Senate reaffirms ban on packer ownership of livestock

WASHINGTON (AP) -- The Senate refused on Tuesday to back off a ban on meatpackers owning their own supplies of livestock, turning aside warnings by the companies that the prohibition would cause upheaval in the beef and pork industries.

The Senate narrowly approved the ban in December as an amendment to legislation extending federal farm programs. Packers, who would have up to 18 months to sell off any livestock that they own, said the restrictions make it harder for them to procure adequate supplies of top-quality meat.

Sen. Charles Grassley, R-Iowa, said the 53-46 Senate vote Tuesday in favor of the ban was a victory for producers who want to restrain meatpackers.

"A free-market economy depends on competition," he said. "Ownership within the hands of too few within the food and feed chain diminishes the leverage and opportunities to compete for small and mid-sized producers."

The Senate, expected to finish work on the farm bill Wednesday, also refused to kill a proposed new program to subsidize farmers who reduce their usage of irrigation water in areas where endangered fish need protection. However, the program was restricted to seven states -- Maine, New Hampshire, Nevada, New Mexico, California, Oregon and Washington -- in the face of opposition from Western agriculture interests.


Opponents of the $1 billion program fear federal involvement in disputes over water usage and endangered species.

The Senate added $2.4 billion in disaster assistance to the farm bill compensate farmers in Montana and other states who lost crops to drought last year.

The Bush administration has already said the bill is too costly, but the disaster aid was approved overwhelmingly, 69-30.

On an 80-17 vote, the Senate refused to lower crop subsidies slightly in order to create IRA-style savings accounts for farmers, an idea the Bush administration is pushing.

The packer restrictions are expected to a be a major issue when House and Senate negotiators write the final version of the farm bill. The House-passed farm bill does not contain the packer measure.

Patrick Boyle, president of the American Meat Institute, a packer trade group, said the legislation "would force massive asset divestitures by hundreds of companies, flooding the livestock market and driving down livestock prices."

Stock in Virginia-based Smithfield Foods Inc., the nation's leading hog producer and pork processor, dropped $2.20 a share, or 8.6 percent, on Tuesday. Smithfield had threatened to close a packing plant in South Dakota, home state of ban sponsor Sen. Tim Johnson, if the prohibition were approved.

Another major packer that would be hit is Excel Corp., a subsidiary of agribusiness giant Cargill Inc., which is privately held. Excel, based in Wichita, Kan., owns some of its own cattle feedlots and also is part of a joint venture with a group of ranches to supply tender steaks to the Kroger grocer chain.


The anti-packer amendment is particularly popular in the Midwest, where livestock producers fear they are losing their independence and market power as packing houses gain control over livestock production, much as they have already done with the growing of chickens.

Livestock farmers risk being turned into "low-paid employees of packers" as processors take over the production of cattle, hogs and sheep, said Johnson, D-S.D.

The Agriculture Department recently estimated that the top four beef processors control a third of the cattle they slaughter.

The Senate approved a change in the legislation to clarify that it wouldn't prohibit packers from buying livestock through the use of forward contracts.

Producers have been divided over the ban. The National Cattlemen's Beef Association and the National Pork Producers Council are both opposed, but the American Farm Bureau Federation supports it.

Poultry was exempted from the Senate legislation, and so are packing houses owned by farmer cooperatives.

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