Questions and Answers
from the
Grain Inspection, Packers and Stockyards Administration’s

Millennium Conference
Kansas City, Missouri
May 9-10, 2000

 

There were several questions from our audience to the panelists at the Millennium conference in Kansas City that were not addressed due to time constraints. Following the conference, the questions which were not addressed were given to those to whom they were intended for response. The following answers were provided either by the panelists or their respective organizations.

 

1.     How many cases have been referred to the Department of Justice (DoJ) and how many did DoJ pursue?

Approximately 72 files were submitted by GIPSA to the Office of General Counsel for Department of Justice action between January 1, 1994, and June 1, 2000. The records indicate that approximately 42 of these files have been, or are in the process of being, pursued by the DoJ.

2.Are you familiar with the report by the University of Missouri on mergers and the affect on farmers? Could you comment on said report?

We assume this refers to the report released in February 1999 by the National Farmers Union prepared by Dr. William Heffernan. Dr. Heffernan is a rural sociologist at the University of Missouri and was one of the speakers at the GIPSA Millennium Conference. Dr. Heffernan's report summarizes statistics on concentration in agricultural processing and related industries. It describes what he calls "food clusters," i.e., linkages among firms which he believes allow large multinational companies to control food production from gene to store shelf.

Dr. Heffernan's descriptive model is somewhat unique. His basic concerns about the potential effects of concentration and consolidation in agriculture and the related industries, however, are common to all of us who have an interest in the well-being of agricultural producers and rural communities. These concerns have motivated the efforts USDA has made over the past several years to help family farms and rural economies remain viable and healthy. Under Secretary Dunn described many of those efforts in his Keynote Address at the Millennium Conference. USDA will continue to aggressively pursue these objectives.

3.  "There is no provision for recovery of damages to the injured parties under the act and no protection from retaliation or harm for the whistle blower. How can this problem be remedied?"

(1)    Recovery of Damages

When individuals are financially harmed as the result of a violation of the P&S Act (the Act), GIPSA will issue a complaint. Any legal action resulting GIPSA's efforts to enforce the Act would be instituted in the name of the United States. Funds forfeited by the violator would not go to the harmed individuals. GIPSA will, however, work with the Office of General Counsel to encourage the respondent firm to provide restitution to those harmed. GIPSA will often allow for a smaller fine or shorter period of suspension from operation if the responsible firm pays those harmed for their loss.

Section 308 allows injured parties to seek recovery of damages under the Act. This may be done in two ways: (1) by filing a complaint in writing with GIPSA requesting reparation for anything done by stockyard owners, market agencies, or dealers in violation of the Act; or (2) by private suit in any district court of the U. S. for anything done by any subject entity in violation of the Act.

Where the harm stems from a failure to pay or pay the full amount due, recovery of damages can be sought through the bonding or trust provisions of the Act.

(2) Protection from Retaliation or Harm for the Whistle Blower

Whistle blower statutes are enacted to protect employees who face retaliatory discharge after reporting a violation of the law. In most cases livestock and poultry producers are not employees and not protected by whistle blower statutes.

Unfair, unjustly discriminatory, or deceptive practices by subject firms are unlawful under sections 202 and 312 of the Act. Retaliatory actions by a subject firm would likely be viewed as unlawful under these statutes. GIPSA recently issued a complaint against a packer alleging the packer changed its bidding and buying practices to the detriment of a feedyard after the sales manager wrote an article critical of the packer. The article was published in a livestock journal.

4. Do DoJ and GIPSA believe that agriculture truly has a free, fair and open market and a level playing field among producers, packers and retailers?

The agricultural economy is dynamic and complex. In general, agricultural markets tend to be open and fair. However, individual firms may engage in anti-competitive behavior. The Department of Justice’s Antitrust Division, the Federal Trade Commission and USDA’s Grain Inspection, Packers and Stockyards Administration monitor industry behavior and conduct investigations when potential violations of the acts they enforce appear to have occurred. The agencies also occasionally recommend new or remedial legislation to address competitiveness issues.

