Safeguards from agricultural industry consolidation

July 27, 2005

Chairman and Ranking Member of Committee on Agriculture, U.S. House of Representatives

Chairmen and Ranking Members of Committees on Agriculture, Forestry, and Nutrition, U.S. Senate

Chairman and Ranking Member of Committee on the Judiciary, U.S. Senate

Chairman and Ranking Member of Committee on the Judiciary, U.S. House of Representatives

Dear Chairmen and Ranking Members:

The undersigned organizations strongly urge you to make the issues of agricultural competition and market concentration a top priority as Congress considers the crafting of agricultural legislation. During the 2002 Farm Bill debates, public testimony provided clear and compelling evidence of the need for free market competition and fairness for America’s farmers and ranchers. Since that time these concerns have become even more urgent and prominent in the public eye.

Today, a small handful of corporations overwhelmingly dominate the nation’s food supply. The market control of the top four firms in food retailing, grain processing, red meat processing, poultry processing, milk processing, and nearly every category of food manufacturing is at an all time high. Corporate mergers and buyouts have concentrated the power of these firms and increased their ability to unfairly manipulate market conditions in their favor. This unprecedented level of horizontal market consolidation effectively eliminates free market competition to the detriment of independent family farmers and consumers.

Compounding the problem associated with horizontal consolidation is the rapid trend toward vertical integration. Manufacturers, processors, and packers increasingly control all stages of production and inventory through commodity ownership and one-sided contracts. This corporate control of production unnecessarily eliminates market transparency, creating an environment ripe for price manipulation and discrimination. It replaces farm-level decision making with centralized corporate planning and leaves farmers trapped in long-term debts tied to short-term, non-negotiable production contracts. In addition, top retailers and packers increasingly engage in relationships with dominant suppliers that exclude smaller competitors and minimize price competition. Because both supply and demand are controlled by the same players in the market, the basic principles of supply and demand cannot function.

The role of government should be to facilitate properly operating markets and to bring balance to the economic relationships among farmers/ranchers, consumers and food companies. Instead, inadequate federal legislation and the lack of enforcement of anti-trust policies have allowed a handful of corporations to continue to consolidate market power, manipulate prices, and create anti-competitive market structures.

Government inaction has a dramatic, negative impact on not only farmers and ranchers, but also on rural communities, the environment, food quality, food safety, and consumer prices. It undermines sustainable production practices and state and local laws that support family-scale, sustainable farm and ranch operations.

Policy makers often state policy goals of maintaining a diverse, farm-and-ranch-based production sector and providing consumers with a nutritious, affordable food supply. However, government failure to redress industry concentration — both vertical and horizontal — is thwarting these policy goals and driving farmers’ earnings down and consumer prices up.

To address these problems, the following legislation should be enacted:

