Commentary: GIPSA - the goldfish didn't get mailed

Ideas don’t always work out the way they are intended. For instance, an Australian firm that seeks to promote South Australia recently mailed – yes, mailed – a number of goldfish to various media outlets with the tagline: “Be the big fish in a small pond and come test the water.”

Predictably, at least 55 of the goldfish died in transit.

A spokesperson for the PR firm that mailed the goldfish said, “We offer our sincere apologies. There was absolutely no intention to cause distress or harm to the fish.”

The Australian goldfish promotion obviously produced unintended consequences.

On a much larger scale, unintended consequences were what many of us feared if the U.S. Department of Agriculture had fully implemented the proposed changes to its Grain Inspection Packers & Stockyards Administration (GIPSA) regulations.

Since June of 2010 when USDA first announced proposed changes, opinions have flowed from all directions. Those supporting the rule argue that changes are needed to restore market competition for livestock producers. Specifically, some believe packers have far too much leverage and they favor some producers over others.

Opponents believe that the proposed rules would greatly reduce the incentive to seek premiums through production marketing arrangements, thereby driving the cattle industry backwards to the time when all cattle were sold as a commodity, undoing the progress the industry has made toward quality the past two decades.

USDA received over 60,000 comments to their proposed rules, and I have received numerous comments of my own. Indeed, I’ve listened to several enthusiastic supporters of the proposed GIPSA rules over the past year, but my humble opinion remains that the proposed rules would cause many unintended consequences.

Further, it’s becoming increasingly hard to visualize this dominant leverage packers are supposed to have on the cattle markets. At least twice this year we’ve seen record fed cattle prices, and cow-calf producers are having a banner year. At the same time, packers have been losing money by the bucketful on every head they’ve purchased this fall – the Sterling Beef Profit Tracker pegged last week’s packer losses at $56.90 per head.

Finally, if the packing industry is so lucrative – with government regulatory agencies oblivious to their underhanded actions – why aren’t there more people trying to get into the packing industry?

Indeed, if the packing business is so good why did JBS SA – the world’s largest beef packer –  announce last month they may sell idled plants in the U.S.? JBS, also the world’s second-largest poultry producer and the largest U.S pork packer, said it was seeking to reduce debt after net debt rose in the third quarter to four times earnings before interest, depreciation and amortization.

It just seems silly to believe anybody with a few billion dollars to spare would want to seek new ventures in the packing business.

USDA’s publishing of the final rule yesterday, however, is not the final word. In fact, Secretary of Agriculture Tom Vilsack hinted in the USDA release that he and the Obama Administration believed the new rules should have gone further.

Others have indicated the debate is likely to continue. National Farmers’ Union president Roger Johnson said in a statement, “While the Final Rule is a good first step, it is certainly not a last step.”

Johnson also lamented the omission of the competitive injury provision. “In choosing to prevent the competitive injury portion of the rule from moving forward, Congress has clearly chosen to put the interests of large packers ahead of family farmers and ranchers.”

Among the thousands of comments against the proposed GIPSA rules, however, were family farmers and ranchers who are as convinced as I am that the unintended consequences would have been disastrous for our industry.

Thankfully – in the GIPSA case – the goldfish didn’t get mailed.

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