During last week’s campaign stop in Raleigh, North Carolina, Kamala Harris told rally goers that she would take on the cost of food.
As Harris speaks to crowds, White House staffers, unelected United States Department of Agriculture (USDA) employees, and the Biden/Harris appointment to the Secretary of Agriculture, Tom Vilsack, are currently working on Harris’s promises as president—promises made months ago by Biden.
The first promised regulation comes in the form of a comprehensive update to the USDA’s definitions of unfair and deceptive practices under the Packers and Stockyard Act of 1921. A new “base rate,” rule for the tournament system, is the second of these regulations promised by the administration. The third promise is that the Biden/Harris administration will make $650 million available in grants – $700 million in total – to “independent processors.”
While lowered food costs might be the stated intent of this whopping billion dollar policy framework, the outcomes will likely create shortages and food rationing—a reality that Harris supporters say they’re excited about.
Background
In the early 1900’s, five meat packing plants began dominating the livestock industry from start to finish. By 1921, these five meat packing companies owned 81% of access to the meat market—prompting Congress to enact the Packers and Stockyard Act.
Originally passed as an anti-trust law, the Packers and Stockyard Act of 1921 was intended to break up the “Big 5’s” monopoly on meat. One hundred and three years later, just four corporations – JBS, Tyson, Cargill and Smithfield – now own 85% of access to the meat market as “subsidiaries” of the USDA.
Without exception, it is illegal in the United States to sell meat of any kind for interstate wholesale consumption or export, unless permitted by a federal government stamp. Any processing facility packaging for export, or grocery stores must be inspected by a full-time USDA certified inspector in order to receive that federal “USDA certified” stamp. With limited certified inspectors, the largest facilities have been given deference over the years, leading to the vertical integration and consolidation of the livestock industry.
Due in part to the USDA’s tightly held grip upon certification, these same four multinational conglomerates also own the five main plants where 95% of America’s meat supply is processed.
Amid ongoing lawsuits, and hot on the heels of supply chain collapses, the Biden administration is now rushing ahead of the courts to redefine the rules.
The Packers and Stockyard Act
Starting with the redefinition of harm under the Packers and Stockyard Act (P&S, or The Act). By claiming that “the Act is broader than an antitrust law,” the USDA is currently attempting to turn the Packers and Stockyard Act into a consumer protection law, “for the public benefit.” Additionally, the administration is attempting to imbue the Secretary of Agriculture with omnipotent future-telling, and mind-reading powers.
Co-opting the Federal Trade Commission Act’s test for consumer protection injuries, the administration’s proposed regulations claim that this rewrite of a century-old law – arbitrarily including consumer protections as part of a new two-part, but “not mutually exclusive,” test – was always the intent of Congress. Alarmingly, the original (202b) anti-trust definition of harm to competition, will no longer be relied upon for the test.
According to the proposed regulation, the P&S Act “could be violated if a challenged practice injures the market to the detriment of the public interest, or if it injures market participants without any specific harm to the market.”
According to the regulatory notice, “proposed § 201.308(a) recognizes that although a specific injury has not occurred, the potential for injury is so great that the Secretary must stop the practice in advance.”
The second part of the test, outlined throughout proposed sections 201.308 (a-d) insists that Secretary Vilsack must be endowed with the power to predict the intent to harm or oppress.
“Because the Act is intended to protect the market from harm and protect producers and consumers from unfair practices, there does not need to be any proof that any harm to the market has yet occurred: only that the threat the Act is designed to prevent is likely.”
Despite the recent overturning of Chevron Deference, the proposed regulations would also imbue the Secretary of Agriculture with the power to prevent “likely harm to Congressional policy goals.”
While listing Congressional policy goals such as supporting new, beginning, and military veteran producers, the notice fails to share the millions recently appropriated by Congress for new, and beginning Black, LGBTQ+, refuge and minority farmers.
Should this new definition pass, processors could be found guilty of violating the Packers and Stockyard Act for nearly anything, even paying less for low quality meat. The single caveat to the rule factors whether a regulated entity can prove that “countervailing benefits to producers, growers, or to competition outweigh the harm.”
Meanwhile, the proposed regulations do not take into consideration the rising costs incurred by producers due to lost grazing access, increased hay or fuel costs. So, while a behavior may harm consumer costs, like buying better raised livestock, a processor would have to prove that cost is justified, without consideration for why healthier livestock is more expensive.
While the monopolies of “The Big 4” shoulder most of the government’s blame for the consolidation of the meat supply, the biggest culprit is big government itself.
The Tournament System
As the first attempt at government intervention backfired, the USDA switched its focus from the Packers and Stockyard Act to the vertical integration of chicken and pork.
Dubbed “The Tournament System,” the USDA promised market stability, shared liability, and lower consumer costs by allowing poultry processing corporations (integrators) to stabilize and control their own production expenses. For years, the Tournament System helped to artificially oppress meat prices despite inflation and costly regulatory burdens. Until finally, as all government intervention eventually does, the program hit a wall.
The Tournament System works by allowing processors to offer contracts to growers. The processor essentially contracts out the work of growing their product, like chicken. A contractor will receive chicks, feed, veterinary care and medicine. At the end of the contract period, the processor will pick up the fully-raised birds to take to processing. Contract farmers are also incentivized with bonuses to use less feed, implement best practices, abide by increasing USDA regulations and deliver top weights.
However, as administrative agencies consistently create new rules and regulations, costly upgrades must be made to farms in order to maintain their Tournament contracts. As prices increase for feed, fuel, electricity, water and medicine, so too has the pressure to cut input costs while increasing growth rates.
