Feds shine spotlight on ag competition issues

In Ankeny, Iowa Friday, the Department of Justice (DOJ) and U.S. Department of Agriculture (USDA) held the first-ever joint public workshop on competition and regulatory issues in the agriculture industry. 

The workshop, led by U.S. Agriculture Secretary Tom Vilsack and U.S. Attorney General Eric Holder, featured panel discussions on a variety of topics, including competitive dynamics in the seed industry, trends in contracting, transparency and buyer power, and concluded with public testimony. 

“Today’s workshop provided the Department with an important opportunity to hear from a variety of perspectives and individuals about competition in the agriculture sector,” said Attorney General Eric Holder.  “We appreciate the importance of this industry to our economy and are committed to enforcing the antitrust laws effectively to ensure fair and open competition that protects both consumers and farmers.”

“In my travels across the country, I hear a consistent theme: producers are worried whether there is a future for them or their children in agriculture, and a viable market is an important factor in what that future looks like,” said Vilsack. “These issues are difficult and complex, which is why this workshop today is so important and long overdue.”

Friday’s meeting was the first in a series of workshops that will be held over the next several months. 

Holder, Varney serve notice to large agribusiness companies

The nation’s largest agribusiness firms received a stern warning from the Obama administration during Friday’s ag competition workshop in Ankeny, Iowa:  There’s a new sheriff in town and anti-competitive practices won’t be tolerated.

Attorney general Eric Holder set the tone for the session. “We know that a growing number of American farmers find it increasingly difficult to survive by doing what they have been doing for decades,” Holder said, “and we’ve learned that some them believe that the competitive environment may be, at least in part, to blame.”

Both Holder and Christine Varney, the assistant attorney general for antitrust, said that while big isn’t necessarily bad, it can be bad if the power that comes with being big is misused.  “With big comes an awful lot of responsibility,” said Varney.  “When you have a tremendous amount of market share, you have the responsibility to behave in ways that keep the competitive playing field open.  You cannot engage in acts that are designed to protect or extend your monopoly.”

Varney said her office will vigorously enforce antitrust law.  When pressed on what actions might be forthcoming, and when, Varney responded that it’s already happening.  She pointed to last year’s blockage of JBS SA’s attempt to purchase National Beef and a recent Justice Department lawsuit seeking to block milk processor Dean Foods’ acquisition of a competitor.   Her message was that future acquisitions and mergers will be getting much more scrutiny than they have in the past.

The following audio clips feature some of the opening comments made at the workshop.

AUDIO: Secretary of Agriculture Tom Vilsack (2 min MP3)

AUDIO: Attorney General Eric Holder (3 min MP3)

AUDIO: Christine Varney, head of DOJ Antitrust Division (3 min MP3)

AUDIO: Iowa Senator Chuck Grassley (3 min MP3)

 

Farmers have their say

The workshop agenda included a panel of six farmers conveying their thoughts on competition issues in agriculture.  Eric Nelson, a grain and cattle farmer from Moville, Iowa argued that the government needs to do a better job of enforcing the anti-competition and antitrust laws already in place.   Pam Johnson, a farmer from Floyd, Iowa, talked about the innovations that have made American agriculture the envy of the world.

AUDIO: Eric Nelson (7 min MP3)

AUDIO: Pam Johnson (6 min MP3)

Canada confirms another BSE case

The Canadian Food Inspection Agency is now confirming that a 6-year-old Angus beef cow in Alberta did have BSE. The cow was discovered by routine testing on February 25th. CFIA says no part of the animal’s carcass entered the human or animal food chain, the cow’s birth farm has been identified and the investigation continues.

There has been some concern that CFIA took so long to announce the discovery to the public. As per a new policy, industry stakeholders such as processors were notified of the discovery but the media and general public announcements are now being done via the CFIA website which is updated on a monthly basis.

Midday cash livestock markets

Iowa/Minnesota barrows and gilts are 2.10 lower at 69.47 on a carcass basis, the West is down 2.18 at 69.47, and the East is .56 higher at 70.26. The Missouri direct base carcass meat price is steady from 64.00 to 67.00 on the barrows and gilts. Hog buyers finally saved some Money in the country on Thursday and are doing the same today.  Processing margins remain bleak, and it looks like packers are managing to reclaim some leverage, perhaps in part because of limited Saturday kill plans. Russia made it official on Thursday by relisting eleven U.S. pork plants for exports.

USDA Mandatory reports cattle trading is moderate on moderate demand in Nebraska on Friday. Compared to last week early dressed sales have trended 2.00 to 3.00 higher at 147.00, but several continue to pass on bids. Trading in Kansas is light with dressed sales 4.00 higher than last week at 148.00. Trading remains inactive in all other areas. Reported negotiated sales volume at 11:00 was 6800 head. Boxed beef cutout values lower, with choice beef down .04 at 149.03, and select down .17 at 148.20.

