Animal Farm
Who can own a pig or a cow?

By Dave Juday, a commodity-market analyst & an adjunct fellow with the Hudson Institute’s Center for Global Food Issues
February 8, 2002 8:25 a.m.

uring the farm-bill debate last December, Virginia Senator George Allen had this sage advice for his colleagues in the world's most deliberative body, "I don't think it is the business of the federal government to (say) who can own a pig, a cow, or a calf." Nonetheless, the Senate did indeed pass new restrictions on who can own pigs, cows, and calves.

By four votes, the Senate adopted an amendment offered by South Dakota Senator Tim Johnson that would prohibit meat packers from "owning, controlling, or feeding livestock" more than 14 days prior to slaughter. Now that the farm-bill debate has resumed in the second session of Congress, lawmakers are starting to see the wisdom of Sen. Allen's words and are looking for ways to undo what they've already done.

At issue is the practice of some meatpackers of securing a cattle supply prior to slaughter by buying the livestock or contracting with farmers. The packers do so in order to be assured of the livestock's quality and, in some regions, to be assured of a sufficient quantity of cattle to keep their processing plants operating efficiently. In all, this practice leads to better quality beef, at more reasonable prices, on the supermarket shelf. That's a result that is good for America's livestock farmers and ranchers — as well as consumers.

Nonetheless, the ownership ban found its way into the farm bill because some populist politicians saw their rhetoric catch up with them. They've railed against the meat-packing industry in their stump speeches for so long — accusing processors of profiting at the farmers' expense — that they were almost forced to bring the issue to a vote, even if it was against their better judgement.

The fact remains, of the 39 billion pounds of beef and pork processed by the largest meat packers, the average profit is a penny a pound. Conversely, cattle still remain the highest grossing commodity in farm gate receipts. And packer control hasn't been a bad thing for hogs either. About two years ago, for example, spot market prices for hogs hit record lows, dropping below 10 cents per pound at the farm gate. During that same bear market, however, many producers had contracts with packers that paid them 40 cents per pound.

But damn the facts. This is good old-fashioned big guy versus little guy politics. Sen. Grassley, cosponsor of the Johnson amendment, in language typical of this debate, wrote the following in a letter to his colleagues: "These meatpackers aren't the ones who keep the water pipes from freezing in the middle of winter or who get up in the middle of the night to help cows have their calves. We can't have independent livestock producers forced out of business by these big packers."

Have all the cows on the open range in fact gone corporate? Hardly. According to USDA's most recent analysis only five percent of all cattle are packer-owned. But given the economics of the industry, it' a critical five percent. For many packing plants, it means the difference between having a sufficient supply of animals or shuttering up their plant.

Indeed, most industry experts and economists see the ban as a real problem for the future of the U.S. livestock and meat sector. And so do some key producer groups. The Texas Cattle Feeders' Association opposes the Johnson-Grassley amendment. As does the Kansas Livestock Association, which recently said the legislation would "have extremely negative effects."

To be sure, only a politician could argue that fewer and less profitable meat-packing plants would actually help the farmers and ranchers who rely on those plants as customers. But like the dog that chases cars, it seems Sen. Johnson and his colleagues aren't quite sure what to do now that they've caught what they've been after. Indeed, there's a lot of backpedaling in the Senate on this issue.

For example, Sen. Johnson gives this less-than-bullish assessment of his own provision: He doesn't think it will be signed into law.

Others who voted for the amendment now claim they really didn't realize at the time that the prohibition on "controlling" animals meant that packers would be, well, prohibited from controlling animals through a forward contract with a farmer.

Indeed, in logic that ranks with President Clinton's "it depends what is, is" statement, some lawmakers now want to ban "ownership" but not "control." All that would do is economically punish some plants and not others for no overriding policy reason, but rather depending on how individual plants procure livestock.

Still other more sober lawmakers propose to swap out the Johnson amendment with a call for a study on this issue. That may just be the out that everyone needs to keep the federal government from meddling in the important business of owning pigs and cows.