Statutorily, the secretary of Agriculture is given several specific charges. Among his general duties, he is required to design programs and policies which “improve the quality of life for people living in the rural …regions of the Nation.”
He is authorized to develop solutions to problems faced by “small- and moderate-sized family farming operations” and any other problem that the “Secretary may determine has an effect upon the economic development or the quality of life in rural areas.”
The secretary is also tasked with developing a “rural development strategy” which “shall take into account the need to strengthen the family farm system.”
How has USDA performed? —in a word, miserably.
The online Wall Street Journal ran a story dated Dec. 25 on the decline in rural lending. The article noted:
"The financial fabric of rural America is fraying. Even as lending revives around cities, it is drying up in small communities."
The value of loans to businesses in rural America peaked in 2004 and today is less than half what it was then. According to one banking official, “smaller towns are really more for deposit-gathering that gives you funds to lend to larger towns.”
Agriculture is America’s largest industry with cattle being its largest single segment. Since 1980, over 544,000 cattle operations have exited the industry.
The nation’s beef cowherd inventory shrank to its lowest level in over 60 years with resulting historically high cattle prices in 2015. The market crashed in 2016 with calves bringing half what they did the previous year.
The beef processing industry is dominated by four packers that process 85 percent of this nation’s cattle. This nation’s 2nd largest packer, JBS, is a Brazilian company, which is also the world’s largest packer.
Last fall, JBS became the center of a corruption investigation including the bribery of Brazilian meat inspectors and more than 1,800 politicians including Brazil’s president.
Notwithstanding such packer concentration and a clear modus operandi by JBS, there has never been any step in this nation to take anti-trust action against the packing industry.
The Packers and Stockyards Act (“PSA”) was intended to protect cattle producers from certain enumerated practices.
At the core of the PSA is a prohibition on packer conduct which is “unfair, unjustly discriminatory, or deceptive….” Such practices clearly are not addressed to industry competitive harm but rather packer conduct directed against individual producers.
Courts, unfortunately, have conflated the PSA with anti-trust legislation which is couched in terms of “restraint of trade,” “monopolize” and “unlawful restraints and monopolies.” Such language addresses an industry competitive harm and not practices aimed at individual producers.
In Pickett v Tyson Fresh Meats, the 11th Circuit stated that the PSA was enacted to “prevent…price fixing and manipulation and monopolization” and required that aggrieved cattle producers demonstrate that meat packer action resulted in an industry-wide competitive harm. The Supreme Court subsequently denied certiorari.
In short, the federal judiciary has made the PSA entirely superfluous: packer conduct toward individual producers may be unfair, unjustly discriminatory or even deceptive so long as it does not violate anti-trust prohibitions against restraints of trade and monopolization.
The so-called GIPSA Rule (a rule promulgated by the Grain Inspection, Packers and Stockyards Administration) provided an “illustrative list of conduct” which constitutes “unfair, unjustly discriminatory, or deceptive” packer practices under the PSA. More importantly, it provided that such conduct was a violation of the PSA “regardless of whether the conduct or action harms or is likely to harm competition.”
In short, the GIPSA rule took a step toward equalizing the playing field between individual cattle producers and the meat packing oligopoly by removing the judicially imposed requirement that individual producers demonstrate competitive harm to the market in general.
This past October, USDA Secretary Purdue delivered a coup de grace to cattle producers. He withdrew the GIPSA rule and then eliminated GIPSA as a stand-alone agency, burying it under the jurisdiction of the Agriculture Marketing Service which, according to its webpage, works “to ensure a productive and competitive global marketplace for U.S. agricultural products.”
Mr. Secretary, whatever became of your statutory charge to “improve the quality of life” for rural Americans; to develop solutions to problems faced by “family farming operations” and to strengthen “the family farm system?”
Jay Platt is a 3rd generation cow-calf rancher operating ranches in Arizona and New Mexico. Previous to returning to the ranching operation in 1984, he worked in the tax department of a then “big eight” public accounting firm and later in the commercial section of a downtown Phoenix law firm. He currently serves as a director for R-CALF USA.