“An Examination of Price Discrepancies, Transparency, and Alleged Unfair Practices in Cattle Markets”
by MCA President, Gilles Stockton
April 27, 2022
Mr. Chairman, Members of the Committee:
Thank you for the opportunity to address you today. My name is Gilles Stockton. I raise sheep and cattle near Grass Range Montana. Today, I am representing the Montana Cattlemen’s Association of which I am president, and the Northern Plains Resource Council. The mission of both these organizations is to preserve family agriculture and the rural communities upon which we depend.
I took over the family ranch in 1975, the same year that I graduated from Montana State University with a Master’s Degree in Animal Science. My wife and I started ranching with nothing except our degrees. My parents were as generous as they could afford to be. We had a loan from the Farmers Home Administration which was the most effective program USDA ever had. With this, we were able to make it work.
However, looking at the current economics of production agriculture, it is now impossible for beginning farmers and ranchers. We are losing an entire generation of motivated, talented, and trained young men and women, because they cannot afford to take over the family farm or ranch. The economic realities just do not allow it.
In 1975, the concentration in the beef packing industry had four firms controlling 25% of the market. Today they monopolize 85%. I lived and ranched through the entire period that has seen the beef industry become subservient to a monopoly cartel.
In 1975, the year I started ranching, the farm to retail spread for beef stood at 71.3%. We ranchers and feeders were able to retain 71.3 cents of every dollar spent by the consumer at the grocery store. In 2021 the farm to retail spread was 36.5%. Over the course of my career in ranching, the primary producers of beef lost more than one third of the dollar spent by consumers. This is money that does not come back to me, my fellow ranchers, or my community. In terms that are very concrete, in 1979 I purchased a one-ton four-wheel drive truck from the proceeds of selling 18 calves. The equivalent truck today would cost me 59 calves.
I do not want to give you the impression that I am looking for sympathy. Far from it. I have had a wonderful life working in an occupation that I love. I experienced as a routine part of my day activities that many people can just dream of. I have been blessed to have two wonderful women willing to put up with me. My first wife passed away in 2003. Between us, we have three sons. One of whom has volunteered to look after my sheep, which are currently having their lambs. Without his help, I could not be here today.
My concern is for my community, the future of agriculture, and the future of food security for this nation. My community of Grass Range has over the course of my life as a rancher dried up and blown away like a tumbleweed. The Cheap Food Policy has been extraordinarily effective. Over the past half century Rural America has been impoverished and hollowed out. Now, from Grass Range Montana to Lumpkin Georgia, rural America is a very large, underpopulated slum.
There is no part of the US Agricultural system that is not oppressed by monopolized dysfunctional markets. This is both for where we sell the food to where we buy our inputs. The American people are not being served by this system. We saw this in the disruptions to the beef supply during the pandemic. Illness in the packing plants slowed the processing of cattle resulting in empty shelves in the meat counter. The packing cartel was able to profit by buying cattle for less and selling beef for more. I am sure that we will hear today how this is all about supply and demand. But it is also about having our entire meat production system funneled through a very narrow bottle neck where packers can exploit both producers and consumers.
Recent research from Georgetown University reveals that for every 1% increase in the level of captive supply cattle procurement there is a 5.9% decrease in the price of cattle. The levels of captive supplies now approach 80%. Another study from Iowa State University shows that beef packers are leveraging their market power across their multiple plants, further eroding true price discovery in the cattle market.
What to do? Actually, it is not that complicated. First pass the American Beef Labeling Act. It is absurd that beef and pork are the only food or manufactured items that do not carry a country-of-origin label. American consumers have the right to know the origins of their beef purchases and cattle producers have the right to a fair and transparent market.
Second, do what your colleagues did in 1921. Require that the beef packers buy their cattle in a competitive and transparent marketplace that they neither own nor control. This is what the Consent Decree that accompanied the passage of the Packers and Stockyards Act required. It was a perfectly free market approach that worked.
Why is this important? Your children’s and grandchildren’s food security is dependent upon your actions to restore competition to agricultural markets. Our entire food system is balanced on a very narrow vulnerable base. We are witnessing extremes in weather phenomena. The western third of America is in the worse drought experienced in the last 1200 years. We see the effects in dramatic wildfires that have burned millions of homes. I just had to sell a quarter of my cattle because there is no grass for the mothers and babies to graze. The south, from Texas to Virginia, Is being hammered by storm after storm. The prediction is that these weather extremes will only get worse. Unless this country moves to reverse a half a century of bad rural policy the American people will find themselves with an unreliable, extremely expensive food supply.