Despite calls to end the Tournament System, the USDA is now changing the rules again. Now, integrators must pay a fixed base rate to all contractors, regardless of the product’s quality. In addition, integrators will now have to estimate return on investment for contractors to make regulated capital improvements.
“This is the latest example of the Biden administration racing to impose its anti-business regulatory agenda ahead of November’s election,” Mike Brown said, president of the National Chicken Council—which represents major chicken processors. “The administration likes to deflect the blame at our country’s food producers as the reason for high grocery prices, instead of looking in the mirror at their failed policies and increased regulation.”
“This rule — which Congress never asked for — will lead to rigid, one-size-fits-all requirements on chicken growing contracts that would stifle innovation, lead to higher costs for consumers, decrease competition, and cost jobs by driving some of the best farmers out of the chicken business,” Brown added.
Selectionism and Protectionism
In 2021, Pilgrim Pride and its Brazilian-owned parent company JBS, were sued by poultry farmers for violating the Packers and Stockyard Act.
The case has brought the issue of centralization to the forefront, giving the Biden/Harris administration a scapegoat for high prices at the grocery store. In addition, the case has helped cultivate public support for the previously outlined regulations to supposedly increase competition.
While a lack of competition absolutely increases consumer costs at the grocery store, the USDA under Secretary Vilsack appears disinterested in actually holding the “Big 4” accountable.
When members of Congress pressed Secretary of Agriculture Tom Vilsack, to disbar JBS from being a Tournament integrator, or receiving future government procurement contracts, Vilsack responded by saying that JBS was too big to fail.
As a caveat, Vilsack offered Congress the solace of knowing the USDA was working on new regulations (outlined above) and would be awarding $700 million in grants to “independent processors.”
$700 Million in Grants
In an effort to assure Americans and Congress that the Biden/Harris administration was taking the supply chain collapses seriously, an Executive Order was signed on Jan. 03, 2022. As opposed to freeing up liquidity and creating equal access through low interest loans, the Executive Order allocated $650 million in grants to “independent meat processors,” and another $50 million to non-profit organizations.
Concerningly, the first round of awards, about $83 million in allocations, appear to have been prioritized to those ideologically aligned with the DNC—as opposed to those with solid business plans.
Justin Trammel, of Panhandle Meat and the Rancher’s Storefront in Texas, operates a state certified slow-growth, regenerative processing facility. Trammel, who has a proven track record, has been denied funding. Like many today, Trammel is facing liquidity deficits as high interest conventional lending inadequately covers Agricultural needs, yet grants are unavailable for state certified processing facilities.
Meanwhile, longtime democratic campaign donor and Harris/Walz supporter, Gary Wertish, secured a million dollars in grants for the Minnesota Farmers Union. Wertish, apparently privy to the July award, announced in February that the organization would begin accepting loan applications from small, state certified processing facilities for a revolving fund of $900,000—turning free money into an interest earning scheme.
Another notable allocation went to the Hastings, Nebraska Kosher meat plant “Noah’s Ark,” owned by WR Reserves. Noah’s Ark, which contracts union labor through the United Food and Commercial Workers Local Union No. 293, was awarded 10 million dollars in grants. The grant allocation immediately followed a landmark ruling by the National Labor Relations Board (NLRB), in which the meat plant was made to pay the union $230k in fines. Interestingly, the case set new legal precedent, drastically expanding the authority of the pro-union NLRB.
Supply vs. Demand
Today, the United States cattle volume has sunk to a 70-year low. While markets are temporarily up, cow/calf producers are letting go of their heifers, as the cost to graze and feed is no longer sustainable. Over the last three years alone, the United States has become a net-importer of beef. Meanwhile, government mandated cullings have drastically reduced the volumes of poultry, pork, deer, elk, and dairy—driving up costs.
Climate change policies and U.N. initiatives have resulted in fewer grazing and farming lands. Costly land disputes have resulted in ranchers being jailed over a few square acres of land. Others have ended in bloodshed after federal agencies unlawfully euthanized cattle.
A lack of basic resource management, coupled with lacking infrastructure investments, have resulted in alternate fires, flooding, drought, and water curtailment orders. All of these factors have drastically increased the costs of raising livestock, and farming crops.
When the Texas Panhandle fires raged through acres of prairie and grass, it was private foundations like the Beef Initiative, and 4F Outfitters that paid to reseed ahead of winter. Despite regulatory red tape, and zero help from federal agencies, Texas ranchers chose to go it alone—making a sizable financial investment into the future. Due to this one act alone, teams of wildlife, and cattle alike, are returning to the Texas Panhandle.
Rebel ranchers- Texas Slim and Cal of 4F Outfitters use a helicopter to spread over 26 tons of grass and forage seeds, before federal agents could stop them.
The true drivers of increased costs are systemic. While it’s fair to draw attention to the abuses enabled by centralized access to market entry points, it’s vital to look closer at the policies that have created the centralization itself.
At each turn of the supply chain, it’s increasingly the regulators that are causing these centralized bottlenecks, as opposed to the so-called “greedy” regulated entities. Of greater concern, however, are the supposed “solutions” Americans are being required to fund.
Ultimately, government interventions hit a wall as taxes increase to fund expanded regulations, while the selected few are given free money and protection from regulatory burdens. Simultaneously, ideological agendas have taken priority over food security and sound land stewardship policies, creating ever-increasing conflicts with stated goals.
Despite campaign promises being made, the policy facts do not support the current rhetoric. Unless the Executive releases its administrative grip on power – or decides to radically decentralize control back to the state and local level – Americans should anticipate higher costs at the grocery store in addition to diminished choices.
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