National Campaign for Sustainable Agriculture

National Campaign Competition and Concentration Committee

Stated Purpose, Goals, and Priority Work

a. Problem
Horizontal consolidation has concentrated the power of large food and agriculture firms and increased their ability to manipulate market conditions in their favor, to the detriment of independent family farm viability and profitability, competition and consumer choice. Four-firm concentration ratios (the amount of the national market controlled by the top four firms) are at all time highs in food retailing, grain processing, red meat processing, poultry processing, milk processing and nearly every category of food manufacturing.

Vertical integration may be a bigger problem. Meat packers control production and inventory through ownership and contracts with producers. Poultry processors have all production under contract. This means that they not only dominate demand for livestock and poultry, they also dominate supply. Thus, the system of supply and demand does not work. The top retailers increasingly engage in relationships with dominant suppliers that exclude smaller competitors and minimize price competition.

The role of government should be to facilitate properly operating markets and to bring balance to the economic relationships among farmers/ranchers, consumers and food companies. Instead, federal policies allow corporations to continue consolidating market power, manipulating prices, and creating anti-competitive market structures. These economic forces-backed by government policy and inaction-have a dramatic, negative impact on agricultural production practices and markets, farmers, ranchers, rural communities, the environment, food quality and food safety. They discriminate heavily against more sustainable production practices, and threaten state and local laws that support family-scale, sustainable farm and ranch operations.

b. Unique/value-added role of the Competition & Concentration Committee
The Competition and Concentration Committee pursues solutions to these problems based on fundamental principles of fairness, market access, transparency, and competition. Shifting policies to support fair and equitable markets requires well-coordinated education and action at local, state, regional and national levels, which the Committee facilitates. For years, a variety of groups have worked at all levels on specific aspects of competition and concentration issues. Since 2001, the National Campaign has helped coordinate scores of organizations working on these previously disparate efforts to develop a comprehensive platform for federal competition and concentration policy. In 2002, the collaborative policy work facilitated through Competition and Concentration Subcommittee resulted in cohesive written materials outlining the problems and proposed solutions, Hill briefings, press coverage, Senate hearings on competition and concentration, development of a comprehensive Competition Title, and ultimately amendments to the Farm Bill passed by the Senate, including a ban on packer ownership of livestock, livestock production contract reforms, and Country of Origin labeling (COOL). Of these, only COOL made it into the 2002 Farm Bill and it is now being undermined (see below). However, a very solid foundation was laid both in terms of organizational relationships, Congressional awareness and support, and strategic coordination of group efforts.

In 2004 and beyond, the Committee will continue to provide a forum for sharing of information, updates, and strategies among groups working on specific pieces of competition and concentration work. The Committee will also create and respond to opportunities to develop and implement coordinated DC and grassroots strategies for pushing forward on a comprehensive competition and concentration platform, in both Agriculture and possible Judiciary arenas.

c. Proposed Priority Work of the Competition & Concentration Committee
for 2004 and Given the current political, economic and budgetary realities in Washington, DC, the current Committee strategies are to:

push for bi-partisan introduction in both the House and Senate of each individual legislative initiative listed below;
build bi-partisan co-sponsorship in both houses of Congress;
closely monitor and act on opportunities to inform and promote a bi-partisan comprehensive competition and concentration agenda in Congress.

1. Prohibition on packer owned livestock: Packer-owned livestock is a major market power tool for meat packers such as Tyson, Cargill, and Smithfield Foods. The practice fosters industrial livestock production and freezes independent farmers out of the markets. Packer owned livestock has been proven to artificially lower farm gate prices while the consumer food prices continue rising.

2. Producer Protection Act: This proposal is designed to set minimum standards for contract fairness in agriculture. It addresses the worst abuses contained in processor-drafted boilerplate contracts including: (1) Clear disclosure of producer risks; (2) Prohibition on confidentiality clauses; (3) Prohibition on binding arbitration in contracts of adhesion; (4) Recapture of capital investment (contracts that require a significant capital investment by the producer cannot be capriciously canceled without compensation); and (5) Ban unfair trade practices including "tournament" or "ranking system" payment.

3. Transparency/minimum open market bill: This bill will requires meat packers to purchase at least 25% of their daily hog and cattle needs from the open market. In the absence of a mandatory minimum open market volume, all producers will be forced into unfair contracts with specific packers. It will limit the ability of packers to use their owned and contracted livestock to manipulate prices down artificially.

4. Captive Supply Reform Act: This legislation will bring secret, long-term contracts between packers and producers into the open by creating a market for them. These secret deals have been proven in court as a market manipulation tool. The bill will bring them into the open and regulate them in an auction market-like setting. This will severely curtail this avenue of market manipulation.

