WASHINGTON – One of the most divisive amendments to this year’s farm bill, in addition to payment limitation debates, is the Johnson amendment to limit packer ownership of livestock.
While there is strong bipartisan support for the amendment in the Senate, it is thin in the House. House Ag Committee Minority Leader Charles Stenholm, D-Texas, has suggested a compromise might be a nine-month USDA study on the issue. But in the other corner, Senate heavyweight and Agriculture Committee Chairman Tom Harkin has said he will do everything he can to see that it is part of the final bill.
“Allowing packers to own livestock gives packers a greater ability to manipulate the market and limits independent producers’ access to the market,” Harkin said in a statement last week.
The Senate legislation would nationalize a policy that is already in place in several Midwest states, including Indiana, Iowa and Minnesota.
American Farm Bureau Federation delegates approved policy in January to “prohibit packer ownership of livestock,” but in an unusual move, the Ohio Farm Bureau board formally dissented from AFBF policy on this issue.
Growing trend. Currently, the top four firms in the packing industry slaughter 70 percent or more of the nation’s hogs. Although exempt from the proposed legislation, the poultry industry is more than 90 percent vertically integrated.
About 7 percent of the beef industry and 25 percent of the hog industry is vertically integrated, according to Purdue University, although the majority of pigs and many cattle are marketed through some form of coordination between producer and packer.
Will it help? “A big part of this amendment is about access to markets,” said Purdue ag economist ken Foster, “and the hope that somehow by removing the animals from the ownership of the packers, those packers now will have to bid for those animals on the open market.”
The economist added, however, that competition is likely to suffer if the amendment becomes law.
“Pork and beef will be at a disadvantage competitively in the domestic market relative to poultry,” Foster said.
He adds that packers may find a way to get around the law by simply setting up a contract or subcontract purchasing system that operates much like a vertical integration arrangement, but still meets the letter of the law.
Another worry voiced by a second Purdue ag economist, Allan Gray, is that packers will move out of areas with limited supplies of animals that can’t support a plant, eliminating packing capacity in that area.
“The major concern that I have is that implications of a law like this are not clear for anybody, particularly the independent livestock farmer,” Gray added.
