The current Administration came into office with the preconceived perception that “small scale” farmers and contractors were subject to anticompetitive practices and exploitation. The Secretary of the USDA spoke of radical restructuring of the agro-economy after nomination. The actions of the USDA, supported by the DOJ, confirmed pre-election rhetoric that will ultimately be deleterious to the National food supply should intentions become reality. In pursuit of a solution to a nonexistent problem, USDA intends issuing rules to “re-establish” competitive and market integrity under the Packers and Stockyards Act and to eliminate unproven “undue prejudice, unjust discrimination and deception”.
USDA will assign $15 million as an Agricultural Competition Challenge to intensify action by State Attorneys General to enforce existing and proposed laws regulating competition in livestock and meat production. The Administration assumes, without economic justification that concentration within the beef, pork and possibly chicken and egg segments of the livestock industry contribute to inflation. The justification advanced by the Administration is that consumers will benefit from new rules although the opposite may be a predictable outcome if efficiency is constrained.
Intensification and expanding of scale of production is an economic response to increasing variable costs. Application of scale reduces the fixed costs of production and provides benefits that are passed onto consumers in a competitive environment. Admittedly, the beef segment represents an oligopoly with four major companies contributing to 80 percent of packing volume. This does introduce risks associated with concentration as evidenced by the fire and temporary closure of the Tyson Foods beef plant in Holcomb, KS. or the spread of COVID during 2020 in large plants that restricted national output of beef and pork.
Proposed regulations would prohibit alleged retaliatory practices including restriction of lawful communications and punitive cancellation of contracts. In addition, contractors, whether justified or not, could make use of a Department of Justice website to claim violations and noncompliance irrespective of validity. This lays open the possibility for unjust civil and criminal intervention by the Department of Justice and capricious tort claims that could ultimately be expensive for packers and integrators to defend.
The motivation for action against highly efficient and structured livestock production is difficult to discern. In the first instance, it may represent a cynical political move to engender consumer support. Alternatively it may reflect an inherent inclination towards socialism expressed by both legislators and Senate-confirmed officials within the Administration. Irrespective of the intent, deliberate attempts to disrupt the existing structure of livestock production will ultimately be deleterious to the economy and to consumers. If there are activities that conflict with the current Packers and Stockyards Act regulations, then the perpetrators must be punished, and equity restored. If there are no obvious or widespread discrimination or deception, then the Administration should cease their attempts to demonize the industry and work cooperatively to resolve any issues that may be disclosed.
At the end of the day, the U.S. functions according to the principles of a free-enterprise market. Entrepreneurs continually identify areas of opportunity and satisfy unserved needs applying capital and resources. Absent any overt or gross deviation from the Packers and Stockyards Act, the Administration should back down and face realities. It is possible that for the remaining two years of the current Administration, their activities will be restrained by a Congress unsympathetic to socialism and court decisions based on a realistic interpretation of law. It is anticipated that the inherent checks and balances bequeathed to us by the Founding Fathers will restore equilibrium irrespective of the present inclinations and actions by the USDA and DOJ.