5. Clarify the meaning of "undue preferences" in the Packers & Stockyards Act: Packers use preferential deals with industrial producers to economically feed factory farms and starve family owned and sustainable farms. These preferences are unlawful, but very difficult to define. Congress should pass legislation that clarifies that preferential pricing paying different prices to different producers for livestock is justified only for real differences in product value or actual and quantifiable differences in acquisition and transaction costs. This will take away the economic advantage of factory farms.

6. Close the poultry loopholes in the Packers & Stockyards (P&S) Act: USDA does not have the authority to bring enforcement actions against poultry dealers. The P&S Act oddly omits this authority even as USDA can enforce the law against packers and livestock dealers. We seek to clarify that USDA's authority over poultry applies not only to broiler operations, but also to growers raising pullets or breeder hens. These loopholes should be closed.

7. Bargaining rights for contract farmers: Close loopholes in the Agricultural Fair Practices Act of 1967 (AFPA) and require processors to bargain in good faith with producer organizations. The AFPA was enacted to ensure that livestock and poultry producers could join associations and market their products collectively without fear of retribution by processors. These goals have not been attained due to loopholes in that Act. Retaliation by processors is commonplace in some sectors. This legislation should be passed to promote bargaining rights and prevent processor retaliation.

8. Mandatory Country of Origin Labeling: Country of origin labeling (COOL) was passed as a provision of the 2002 Farm Bill. This popular measure allows consumers to determine where their food is produced while allowing producers to showcase their products for quality and safety. It also limits the ability of global food companies to source farm products from any country while passing them off as U.S. in origin. The meat packers and retailers have successfully stymied the effort to implement this law. We will work to ensure that COOL is implemented in September 2004 as intended to benefit producers and consumers.

d. Capacity/expertise provided by the organization(s) proposing this work
This section will expand as more partner organizations write up their contributions. An initial listing includes:

Center for Rural Affairs: Policy analysis, Grassroots mobilization, Education and outreach, Media. In particular, the Center plans to take the lead on the undue preferences work.

The Campaign for Contract Agriculture Reform (CCAR) is a national alliance of organizations working to provide a voice for farmers and ranchers involved in contract agriculture, and the communities in which they live. The campaign's goal is to assure that the processor-producer relationship serves as a fair partnership, rather than a dictatorship. CCAR member organizations represent a broad range of interests and experience including a number of poultry organizations with decades of experience in vertically integrated and increasingly concentrated markets. CCAR offers information and resources, assistance using our DC presence, policy analysis expertise on agricultural competition issues, grassroots mobilization and education/ outreach, particularly in the Southeast and Midwest, and some limited media work.

Campaign for Family Farms:

OCM: The Organization for Competitive Markets focuses upon antitrust and competition in all commodities. Its areas of expertise include policy analysis, education and advocacy at the national level.

R-CALF:

National Catholic Rural Life Conference (NCRLC): NCRLC has a long history of working on competition policy; it has been a bedrock of our policy focus for 80 years. NCRLC does policy analysis; collaborates with CCAR, and has worked closely with congressional delegation from Iowa. NCRLC works closely, too, with OCM and the National Family Farm Coalition on these issues. NCRLC has considerable capacity in education and outreach materials, published articles, workshops, and membership mobilization. NCRLC's policy coordinator has professional research background in rural sociology; the Executive Director brings legal proficiency to these areas. NCRLC's grounding in Catholic social teaching brings a consistent, in-depth philosophical/moral dimension to their analysis.

National Farmers Union: For more than 100 years, NFU's primary goal has been to sustain and strengthen family farm and ranch agriculture. NFU believes good opportunities in production agriculture are the foundation of strong farm and ranch families and that strong farm and ranch families are the basis for thriving rural communities. Inadequate market competition is one of the most pressing issues facing independent producers across the country. NFU works on behalf of nearly 300,000 farm and ranch family members, through grassroots-driven policy to ensure fairness, transparency, protection and bargaining rights for producers, and restore and enhance competition for agricultural markets.

Rural Advancement Foundation Int'l - USA (RAFI): RAFI-USA has been working on issues related to vertical integration in the poultry industry and unfairness in contracts since the early 80's. RAFI's Poultry Program has expanded to the Contract Reform Program as contracting and vertical integration have migrated to other commodities. We offer analysis and information on the impact of contracting on the family farmer and opportunities for reform. We are also a lead coordinator of the Campaign for Contract Agriculture Reform.

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