  • Prohibition on Packer-Owned Livestock: Packer-owned livestock is a major market power tool for meat packers such as Tyson, Cargill, and Smithfield Foods. This practice fosters industrial livestock production and freezes independent farmers out of the markets. Packer-owned livestock has been proven to artificially lower farm gate prices while the consumer food prices continue rising. By prohibiting direct ownership of livestock by major meatpackers, a packer ban addresses a significant percentage of the problem of captive supply which packers use to manipulate markets, and would help increase market access for America’s independent producers who currently experience great restrictions in market access due in part to packer ownership of livestock.
  • Producer Protection Act: This proposal is designed to set minimum standards for contract fairness in agriculture. It addresses the worst abuses contained in processor-drafted boilerplate contracts. It includes: (1) Clear disclosure of producer risks; (2) Prohibition on confidentiality clauses; (3) Prohibition on binding arbitration in contracts of adhesion; (4) Recapture of capital investment (so that contracts that require a significant capital investment by the producer cannot be capriciously canceled without compensation); and (5) A ban on unfair trade practices including “tournament” or “ranking system” payment.
  • Transparency/Minimum Open Market Bill: In the absence of a mandatory minimum open market volume, all producers will be forced into unfair contracts with specific packers. This bill will require meat packers to purchase at least 25% of their daily hog and cattle needs from the open market and will limit the ability of packers to use their owned and contracted livestock to manipulate prices down artificially.
  • Captive Supply Reform Act: This legislation will bring secret, long-term contracts between packers and producers into the open and create a market for these contracts. The Captive Supply Reform Act would restore competition by making packers (and livestock producers) bid against each other to win contracts. Currently, forward contracts and marketing agreements are negotiated in secret, in a transaction where packers have all the information and power, with the result that these contracts and agreements depress prices and shut small and independent producers out of markets. The Captive Supply Reform Act would require such contracts to be traded in open, public markets to which all buyers and sellers have access.
  • Clarification of “Undue Preferences” in the Packers & Stockyards Act: Packers commonly make unjustified, preferential deals that provide unfair economic advantages to large-scale agriculture production over smaller family owned and sustainable farms. Courts have found current undue preference legal standards virtually impossible to enforce. Additional legislative language is needed to strengthen the law and clarify that preferential pricing structures (those that provide different prices to different producers) are justified only for real differences in product value or actual and quantifiable differences in acquisition and transaction costs.
  • Closing Poultry Loopholes in the Packers & Stockyards (P&&S) Act: USDA does not have the authority to bring enforcement actions against poultry dealers. The P&S Act oddly omits this authority even as USDA can enforce the law against packers and livestock dealers. We seek to clarify that USDA’s authority over poultry applies not only to broiler operations, but also to growers raising pullets or breeder hens. These loopholes should be closed.
  • Bargaining Rights for Contract Farmers: Loopholes should be closed in the Agricultural Fair Practices Act of 1967 (AFPA) and processors should be required to bargain in good faith with producer organizations. The AFPA was enacted to ensure that livestock and poultry producers could join associations and market their products collectively without fear of retribution by processors. These goals have not been attained due to loopholes in that Act. Retaliation by processors is commonplace in some sectors. This legislation should be passed to promote bargaining rights and prevent processor retaliation.
  • Mandatory Country of Origin Labeling: Country of origin labeling (COOL) was passed as a provision of the 2002 Farm Bill. This popular measure allows consumers to determine where their food is produced while allowing producers to showcase their products for quality and safety. It also limits the ability of global food companies to source farm products from any country while passing them off as U.S. in origin. The meat packers and retailers have successfully stymied the effort to implement this law. Congress should immediately implement COOL to benefit producers and consumers as intended in the law.

Our country’s farmers, ranchers, and consumers-both rural and urban-are asking for nothing more than a fair market and a competitive share for family farmers of the $900 billion dollars that consumers insert into the food and agriculture economy annually. Market reforms remain a key ingredient for rural revitalization and meaningful consumer choice. Laws to promote fairness and healthy competition, such as those outlined above, are key to achieving the goal of promoting an economically healthy and diverse agricultural production sector and providing consumers with healthy, affordable food.

Thank you.

Sincerely, (Signatures gathered as of July 27, 2005)

National/International Organizations
Alternative Energy Resources Organization
American Corn Growers Association
Animal Welfare Institute
Campaign for Contract Agricultural Reform
Campaign for Family Farms & the Environment
Center for Rural Affairs
Community Food Security Coalition
Corporate Agribusiness Research Project
Defenders of Wildlife
Earth Cluster of Franciscans International
Farm Aid
First Nations Development Institute
Food First
FoodRoutes Network
Global Exchange
GRACE Public Fund
Grassroots International
Humane Society of the United States
Independent Organic Inspector’s Association
Institute for Agriculture and Trade Policy
Justice and Witness Ministries, United Church of Christ
Land Stewardship Project
National Association of Latino/Hispanic Farmers and Ranchers
National Campaign for Sustainable Agriculture
National Catholic Rural Life Conference
National Center for Appropriate Technology
National Contract Poultry Growers Association
National Family Farm Coalition
National Farmers Organization
National Farmers Union
Organic Consumers Association
Organic Farming Research Foundation
Organization for Competitive Markets
Oxfam America
Public Citizen
R-CALF United Stockgrowers of America
Sierra Club National Agriculture Committee
Small Farm Today
Small Planet Institute
Soybean Producers of America
Sustainable Agriculture Coalition
The Urban Agriculture Network
Union of Concerned Scientists
Weston A. Price Foundation
Women, Food and Agriculture Network
World Hunger Year

