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Top Obama Officials Assigned to Take On Meat Monopolies Quit in Frustration

Congress' Continued Backing of Big Ag Stymies Govt Efforts to Support Small Farmers and Ranchers

It went largely unnoticed, but last month Dudley Butler, the Obama administration official whose mission was to combat agricultural monopolies (specifically in the meat industry), quit in frustration.

Photo by Dey AlexanderIn agriculture, monopolies mean small farmers get squeezed. The foods we buy that promise “cage-
free” or “organic” meat may come from huge operations that look nothing like the family farm that the
terms bring to mind.

His departure was the latest and final of several such resignations from the specially-selected cadre of bureaucrats that the White House had convened to take on this problem. Christine Varney, an assistant attorney general who worked closely with Butler, resigned last summer and Philip Weiser, another Justice Department attorney, who promised to take on big agribusiness but quit in April 2010.

The latest resignation, which came in response to Congress blocking regulations proposed by Butler and his colleagues, speaks of broader problems within the American agricultural industry.

The overarching problem has to do with monopolies. And, as should be all too clear from recent years (think of the “too big to fail” national financial system and its multi-billion dollar taxpayer bailout), monopolies are dangerous.

In agriculture, monopolies mean small farmers get squeezed. They go out of business or barely hang on. They find themselves increasingly replaced by large-scale agribusinesses whose animal-raising operations tend to be far more concentrated. It means consumers have little free-market style influence on price — shoppers have far less ability to use targeted boycotts to foster more environmentally-friendly policies when a small set of companies have so thoroughly cornered a market.

The foods we buy that promise “cage-free” or “organic” meat may come from huge operations that look nothing like the family farm that the terms bring to mind. And if accidents or food safety problems arise at an oversized meat-packing company, the fallout for consumers may also be oversized.

So, what was Butler trying to do about all this?

In May 2009, when he took over as administrator of the USDA's Grain Inspection, Packers and Stockyards Administration, an agency that has special antitrust authority over agribusinesses, one of his top priorities was to level the playing field between farmers and ranchers on one side, and big stockyards and meat processors on the other.

Butler was up against the four giants of the meat slaughterhouse and packing industry: Tyson Foods; JBS, Cargill and National Beef.

Currently, these four companies process about 80 percent of all beef in the United States. And over the past three decades, as these companies have grown, more than half a million families have stopped raising cattle.

Soon after his appointment, Bulter came under fire from Republicans in Congress, who argued that because he had previously worked as an independent lawyer litigating on behalf of small farmers, he should recuse himself from writing new regulations governing the industry he had previously sued in court.

But Butler forged ahead.

He launched investigations to see if meat packers and processors were illegally or, at least, unfairly driving down cattle prices. He tried to give greater protection to chicken farmers and cattle ranchers by giving them more power to sue packers and processors over such issues as the prices they pay the latter or which production costs they cover.

As meat packing has become increasingly consolidated, cash markets for sale of livestock have disappeared. More livestock is raised, not by independent entrepreneurs competing in an open marketplace, but under contracts that are controlled by large packers and processors. Ranchers have few options but to sell to specific large meat processors and packers, which means the contracts were typically very unfair and one-sided. Too often, packers and processors use market power to drive small ranchers out of business or to retaliate against them if they complain about unfair practices.
Butler’s agency proposed a major regulatory reform that would help ensure that smaller ranchers could get fair contracts. The rules made it clear that if a single rancher could meet the same contract terms as a large company ranch, the packers and processors could not opt out of using their products.

Poultry or pork producers would have been given added protection so that packers could no longer use pressure tactics, such as cutting off the delivery of baby chicks or pigs, or intentionally delivering sick animals to unpopular producers.

In the end, meat-packing groups fought these proposals, and they won. Last year, Congress denied funding for the rules.

The failed effort to reign in the meat monopolies marks a larger turning point for the cattle industry as it faces the type of consolidation that has already occurred in the poultry and pork businesses. (To read a bit more about the history and consequences of this consolidation of the poultry industry, take a look at an extensive report from the Pew Foundation published last year. For a more textured discussion of the experiences of small ranchers and farmers, start here).

Small farmers, faced with what they’ve termed “the corporatization of our food supply,” will continue to face the sorts of market imbalances that drive them under.

Not only have efforts like Butler’s fallen short, but in some cases, the programs the federal government does fund seem to accelerate this trend.

A 2006 study by the Center for Rural Affairs found that only about 5 percent of the nearly $500 million spent by the US Department of Agriculture on research and grant programs went to projects benefiting small producers.

This is a worrisome for reasons that Butler summed up best.

“When you have that high a level of concentration, there’s an imbalance of power,” he said in interviews after resigning in frustration. “There’s just not a level playing field.”

Sharon Kelly is a Philadelphia-based lawyer and freelance writer. Her work has appeared in the New York Times, the National Wildlife Federation, and the Legal Intelligencer.

Sharon Kelly
Sharon Kelly is a Philadelphia-based lawyer and freelance writer. Her work has appeared in the New York Times, the National Wildlife Federation, and the Legal Intelligencer.

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