Antitrust official stampeded by big beef
J. Dudley Butler quit his job last week.
Never heard of him? He was President Obama's appointee to run the division of the U.S. Department of Agriculture that governs antitrust issues in the meat industry. He was part of a cadre of high-level bureaucrats charged to expose and fight agribusiness monopolies. In fact, he was the last of that group.
Butler set out to change the cattle industry. But he ran into many hurdles, not least of which was fierce opposition from meatpackers, who exert a lot of influence in Washington, D.C.
Meatpacking is a business that cattleman will tell you gets harder all the time. More than half a million families have stopped raising cattle in the past three decades. Some say efficiency and economies of scale fully account for the decline. Others blame a revolution in the way livestock is sold.
Meatpackers once bought cattle on the open market. But those days are over, said Steve Kay, the publisher of Cattle Buyers Weekly. The four big packing companies now buy mostly on contract — a more sophisticated and efficient arrangement.
"It rewards producers who produce the most consistent, highest-quality cattle, so that we can then produce more consistent, high-quality beef for consumers," Kay said.
Packers get a guaranteed supply; cattle producers get a guaranteed market. That's good for everybody, according to Mark Dopp, senior vice president of the American Meat Institute.
"That working relationship gives everyone some certainty and removes risk," Dopp said. "But it also removes a measure of independence, and that rankles some small producers."
This happened in the poultry industry years ago. Now, fewer producers raise a whole lot more birds, and their work is governed closely by contracts with packers.
Fred Stokes, a Mississippi cattleman who runs the Organization for Competitive Markets, believes beef is next.
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Photo courtesy USDA.
"We call it 'chickenization,' " Stokes said. "Go the way the poultry guy is, where the farmer owns the land, totes the mortgage, does the work, but is under contract to someone who determines how much he's going to get paid."
And if that pay seems unfairly low, Stokes said, there's not much a producer can do about it under the current interpretation of the Packers and Stockyards Act.
This is where Butler comes in. A lawyer with experience suing poultry processors, Butler took over the Grain Inspection, Packers and Stockyards Administration determined to make litigation against packers easier.
“There’s not a level playing field. That situation needed to be addressed,” Butler explained in an interview with Harvest Public Media in late January shortly after leaving his position.
Butler wanted to force packers to disclose some of the terms of their contracts with producers. His rule change would have made it easier for cattleman prevail in court against packers.
“We wanted to create more transparency and fairness, and create rules that people play by,” he said.
The USDA linked up with the U.S. Justice Department to launch a massive study of antitrust issues in agriculture, which led to five big public hearings. Christine Varney, who was an assistant attorney general, led a freshly invigorated antitrust department, launched investigations and worked with Butler.
Now, Varney said, she's sad to see Butler step down.
"I think he has a done a great job for the farmers of America, and it's a great loss to the Department of Agriculture, but these are tough jobs and everybody serves their time," said Varney. In fact, Varney herself resigned last summer.
Bill Bullard, who runs R-Calf USA, a cattleman's advocacy organization, said Butler and Varney were part of the reformist team that was supposed to restore competition to the market.
"Now they are all gone, and we have seen no improvement, whatsoever in the ongoing erosion of competition," he said.
Of course, that's not the way major meatpacking and livestock groups see it. They say what Bullard would call increased and transparent competition for cattle would have thrown a monkey wrench into the beef industry. It would be big enough to cost thousands of jobs, millions of dollars and significantly raise the price of beef, they say.
In the end, the U.S. House of Representatives refused to fund implementation of a proposed change to a rule, known as the GIPSA rule, that Butler authored. It would have forced beef packers to change the way they do business.
Still, Butler’s former boss, U.S. Agriculture Secretary Tom Vilsack said that’s not the end of the story.
“While Dudley was very important, Dudley was one person in a very large agency,” Vilsack said. “We’re going to continue to enforce the law, continue to work in concert with the Department of Justice, and the fact that Dudley is resigning isn’t going to affect our desire, our passion, our interest in this area, it’s going to continue.”
For now, though, big meat packing companies will keep the production system based on contracts with producers, leaving smaller cattle operations continue scrambling to figure out their place in the modern meat industry.