Regional Organizations
Agriculture of the Middle
Appalachian Sustainable Development
Concerned Citizens of Central Ohio
Delmarva Poultry Justice Alliance
Federation of Southern Cooperatives/Land Assistance Fund
Midwest Organic and Sustainable Education Service
New England Small Farm Institute
Rocky Mountain Farmers Union
Southern Institute For Justice (MS)
Southern Sustainable Agriculture Working Group
Western Organization of Resource Councils
Western Sustainable Agriculture Working Group

State and Local Organizations
Action for a Clean Environment (GA)
Agricultural Missions (NY)
Agriculture & Land Based Training Assoc. (CA)
Alabama Contract Poultry Growers Association
Alaska Farmers Union
Alliance for Sustainable Communities (MD)
Alm Hill Gardens (WA)
Amanecer, Inc. (TX)
American Agricultural Movement of Texas
Appalachian Crafts (KY)
Archdiocese of Dubuque Rural Life Office (IA)
Arkansas Farmers Union
Berkeley Farmers Market (CA)
Bottega Restaurant(AL)
Boulder County Farmers Markets(CO)
Bronx Greens (NY)
Brykill Farms (NY)
C.A.S.A. del Llano (TX)
California Certified Organic Farmers
California Coalition for Food and Farming
California Dairy Campaign
California Farmers Union
Caretaker Farm CSA (MA)
Catholic Charities of Kansas City-St. Joseph, Inc. (MO)
Catholic Charities Parish Social Ministry Dept, Archdiocese of Louisville KY
Catholic Charities, Diocese of Sioux City (IA)
Catholic Rural Life, Archdiocese of Dubuque (IA)
Chemung County Council of Churches (NY)
Chez Fonfon Restaurant (AL)
Church Women United of Chemung County NY
Church Women United of New York State
Churches’ Center for Land and People (WI)
CitySeed (CT)
Colorado Genetic Engineering Action Network
Commission on Peace and Justice of the Roman Catholic Diocese of Albany (NY)
Commodity Growers Cooperative (KY)
Community Action Resource Enterprises (OR)
Community Alliance with Family Farmers (CA)
Community Farm Alliance (KY)
Cornucopia Institute (WI)
Court St Joseph #139, Catholic Daughters of the Americas, Corning-Elmira, NY
Dakota Resource Council
Dakota Rural Action
De Comunidad a Comunidad (Community to Community Development) (WA)
Delta Land and Community (AR)
Diocese of Jefferson City (MO)
East End Community Organic Farm (NY)
Ecological Farming Association (CA)
Endangered Habitats League (CA)
Environmental Action Committee of Westmar (MO)
Faces of Food (MO)
Family Farm Defenders (WI)
Family Farms For the Future (MO)

