AFF Sentinel Vol.4#40

Can lawmakers totally ignore facts & consumer/voters in slavish fealty to an agenda?

Colorado citizens are seeing such a scenario played out there. A report to a convention of tavern and bar owners recently showed a $30 million drop in revenue to businesses licensed to sell beverages, after a statewide smoking ban in bars and taverns went into effect. The ban has had a significant effect, in business and tax revenue, in failed businesses and fewer jobs.

Colorado casinos, previously exempt but now slated to be covered by the ban January 1, are busy constructing outdoor pavilions to accommodate smokers. The smoking ban advocates are trying to get the pavilions declared illegal.

A guest editorial in a Colorado Springs paper, noted the above plus public opinion polls showing weakening support for curtailing people's behavior when economic impacts become more apparent ("Anti-tobacco Lawmakers Unresponsive To Ban's Impact," Gazette, 11/06/07). Norman Kjono's column noted that even California last year failed to pass a ballot measure that would have levied a new cigarette tax to finance expansion of health care in that state. A recent Harris/Wall Street Journal survey showed only 35 percent of respondents agreed that people with "unhealthy lifestyles" should pay higher insurance co-payments or deductibles, down from 53 percent in 2006.

Yet the licensed beverage folks were told Colorado lawmakers' response was to ignore economic impacts and weak public support and insist no changes to the smoking ban would be even proposed in the legislature.

If facts can be ignored in Colorado, can it happen in the U.S. Senate? Congress authorized a massive independent study* of livestock markets, using surveys, interviews and the data from 590,000 cattle sales transactions (58 million head) from the Mandatory Price Reporting (MPR) program. The MPR required packers to report purchasing and operating data to GIPSA. The study, utilizing more data than economists had ever had, came to the same conclusion as previous reports - that market and demand forces from consumers were being accurately reflected in the prices packers paid for livestock.

Yet, responding not to the facts their research confirmed, but to populist agendas, the Senate has inserted provisions into the Farm Bill that would virtually eliminate livestock contracting and the alliances and branded beef programs that cattlemen, packers and retailers have fashioned to meet consumer demand. The Senate is responding to unsubstantiated claims that markets are manipulated and that competition in livestock markets doesn't exist.

The combination of contracting prohibitions and livestock ownership limitations would have drastic effects on consumers, as about two-thirds of the 32 alliances listed in Beef magazine's "Alliance Yellow Sheets" list packer partners as part of their program. The retail beef brand names consumers recognize in the meat case would be drastically affected or eliminated. How does that help cattlemen serve America's consumers? Why should the U.S. government attack programs and brands consumers have expressed a desire to support, by paying premium prices for these brands? Congress' study noted that one of the top three reasons packers used "alternative marketing agreements" (AMA) instead of just cash purchases, was to "allow for product branding in retail stores."

The Congressionally-mandated report, conducted by RTI International, noted that under the present livestock economic system, "cattle prices set annual record highs in 2003, 2004 and 2005" and higher hog prices in 2004 and 2005 amid record pork production. But "packers experienced significant losses..."

Question: if there is no competition among packers and they can manipulate prices so deftly no one can find it, why are they manipulating prices so they lose money for several years running? Why have their stockholders not demanded they exert their "influence?" Is it because such manipulation is virtually nonexistent under our competitive system?

The study found cattle producers used AMAs to realize cost savings of $1-$17/head from "improved capacity utilization, more standardized feeding programs and reduced financial commitments" required to keep feedlots full. How is it Congress feels compelled to take these cost savings from cattlemen?

From Oct. 2002-March 2005, the study found AMAs accounted for 38 percent of the cattle on feed and 89 percent of hog volume. While packers actually owned only five percent of the cattle on feed, it is the alliances and AMAs where packers, cattlemen and, often, retailers share ownership under varying coordinated arrangements that would be decimated by Congressional mandates outlawing contracting and limiting livestock ownership.

Why does Congress insist on fixing a problem that doesn't exist, if producers are getting higher prices and willingly participate in alliances and AMAs?

*"GIPSA Livestock and Meat Marketing Study," USDA, RTI International, Research Triangle Park, N.C.