DOJ: News Release

Bullock to U.S. Attorney General Holder, USDA Secretary Vilsack: “When Rural America is not Healthy, Nation’s Economy Suffers”

AG presents Montana’s, national comments on competition in agriculture

ANKENY, IOWA – Montana Attorney General Steve Bullock testified Friday at the first ever joint workshop of the U.S. Department of Justice and U.S. Department of Agriculture on competition and regulatory issues in the agriculture industry.

The summit, held outside of Des Moines, is the first of several workshops being held nationally this year to discuss the vulnerability of agricultural producers and the nation’s consumers to anticompetitive conduct.

Participants today included U.S. Attorney General Eric Holder, U.S. Agriculture Secretary Tom Vilsack, representatives from producer and industry organizations and academics in the field, along with several of Bullock’s fellow attorneys general.

“These workshops are not just about a rural way of life or our nostalgic past. It’s just practical. It’s about ensuring the competitiveness of our agricultural markets,” Bullock testified. “America’s rural and urban economies absolutely depend on each other. The rural economy has often been the barometer of the nation’s economy as a whole—when rural America is not healthy, the nation’s economy suffers.”

In his testimony (full testimony below), Bullock noted that farmers and ranchers have seen the face of agriculture change over the past several decades:

  • In 1984, Montana had nearly 200 grain elevators – despite an increase in production, today there are less than 50.
  • Nationwide, the top four beef packers now process 85 percent of our beef and the top four pork packers around 65 percent of our pork.
  • And just a handful of multinationals dominate the seed and trait industry.

Bullock also presented the summit written comments that show areas of major concern in agriculture markets. Those comments, authored by Bullock, were also signed by the attorneys general of 13 other states.

Testimony of Montana Attorney General Steve Bullock (as prepared for delivery)
U.S. Department of Justice/U.S. Department of Agriculture
Joint Workshop on Competition in Agriculture
Ankeny, IA – March 12, 2010

On behalf of myself and the other panelists at this table, I’d like to thank the Department of Justice and USDA and their dedicated staff for putting together this workshop for all of us. I think we’ve all learned a lot today, and that would not have been possible without the hard work of folks like Mark.

In 1999, as an Assistant AG for the Montana Department of Justice, I had the opportunity to provide testimony to the Senate Commerce Committee. At that time, the committee was grappling with the issue of how mergers in the agriculture industry had affected consumers. The following year, in Colorado, the USDA convened a Summit to discuss livestock and grain issues. State and federal government regulators came together to discuss the vexing issues surrounding market concentration and its impacts on consumers and producers.

In many respects, it’s déjà vu all over again. Everything I testified about a decade ago –highly concentrated markets, potential abuse of market power to harm both producers and consumers, the need for greater market transparency and a plea for greater coordination of efforts in regulation and enforcement – is as true today, if not more so.

So, on the one hand, there is reason for pessimism.

Yet, fast forwarding a decade-plus later, there are bright spots on the horizon. Within two months of my coming into office last year, JBS-National called off its proposed merger. This merger threatened to combine the world’s largest beef packer with the nation’s fourth largest, concentrating over 80% of the nation’s cattle packing capacity into just three firms and threatening to reduce demand for ranchers and output for consumers.

It’s unlikely their decision to walk away from the proposed transaction was attributable to a change of heart. It was the result of the United States Department of Justice and 16 states joining hand-in-hand to stop it, having filed suit to block the merger four months prior.

Another bright spot is the fact that this workshop is being held today. While this isn’t the first time that regulators have gathered to learn about and discuss these concerns, I imagine that it is the first time the players around the table have included the Secretary of Agriculture and the U.S. Attorney General.

And this is as it should be, because it’s not just about a rural way of life or our nostalgic past. It’s just practical. It’s about ensuring the competitiveness of our agricultural markets, for all our sakes. America’s rural and urban economies absolutely depend on each other. The rural economy has often been the barometer of the nation’s economy as a whole—when rural America is not healthy, the nation’s economy suffers.

Agriculture ranks as one of the top sectors of most state economies. And while the agricultural heritage of each of our states differs – sometimes dramatically – the concerns about market concentration, transparency, and effective regulation cross geographical boundaries, and are shared concerns irrespective of the crops we produce and the animals we raise.

For example, while Montana doesn’t have the significant corn, soybean or hog production that you find in the Midwest and here in Iowa, agriculture is still my home state’s largest industry. In Montana, our dominant ag commodities are beef cattle and wheat and barley, with the value of crop and livestock production at almost $3 billion dollars in 2008. The economic health of our one million Montanans is inextricably intertwined with the economic health of our agricultural markets.

The changes in those industries that influence our farmers and ranchers over the past decades have also changed the face of agriculture itself. For example:

  • In 1984, the Montana landscape was dotted with almost 200 grain elevators. Today, there are less than 50, even as production has increased.
  • Nationwide, the top 4 beef packers now process 85% of our beef and the top 4 pork packers around 65% of our pork.
  • And just a handful of multinationals dominate the seed and trait industry.

Overlaying all of this, we have a rail transportation system our grandfathers couldn’t comprehend. In 1930, there were over 130 Class I railroads. Today, there are just seven. Four of those seven control over 95% of “ton-miles” hauled in the U.S.

Yesterday, the States submitted comments that, from the States’ perspective, intend to serve as a starting point to help frame the discussion as we go forward. Yet we know there is still much work to do.

The States’ comments squarely address many of these issues:

For seeds: The issues that the seed industry face are incredibly complex and require a thorough understanding not just of antitrust jurisprudence, but of intellectual property laws and the way these two areas of law intersect. The DOJ and USDA should explore the concerns that have been raised and consider whether there are bases for changes in policy and existing laws.

For dairy: The Capper-Volstead Act and the current milk pricing scheme under the Agricultural Marketing Agreement Act need be reviewed to ensure that they continue to protect and benefit dairy farmers as originally intended.

For the meat industry: The USDA should explore legislative or regulatory revisions that will ensure compliance with the Packers and Stockyards Act – specifically, whether it would be valuable to adopt rules that regulate captive supply procurement methods. Furthermore, we should explore to what extent state involvement would potentially benefit enforcement of the PSA.

When it comes to rail, our comments spell out our support of legislation that will reform the framework and functions of the Surface Transportation Board, and legislation that would repeal the outdated antitrust exemptions that railroads have reaped the benefits of for so long. The legislation would simply bring railroads under the same rules as almost every other business must follow.

We cannot turn back the hands of time. Enforcers cannot open state-sponsored packing plants. Nor can I go out and construct another class I railroad in Montana. Rather, our role is to ensure that:

  • any additional consolidation or integration in the agricultural sector does not occur without a critical and coordinated review;
  • that there is a regulatory framework that fills some of the gaping holes that exist;
  • that where there are potential market failures, real or perceived, we vigorously investigate and, when appropriate, enforce our laws;

And our role is to work together.

I, for one, think these workshops are a productive first step in understanding the issues that face many of our producers every day. I have heard from farmers and ranchers in my home state that they feel like this has been a long time coming—but I hope we can all agree that these workshops promise a renewed commitment. Thank you

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