State and Local Organizations (continued)
Farm to City Pittsburgh (PA)
Farmer Johns Organic Produce (NJ)
FH King Students of Sustainable Agriculture at UW Madison (WI)
Florida Organic Growers and Consumers
Foodshed Alliance of the Ridge and Valley (NJ)
Future Harvest – CASA (MD)
Genesis Farm (NJ)
Georgia Organics
Georgia Poultry Justice Alliance
Go Wild Campaign (WA)
Good to Go Foods (NE)
Grass-Roots (NY)
Grassworks (WI)
Heartland Center, Office of Peace and Social Justice of the Diocese of Gary (IN)
Highlands Bar and Grill (AL)
Hmong American Committee (CA)
Horseheads Grange #1118 (NY)
Idaho Rural Council
Illinois Farmers Union
Illinois Stewardship Alliance
Indiana Campaign for Economic Justice
Iowa Citizens for Community Improvement
Iowa Farmers Union
Jackson County, WI Democratic Party
Just Food (NY)
Kansas City Food Circle (MO)
Kansas Farmers Union
Kansas National Farmers Organization
Kansas Rural Center
Kirschenmann Family Farms (IA)
Ladies of Charity of Chemung County (NY)
Maine Organic Farmers and Gardeners Assn.
Maysie’s Farm Conservation Center (PA)
Michael Fields Agricultural Institute (WI)
Michaela Farm (IN)
Michigan Farmers of Union-Kent County
Michigan Farmers Union
Michigan Land Trustees
Mid Nebraska Pride
Minnesota Farmers Union
Minnesota Food Association
Minnesota Project
Minority Agriculture Producers Co-op. (TX)
Missouri Farmers Union
Missouri Organic Assoc.
Missouri Rural Crisis Center
Montana Farmers Union
Nature’s International Certification Services (WI)
Nebraska Farmers Union
Nebraska Sustainable Agriculture Society
Nebraska Wildlife Federation
New Entry Sustainable Farming Project (MA)
North Carolina Contract Poultry Growers Association
North Dakota Farmers Union
Northeast Organic Farming Association/NY
Northeast Organic Farming Association/Vermont
Northern Thunder (WI)
Northwest Coalition for Alternatives to Pesticides (ID)
Office of Peace & Justice, Diocese of Gary (IN)
Ohio Ecological Food and Farm Association
Ohio Environmental Council
Operation Spring Plant, Inc. (NC)
OR Sustainable Agriculture Land Trust
Past Regents Club of the Diocese of Rochester NY
PCC Natural Markets (WA)
Pennsylvania Association for Sustainable Agriculture
Platte County Farm Bureau (NE)
Politics of Food Program, Inc. (NY)
Powder River Basin Resource Council (WY)
Provender Alliance (OR)
Red Tomato (MA)
Research, Education, Action and Policy on Food Group (WI)
Rhio’s Raw Energy (NY)
Ross’ Creek Farm (KY)
Rural Vermont
Save Family Farms & Ranches (SD)
Seedcorn (NY)
Shinn Estate Vineyards (NY)
Sisters of Providence, St. Marys of-the-Woods (IN)
Sisters of St. Francis of Tiffin, OH
Slo Buy Fresh Buy Local (CA)
Small Farm Resource and Training Center (CA)
Social Concerns Department, Catholic Charities, Diocese of Sioux City, IA
Social Concerns Office of the Diocese of Jefferson City (MO)
South Dakota Farmers Union
Southern Research & Development Corp. (LA)
Sprout Creek Farm
St. Joseph’s Catholic Church in Easton (MD)
St.Matthew’s Episcopal Church, Iowa Falls, Iowa
Sustainable Earth (IN)
Sustainable Food Center (TX)
The Second Chance Foundation (NY)
Watershed Alliance of South Kent (CT)
Three Roods Farm (MI)
Tilth Producers of Washington
Trappe Landing Farm & Native Sanctuary (MD)
Tree Roots Buying Club (MI)
Tufts Food Awareness Project (MA)
Tuscarora Organic Growers Coop (PA)
Urban Nutrition Initiative (PA)
Valley Stewardship Network
Valley Watch, Inc. (IN)
Veritable Vegetable (CA)
VA Association for Biological Farming
Washington Farmers Union
Wash. Hts Little Seed Grdns CSA (NY)
Wellspring CSA in Wisconsin
Willow Creek Farm (WI)
Winter Garden Sustainable Agriculture Coalition (TX)
Wisconsin Farmers Union

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