Proposed U.S. cattle rules more bull for Canadians?

Canadian livestock producers are in the unenviable position of being bystanders in yet another policy debate south of the border that could directly affect their futures.

The United States is Canada's biggest market for exports of live cattle and hogs and when politicians there decided to move forward with country of origin labelling rules, farmers here took a direct hit on their bottom line -- either through reduced marketing opportunities or lower prices.

The latest debate is over new regulations proposed by the U.S. Grain Inspection, Packers and Stockyards Administration (GIPSA). The effects on Canada are less clear.

The new regulations, which are open to public comment, are designed to increase transparency in U.S. cattle markets. They would require a packer, contractor or live-poultry dealer to maintain written records to justify differential pricing offered to producers.

For example, a packer would be in violation if it paid a higher price to one high-volume producer than what it offered to a group of smaller producers who can collectively supply the same quality and quantity.

A poultry or swine contractor could find itself in violation if it selectively imposed expensive upgrades on contractors, or terminates a production contract without notice or due cause.

Poultry farmers have long complained they are at the mercy of contractors who can modify or terminate contracts on a whim or single out producers for upgrades that keep them virtually indentured due to crippling debt.

Small-scale cattle and hog producers say the vertically integrated packing industry uses its own production capacity to manipulate prices.

In a July letter to U.S. politicians, more than 60 producer groups in the United States said they support the proposed changes.

They point out the U.S. Packer and Stockyards Act makes it unlawful for packers, swine contractors and live-poultry dealers to engage in any "unfair, unjustly discriminatory, or deceptive practice or device," or to "make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect, or subject any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect."

However, GIPSA has never defined these broad prohibitions, or adequately enforced them. The groups say they want this to change.

"Over past decades, very little attention was focused on the effects of ongoing industry concentration and supply chain integration on the competitiveness of U.S. livestock and poultry markets," the groups wrote.

They say that with the massive concentration of the cattle, hog and poultry feeding and packing industries, realistic market competition has disappeared. But because unfair trade practices and "manipulative marketing schemes" are so widespread "they are now viewed by many as being normal and natural. We adamantly disagree with that view."

Many Canadian cattle ranchers and hog producers would agree.

But that's not the position taken by representatives of the Canadian Cattlemen's Association at their recent semi-annual meeting in Calgary, who characterized the proposed changes as "sinking ship for all of us."

The CCA has aligned itself with the dominant U.S. beef industry organization, the U.S. National Cattlemen's Beef Association (NCBA). It says packers will simply use the price transparency rules to stop offering quality or delivery premiums. Rather than improve the ability of small-scale operators to extract fair market returns, packers could use these new regulations to drive down the price for all.

The CCA's concern seems to stem from the fact R-CALF, the Ranchers and Cattlemen Action Legal Fund, is among the U.S. groups supporting the changes.

Mentioning the acronym R-CALF to a Canadian cattle producer has about the same effect as pulling your fingernails across a chalkboard.

The organization formed in 1998 to fight for the livelihoods of small ranchers in the United States first set its sights on rising Canadian cattle imports as the reason why producers were seeing lower returns. And it was successful for a while in persuading the courts and U.S. trade tribunals to that effect.

After this country discovered its first case of bovine spongiform encephalopathy (BSE) in 2003, once again R-CALF lobbied hard to keep the Canada-U.S. border closed to Canadian cattle, this time due to health concerns.

So to a Canadian cattle producer, it seems logical to assume that if R-CALF is supporting the proposed changes to the GIPSA rules on marketing, that can't be good.

But hold on just a minute.

If the NCBA is correct and the packers will benefit from these changes, why are they arguing so vociferously against them?

R-CALF is no friend of Canadian cattle exporters, but in this debate, it may not be their enemy either.

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 792-4382 or by email:

laura@fbcpublishing.com

Republished from the Winnipeg Free Press print edition September 4, 2010 B9