000932 USDA Has Meat Pricing Rules Hearing

Denver - Ranchers and representatives of the nation's largest meatpackers wrangled over the industry's pricing practices, which ranchers claim are illegal and manipulative.

Cattlemen say meatpackers control a large percentage of the market by raising cattle themselves and contracting independently, under so-called captive markets, with producers.

Meatpackers argue that the captive markets help protect profits as demand for beef declines and help improve product quality.

The forum was held as the Agriculture Department is finalizing a set of rules that would require meat processors to make public the terms of contracts with producers.

The Western Organization of Resource Councils, a grassroots public policy group that wants to end captive markets, has proposed a separate set of rules to add more protections for ranchers.

“We have no leverage, we have no control,” said Clarence Newcomb, a small cattle producer from Rye, Colo. “We're totally at the mercy of what these packers do.”

Captive markets put the producer in the position of accepting a lower bid than they might receive otherwise, said Neil Harl, an Iowa State University agricultural economist at the forum.

“And the captive market diminishes the opportunity to gain access to the packer,” he said.

In 1998, 86% of the 29 million cattle slaughtered in the United States was purchased in nonpublic or captive markets, according to the latest USDA statistics.

The agency regularly monitors meatpackers to watch for price fixing because of the captive supply, said Michael V. Dunn, a USDA undersecretary.

“We have done a number of studies and we have not found any blatant use of this captive supply to manipulate the marketplace,” he said.

The USDA's proposed rules would require disclosure of basic terms of contracts between meatpackers and producers and would allow producers to get financial and legal advice on contracts.

The ranchers' group also wants the department to impose rules requiring fixed prices on contracts between meatpacker and producers.

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