Packer Amendment Takes on New Dimensions

January 30, 2002

Interpreting a controversial amendment to the Senate farm bill by Sens. Charles Grassley (R-IA) and Tim Johnson (D-SD) has pitted several agricultural law professors against a group of agricultural economists in a seldom-seen public debate. The amendment prohibits packer ownership of cattle more than 14 days before slaughter.

The paper authored by professors Roger A. McEowen, Peter C. Carstensen, and Neil E. Harl claims a group of economists engaged in an "erroneous legal analysis" of the amendment that needed correction.

McEowen, Carstensen and Harl claim the economists "opined that the prohibition would include forward contracts, marketing agreements, contracts containing any promise of delivery and would result in producers having no legally assured market for their livestock before the last two weeks preceding slaughter ... (and) predicted that the beef and pork sectors would become less efficient and less competitive due to the loss of contracting rights and alliances."

That, they add, is an interpretation that "constitutes a manifest misreading of the proposed statutory language."

They point out the amendment includes exemptions for packing houses owned by farmer cooperatives and packers with less than 2% of national slaughter.

Johnson has said the amendment's reference to "control" is to be interpreted in the context of "ownership." The agricultural lawyers said the amendment "is not designed to prohibit contracts for futures delivery of livestock but is designed to prevent packers from owning cattle outright, through a subsidiary or through arrangements (contractual or otherwise) that give them operational control over livestock except within the last two weeks before slaughter."

The lawyers' paper is available on the Internet at http://harkin.senate.gov/specials/20020125-packers.pdf.

Grassley issued a statement saying the amendment "was drafted to ensure that vertical integration and captive packer supply don't push independent livestock producers out of business. The amendment also protects important risk management tools for family farmers such as futures contracts or forward marketing agreements. All the amendment does is keep packers from competing with producers. As a practical matter, what we're trying to do is to chase the cow out of the calf creep."