A Conference for Family Farms
Kansas City Airport Marriott
Good afternoon, my name is Charlie Kruse. I am the president of the Missouri Farm Bureau and a member of the board of the American Farm Bureau Federation. I am a fourth generation farmer from Stoddard County, which is located in the bootheel of Missouri. My family and I raise corn, soybeans and cotton.
Mr. Baker, I appreciate the opportunity to participate in such an important forum—it is indeed time we work together to address the impacts of increasing consolidation within the US farm sector.
Let me begin by saying that Farm Bureau believes that consolidation, and the subsequent concentration within the agricultural sector is having an adverse economic impact on family farmers. To address this trend, we believe Congress must review existing statutes, develop legislation where necessary and strengthen enforcement activities.
Since last fall, state presidents and staff have spent countless hours trying to develop federal legislation which would indeed lessen the adverse impact of concentration on agriculture. In fact, early in the process our staff met with Jim and others from USDA. We also met with officials from the US Justice Department and have worked closely with staff from several Congressional offices.
We are learning there are many complex issues surrounding agricultural concentration and antitrust issues. Together, we attempted to reach attainable, timely and common sense goals. Is it feasible to completely stop the consolidation that is occurring today? Probably not. But there are actions we can take to gain a better perspective…to help direct the course of our industry.
Here in Missouri, we have firsthand experience with the changing structure of production agriculture. In 1993, legislation was passed and signed into law that provided a three county exemption to the state’s corporate farming statute. Premium Standard Farms has provided an economic lift in the region but has also contributed to demise of many independent hog producers and has caused the imposition of new environmental regulations.
And on April 29, Missouri’s first ethanol plant opened in Macon. This new generation cooperative has been years in the planning and represents a new era for our state. We believe this plant, and another to be opened shortly, will serve as a model for other producers who share the belief that opportunities await for those who seek to climb the ladder to capture more of the consumer food dollar.
Today, at the federal level, Farm Bureau continues to urge Members of Congress to make consolidation a priority and cooperate to address this issue in the remaining days of the 106th Congress.
Many of the concepts proposed by Farm Bureau have been included in legislation introduced by Senators Daschle and Leahy and Senator Grassley. Our goal is for legislation to move this year and for increased involvement in the consolidation issue by the Department of Agriculture (USDA).
Specifically, Farm Bureau would like to see an expanded role for USDA in evaluating agribusiness mergers and acquisitions which are currently under the sole jurisdiction of the Department of Justice. Broadened USDA responsibility and official consultation with DOJ will ease some of the concern regarding the concentration of agribusiness.
USDA is uniquely positioned and qualified to offer a thorough economic analysis of any proposed merger or acquisition. This is the proper role for USDA. This analysis should be made available to the public and other government agencies. The Justice Department focuses on the consumer so it is appropriate for USDA to serve as an advocate for the producer.
We are very interested in the model currently being used by the Surface Transportation Board. Under that model, the Department of Justice is required to provide an analysis on proposed mergers and a recommendation on whether to approve a merger to the STB. STB in turn is required to give the Justice Department analysis significant weight in the decision-making process, but is not required to live by the DOJ recommendation. This system could be used in reverse for the USDA-DOJ relationship.
Farm Bureau does not believe the proper role of USDA is to become the enforcement agency, judge or jury in any given antitrust situation. That is the responsibility of the Department of Justice. Yet USDA can, and should, play an increased role.
We would like to see the following additional actions considered in the concentration debate:
1. The Grain Inspection, Packers and Stockyards Administration (GIPSA) may need additional resources to investigate anti-competitive pricing practices. Farm Bureau members would like to see better publicizing of these investigations, the results of the findings, and whether civil penalties were imposed.
2. GIPSA should be able to evaluate actions taken by packers who purchase plants and then shut them down. This has the effect of limiting competition in the area and reducing the number of marketing opportunities for independent producers. While GIPSA should balance the capacity needs, environmental considerations and other financial issues of the packers, these actions are contributing to concentration within the meatpacking industry. Smithfield's announcement that it would shut down the hog processing lines once it purchased Farmland's Dubuque, Iowa, pork plant is a good example. This action may well result in substantially lower prices for producers of the 7,800 hogs that are processed or slaughtered each day at that plant. A GIPSA analysis prior to these mergers would be valuable to agricultural producers. If the GIPSA analysis shows that a plant closing would have a major impact on producers, then steps could be taken to try to keep the plant open.
3. GIPSA should be allowed to ask for reparations for producers that can show damage as well as civil penalties when a packer is found to be engaged in predatory or unfair practices.
4. Contract poultry growers should be provided the same protections as livestock producers by extending the powers of GIPSA to cover live poultry dealers in the same fashion as packers of cattle and swine are covered. In addition, GIPSA authority should be extended to cover producers of poultry and domestic fowl raised for non-slaughter purposes.
5. Farm Bureau has long supported authorization for a statutory trust for the protection of cash sellers to livestock dealers.
6. More transparency is necessary. It is basic human nature that anyone provided limited information becomes highly skeptical, no matter the circumstances. Farmers become especially skeptical when no information is forthcoming and the result is a constriction of the number of marketing outlets in their local area. The transparency of information regarding mergers, acquisitions and anticompetitive activities must be enhanced.
7. Farm Bureau supports appointing an Assistant Attorney General at DOJ with the sole responsibility of handling agricultural mergers and acquisitions.
8. We support an increase in the staff of the Transportation, Energy and Agriculture section of the DOJ.
9. The enforcement of confidentiality clauses in livestock and grain production contracts should be prohibited except to the extent that a legitimate trade secret is being protected. The objective is to bar the enforcement of confidentiality clauses that seek to prevent dissemination of information about the material terms and conditions of contracts without any legitimate trade secret basis. The primary practical effect of such provisions appears to be to inhibit producers from discussing, comparing and contrasting the differing types of contractual arrangements with their bankers, lawyers and accountants.
10. USDA should be required to assimilate, maintain and disseminate, upon request, detailed information relative to corporate structure, strategic alliances, and joint ventures for all agribusiness entities with annual sale in excess of $100 million.
And finally, producers need government assistance to develop co-ops that will add value to their product and legal structures that will help them to develop relationships with other producers to pool resources and compete in today's economy.
In Missouri, the state provides eligible producers with up to a 50 percent tax credit for the costs of participating in a new generation cooperative. To assist producers, Missouri Farm Bureau is currently buying these tax credits at 100 percent of face value.
In addition, I support legislation to provide a federal tax credit for participation in a new generation cooperative. Ultimately, value-added opportunities represent a key to our future.
The future of agriculture will be much different than the past. As public officials, and representatives of agricultural organizations, we have a responsibility to anticipate change and chart a course in which family farmers can prosper. That course will include many things…including dealings with large corporations…and that is not always bad. For example, I recently read that Cargill and Dow Chemical have formed a joint venture to construct a large polymer plant in Nebraska. This new 14 million bushel plant will not be a cure for low prices but it will certainly help.
In closing, I think many people realize there is no single solution to the problems facing our farmers. We have to have a comprehensive plan that ultimately lets producers make the decision how they prosper. It is our job to ensure they have options.
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