of livestock sales, (2) provide protections for livestock producers against retaliation by packers on account of any statements made by producers regarding actions of packers, and (3) provide for a review of the effect of federal agriculture credit policies on concentration in agriculture.

In conclusion, we urge you to support the Senate provisions on livestock concentration. Enactment of this legislation is in the best of interests of producers and consumers in our states and across the nation.

Sincerely yours,

[Signed by Attorneys General listed in first paragraph of letter.]