Feeder cattle receipts at Missouri auctions this week totaled 41,441 head. Compared to last week feeder steers and heifers found the majority of the sales steady, with trends at some auctions showing certain weights and cattle of classes several dollars higher to several dollars lower. Demand was good on a moderate supply. Feeder steers medium and large 1; 1385 head averaging 621 pounds traded at 111.95 per hundredweight, 1207 heifers weighing 623 lbs averaged 100.28.

First ag competition workshop is in Iowa

The first Department of Justice/USDA workshop on competition in agriculture takes place in Ankeny, Iowa Friday.

Agricultural competition is one of those “hot button” topics, one that evokes some very strong emotions.  Corning, Iowa farmer Ray Gaesser, vice-president of the American Soybean Association will be part of a workshop panel discussing seed competition issues.  He says there’s fine line between too much and too little regulation.

“We think there is a need to review what’s going on in our industry—but at the same time, we have concerns that we go too far and stifle innovation,” Gaesser says, “so it’s really a fine line that we must walk on to make sure that we have competition, but at the same time that we don’t over-control and stifle competition.”

How great is the interest in this subject?  DTN reports that, prior to the workshops, Justice and USDA asked for public comments and received more than 15-thousand responses—so many that DOJ has been unable to post all of them.

AUDIO: Ray Gaesser (2 min MP3)

A profitable quarter for Smithfield Foods

For the first time since 2008, Smithfield Foods is reporting a quarterly profit. For the quarter ended January 31, the nation’s largest hog producer reports net income was $37.4 million, or 22 cents per diluted share, compared with a loss of $107.5 million, or 74 cents per share, in the same quarter of 2009. Sales fell 14 percent to $2.88 billion due, in part to the quarter being a week shorter than last year and the closing of several plants.

Packaged meat sales for the quarter were $145.3 million compared to $115.9 million a year ago. That was more than enough to offset fresh pork sales which dropped from $13.5 million to $7.5 million.

Smithfield’s hog production unit was able to reduce losses in the third quarter from $253.6 million a year ago to $55.6 million this year. CEO Larry Pope says the ongoing restructuring of the pork business will be completed in April with the closing of the John Morrell plant in Sioux City. He also believes the reopening of the Russian market and hopefully China will help put the division back in the black.

Read the quarterly report here:

HSUS kicks off anti-confinement campaign

The vote in the Ohio House Wednesday was unanimous in establishing the Ohio Livestock Standards Board that voters approved last fall in the general election. While the measure moves to the Ohio Senate, where it is sure to pass, the Humane Society of the U.S. pushes its campaign to take another stab at Ohio livestock production. The Columbus Dispatch says HSUS director Wayne Pacelle is in Ohio to kick off the group’s signature campaign for a proposed constitutional amendment to ban what HSUS and its supporters call “extreme confinement” of pigs, chickens and other farm animals.  According to the Columbus Disptach, the HSUS claims to have 400-thousand members in Ohio. Just over 402-thousand valid signatures are needed by June 29th to place the statewide proposed confinement ban on the Ohio November ballot.

A few cattle sell in the north at higher prices

Packer inquiry into the cattle was light to moderate in the North and very light in the South on Thursday. A few cattle sold in Nebraska at 146.00 on a dressed basis, generally 2.00 higher than last week. Asking prices do remain firm at 147.00 to 148.00 in the North, and 94 in the South. The slaughter totaled an estimated 122,000 head, 4,000 below last week, but 5,000 greater than last year. Boxed beef cutout values were weak on light to moderate demand and, moderate offerings. Choice beef was down .42 at 149.07, and select was down .83 at 148.37.

Chicago Mercantile Exchange live cattle contracts settled 32 points higher to 30 lower.  Front months were supported by longs rolling into June and August out of April. There were some spreaders that bought August and sold June. Uncertainty over the direction of this week’s feedlot trade weighed on the market. April settled .05 lower at 93.82, and June was .22 higher at 91.95.

Feeder cattle contracts ended the session, mostly 7 to 62 points higher with only spot March lower. Spreading out of the deferred months into March was the main feature. DTN’s Rick Kment says, traders remain unimpressed with the up and down nature of the market over the last couple of days and for the most part remained on the sidelines until late in the session.  March was down .07 at 101.92, and April was up .07 at 105.10.

Feeder cattle receipts at the Bassett, NE Livestock Auction totaled 2650 head on Wednesday. Compared with two weeks ago steers and heifers trended steady. Demand was good and trading was active. Feeder steers medium and large 1; 454 head averaging 568 lbs traded at 125.31 per hundredweight. 126 heifers weighing 583 lbs brought 107.49.

