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Packer ownership ban still alive

Minnesota farmer says ban is a must-have

By Carol Stender

cstender@agrinews.com

Hog farmer Nolan Jungclaus of Lake Lillian, Minn., spent part of his vacation testifying last week in a Senate ag committee in Washington, D.C.

Jungclaus testified about a proposed ban on packer ownership of livestock.

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The hearing was called by Iowa Sen. Tom Harkin. Harkin wants the packer ban and enforcement of the Packers and Stockyards Act.

Jungclaus has first-hand experience with ever-tightening livestock markets. Because of it, he's joined other hog producers in establishing the farmer-owned Prairie Farmers Cooperative which, at full capacity, will slaughter 65,000 hogs a year.

Due to captive supply created by packer-owned livestock, independent producers suffer, he said.

"The only price we get isn't worth anything," Jungclaus said. "We are left out. With long-term contracts and with the packers owning livestock, they are taking the profit out of these rural communities and sucking the life blood out here. The money independent producers make is used within the rural communities. Out here the money goes to the churches, schools, stores and hospitals. When corporations get the money, it isn't used out here."

Consumer-driven

During Jungclaus's testimony, Patrick Boyle of the American Meat Institute said vertical integration is consumer-driven. Jungclaus countered by saying specialty markets like antibiotic- and hormone-free meat are growing. Larger-sized livestock operations haven't focused on that type of production.

Herman Schumacher, director for R-CALF USA, testified about a National Cattlemen's Beef Association-commissioned study that argues in favor of moving toward the poultry industry vertical integration model. That model has lost "tens of thousands of dollars of small businesses and independent producers through vertical integration," he said.

"In the poultry production model, competitive market signals no longer reach the producers as the integrator dictates both the terms of production and the prices for live birds," he said.

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Beef model

The other choice is the cattle model characterized by 1 million independent cattle producers marketing to independent feeders who sell to the beef processing industry.

"When cattle prices function properly, consumer driven supply and demand signals determine both the terms of production and the prices for cattle," Schumacher said. "But today our cattle markets are not functioning properly. Instead the economic power exerted by the highly concentrated beef processing industry upon the live cattle industry is becoming alarmingly similar to the poultry model."

He urged the committee to choose an "open and competitive marketplace free of undue influences and manipulation by the packing sector."

Although the ban was passed by the Senate, the House didn't vote on the provision. Now Harkin is seeking a clearly defined position on the issue from the Bush administration.

"Obviously this is still a controversial topic," Harkin said at the hearing. "But for those who oppose the ban and predict negative consequences if it is adopted, I simply point to our record in Iowa. Iowa law has prohibited packers from owning livestock for over twenty years and we are still the number one producer of hogs in the nation, with strong independent hog farming sector and more hog packing plants than any other state.

"Frankly, the present situation cannot continue,'' he said. "Frustration over lax enforcement of the Packers and Stockyards Act has been building for some time and it is now boiling over. Far too many independent livestock producers have been forced out of business and many more can see the handwriting on the wall. They have no future in the industry unless fair, open and competitive markets are restored."

Harkin's counterpart in Iowa, Sen. Chuck Grassley, is preparing a bill to increase livestock market competition. The Independent Livestock Producers Act would "guarantee independent producers a share in the marketplace by improving the Mandatory Price Reporting system," Grassley said.

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The bill would require 25 percent of a packer's daily kill to come from purchases made on the daily open or spot market.

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