5. How long does one have to file a claim with GIPSA? What is the statute of limitation for farm cases?

There are separate filing requirements for claims presented to GIPSA under the bonding, trust, and reparation provisions of the Act as follows:

Complaints concerning violations of the Act do not have time limits for filing. Anyone believing he or she may have a basis for filing a complaint under the Act should promptly contact the P&S regional office serving their area. Addresses and phone numbers are available on GIPSA's web page at http://www.usda.gov/gipsa/ thisis/directry.htm#pspro

6. Does the Secretary of Agriculture have the authority to promulgate rules under the Packers and Stockyards Act? If so, why has the petition on captive supplies in cattle markets offered by the Western Organization of Resource Councils languished for 4 years?

The Act grants the Secretary of Agriculture the authority to regulate packers, livestock dealers, and market agencies who engage in interstate and foreign commerce in livestock, livestock products, poultry, and poultry products. Under the Act the Secretary is allowed to exercise those powers required to enforce the Act. Such powers include making rules and regulations, gathering and compiling information, and requiring the attendance and testimony of witnesses.

USDA published the WORC petition in the Federal Register and received over 1,700 comments in 1997. The Department reviewed the comments, completed a major investigation of fed-cattle procurement in the Texas Panhandle region, which included an analysis of captive supplies, and conducted a peer review of that investigation. The USDA's analysis found no compelling evidence that use of captive supplies causes lower fed cattle prices. However, USDA has continued to conduct a dialogue with WORC representatives and others about the merits of restricting packer use of captive supplies and other ways of addressing concerns about concentration and consolidation. We hope to announce a decision on the petition soon.

7. Many of the farmers I talked with don't necessarily want to go with value added. We still want to sell to the Excel's or IBP's and still think that we are the least cost-most efficient producers. We however feel that packers ownership threatens this. We believed in the past that a 1% increase in production decreases price 2%. Is that still true?

This question does not have a simple answer. A change in production will, in the short run, have a greater impact on price than the same change will have in the long run, after firms have a chance to adjust to the change in production. The starting point also matters. Based on research done by the USDA Economic Research Service, a 1% increase in hog production today, for example, will have a much smaller effect on price than that same change would have had in December 1998, because packers were operating at the limits of their kill capacity at that time. But the short answer to the question is that, in general, a 1% increase in production leads to a price reduction of about 2% for both cattle and hogs.

8. How could you or do you check to determine whether a multi-million or billion dollar corporation is not raking in REAP funds to pay their employees?

The Rural Economic Area Partnership (REAP) initiative is administered by the Office of Community Development (OCD), one of the Rural Development agencies within USDA. According to information from representatives of OCD, REAP funds are dispersed through an independent third-party fiscal agent. Projects are monitored for compliance with all covenants in the loan terms, and the use of the funds is subject to Federal audit to assure that they are used properly. Funding directly to individual businesses normally consists of loans to start-up or small companies, not to large multi-billion dollar corporations.

More information about REAP is available on the OCD Internet Web page at (http://www.rurdev.usda.gov/ocd/reap.html) .

9. Do you have the authority, ability and desire to investigate formula pricing contracts and the discriminatory and predatory pricing practices that result from these arrangements?

Yes we do. Because of concerns about the volume of livestock committed to packers through packer feeding, forward contracts, and marketing agreements; GIPSA began collecting data on these procurement methods in 1988. Until recently, the data collected included all slaughter transactions for the top 15 firms which in 1996 accounted for 91 percent of the total U.S. commercial slaughter. In 1997, GIPSA began collecting this data from all packers slaughtering over 100,000 steers and heifers annually. Such firms account for about 95 percent of U.S. commercial slaughter.

GIPSA has a keen interest in the various procurement and pricing methods and their potential impact on open, competitive markets and the price discovery process. These issues were examined in the study of concentration in the red meat packing industry, which was released in February 1996. GIPSA has also focused on such issues in our investigation of cattle procurement in Kansas, in the Texas panhandle, and in our investigation of hog procurement in the Western corn belt.

The use of formula pricing contracts would constitute a violation of the Act if implemented in such a manner they were considered an unfair, unjustly discriminatory, or deceptive practice.

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