Barrows in the Iowa/Minnesota direct trade closed 2.81 lower on a carcass basis, the West was down 2.42 at 71.66, and the East was down .26 at 69.70. Missouri direct base carcass meat price closed steady to 1.00 lower from 64.00 to 67.00.Thursday’s hog kill was estimated at 414,000 head, 11,000 less than last week, and down 1,000 from last year. Saturday’s slaughter is only expected to be around 30,000 head, but Tyson’s plans were still undecided. Iowa barrows and gilts last week averaged 269.3 pounds, .1 pound lighter than the previous week, and .8 pounds larger than 2009, and 1.3 pounds heavier than the three year average.

Lean hogs settled 15 to 80 points lower on Negative fundamentals. Cash hog prices were sharply lower at midday in the direct trade. There was rolling by longs out of April into June. April settled .67 lower at 71.87, and June was down .45 at 80.20. The pork trade was slow, with light to moderate demand and offerings. The pork carcass cutout value was up .16 at 74.11.

 May pork bellies closed lower on the decline in the lean pit. Most contracts were not traded.  May finished the session .50 points lower at 92.50.

Midday cash livestock markets

A few more bids are being reported in the feedlot cattle trade at midday. But most of those are in the North at 88.00 to 90.00 live and 144.00 to 145.00 dressed, asking prices are 150.00. No bids have been reported in the South where asking prices are around 94.00. Significant business could be delayed until later today and/or tomorrow.  Choice boxed beef is .41 lower at midday, and select is down .44 at 148.76.

Feeder cattle receipts at the Bassett, NE Livestock Auction totaled 2650 head on Wednesday. Compared with two weeks ago steers and heifers trended steady. Demand was good and trading was active. Feeder steers medium and large 1; 454 head averaging 568 lbs traded at 125.31 per hundredweight. 126 heifers weighing 583 lbs brought 107.49.

Barrows and gilts in the Iowa/Minnesota direct trade opened 3.54 lower at 70.78 on a carcass basis, the West is down 2.94 at 71.14, and the East is .60 lower at 69.36. Missouri direct base carcass meat price is steady to 1.00 lower from 64.00 to 67.00. Iowa barrows and gilts last week averaged 269.3 pounds, .1 pound lighter than the previous week, and .8 pounds larger than 2009, and 1.3 pounds heavier than the three year average. While the week to week change is minimal, the fact that weights continue to hang above 2009 and the three year average represents some evidence for those that think finishing floors could be more current.

Financial bleeding in pork industry has subsided

Neil Dierks, CEO of the National Pork Producers Council said that pork producers in this country have seen the worst economic times in the industry for a variety of reasons over the course of the past two and a half years.  “Although it isn’t wildly profitable” he told Brownfield during the recent National Pork Industry Forum, “At least the bleeding financially has subsided.”

Dierks said several of the issues addressed at this annual meeting are similar or even same as those addressed in past annual meetings and will be addressed at future gatherings.   However, there is one new issue in the spotlight:

“The issue of animal health product availability has been debated on national television news but it is also being talked about in Congress. We have been working together with . . .other commodity and livestock organizations to make sure producers have access to using animal health products, because they are necessary to take care of the animals and actually it is an animal welfare issue for us because you want healthy animals.”

Enforcement issues in environmental realm, freedom to operate issues, and trade policy issues were all key topics of discussion.  ”At the same time, there is a lot of discussion about the We Care program.  It is our commitment to society and our commitment to doing a good job on animal welfare, on animal health, and community involvement to show that we are responsible citizens.”

When asked about the mood of producers at National Pork Industry Forum, Dierks replied, “Generally, people are optimistic. Money is not falling from the sky. But on the other hand we have made it through these challenges as it is related to the economy, as related to production, as related to H1N1, and the misuse of the name with H1N1. . .  producers see some opportunity to look at our future prices. There are some opportunities ahead of us. The reality is the US most competitive county in the world to produce pork. The USDA projects an 8 percent increase in our exports versus a year ago. So people are cautiously optimistic.”

Conversation with Neil Dierks

11 Million dollar verdict against hog operation

The largest monetary award against a hog farm in an odor nuisance case has been awarded in the state of Missouri.

A Jackson County jury last week awarded an 11 million dollar verdict against Premium Standard Farms hog producers, a subsidiary of Smithfield Foods. The odor lawsuit was filed on behalf of residents living near the farming operation in northern Missouri. The case was filed in 2002 by seven households.

Premium Standard Farms issued a statement following the verdict last Thursday that they are disappointed with the verdict and have grounds to appeal. They also say they will seriously consider not making future investments in the state of Missouri – that the verdict “threatens the viability of the Missouri farm economy when a farm has been granted a permit to operate by the state” and is in compliance with state and federal regulations. Premium Standard Farms says there is a gaping hole in Missouri law allowing such a thing to happen and the legislature should move to correct it.

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