Editor's Note: Sam Carney is president of the National Pork Producers Council. He and his son run Carney Farms Inc., a wean-to-finish operation that markets about 4,000 hogs annually. The following editorial appeared in the Omaha World-Herald Monday, Aug. 23.

Say you’re a hog farmer who consistently raises top-quality hogs. The meatpackers to whom you sell know this and offer you a little more than the average guy.

Now imagine the government steps in and tells the packers that it can’t pay you that premium for better livestock. You’ll be forced to receive the same price as every other hog farmer, even though your animals are superior.

Sound like a ridiculous new reality show called “Bureaucrats Gone Wild”?

In fact, it’s exactly what the Obama administration is proposing for the nation’s livestock farmers. Draft regulations published by the USDA would make it nearly impossible to negotiate premiums for cattle, pigs and poultry without justifying any increase with a written cost analysis.

The same would apply to hogs of less-than-average quality. Packers wouldn’t be able to offer a lower price for inferior animals — which otherwise might not be purchased — without justifying it in writing.
That’s not all. USDA bureaucrats also broadened the scope of what constitutes a violation of the 89-year-old Packers and Stockyards Act, which regulates the buying and selling of livestock.

Under the proposed rules, almost any practice that could be shown to be “unfair” to a producer — regardless of whether the action did, or was likely to, prevent the producer from selling animals for a fair price — could be a violation. The agency muddied the waters so much that it will be hard to know what’s allowed and what’s not.

That’s a powerful incentive for packers not to deal with producers at all. Instead, they may simply raise their own livestock, increasing vertical integration in the meatpacking industry.

The regulations might make sense if there were an outcry from beef, pork and poultry producers that the current system doesn’t work. But the great majority of producers are happy with how their markets operate, especially since the recession bottomed out and prices started to climb.

And producers like me want a variety of options for marketing livestock to help manage our risks. Packer contracts offer a guaranteed income for a specified period, protecting producers from fluctuating prices.

Despite this, the USDA fashioned regulations based on the views of a small minority of dissatisfied producers. Because they cried foul, the regulations will turn the entire livestock market on its head.

The USDA says it’s simply fulfilling a mandate under the 2008 Farm Bill. In reality, these regulations go well beyond that bill’s requirements. Indeed, some provisions were specifically rejected by lawmakers. The one eliminating the need to prove that an “unfair” action actually adversely affected or was likely to affect competition is contrary to the decisions of eight of the U.S. Court of Appeals’ 13 circuits.

These regulations won’t “open” livestock markets, as the USDA contends. They’re likely to dictate the terms of contracts, restrict marketing arrangements, lower prices and require reams of paperwork.
They are a recipe for disaster; they will stifle innovation, force simple contract disputes into court and compel packers to own their animals rather than contract with farmers to raise them — and that will kill jobs.

With fewer contracts available, producers likely will be forced to rely on the “cash” market, where prices tend to be lower and risks are greater. Many will be hard-pressed to survive in that market, and others may not be able to get from risk-averse bankers the capital needed to operate. As producers go out of business, concentration and vertical integration in meat processing will increase.

That’s bad for pork producers, consumers and rural Americans.

Source: Omaha World Herald