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AMI: Meat Packing Industry is Dynamic and Competitive

by 5m Editor
19 April 2007, at 10:22am

US - American Meat Institute President J. Patrick Boyle today told the House Committee on Agriculture, Subcommittee on Livestock, Dairy, and Poultry that the U.S. meat packing industry is dynamic and competitive and that the industry will oppose legislative and regulatory efforts to restrict livestock marketing and meat packing procurement opportunities that have helped grow the industry and provided consumers the most affordable meat supply in the world.

“We believe the strength of the livestock marketing system in the U.S. is the flexibility it provides to producers, packers/processors and retailers in responding to market signals and offering an increasing variety of alternatives for the producer though to the consumer,” Boyle said.

Boyle told committee members that the many marketing options available today – such as spot market transactions, production contracts, cooperatives, bargaining associations and marketing agreements – provide producers the ability to diversify or concentrate their marketing plan to best match their skills, experiences, capital base or tolerance of weather and price risks. Many producers and packers enter these types of arrangements, Boyle said, in order to manage price risks to aid in the access of credit and capital.

“Producers and packers recognize that managing this volatility is critical to their long-term economic well-being and livelihood. This is true across agriculture, where more than 40 percent of all agricultural goods are produced via contracts or related agreements,” he said.

Boyle also noted that consumers have benefited from improved efficiencies – including increased diversity in the meat case and more competitive prices at the supermarket. “Attempts to limit packers’ and producers’ abilities to engage in contracts, marketing agreements, and strategic mergers reduce capacity to respond to consumers and pursue economic, social and environmental goals in rural America,” he said.

In his testimony, Boyle also cited two recently released studies – both mandated by Congress – that affirm AMI’s assessment of the competitive and rational nature of the livestock and meat market, as well as the resulting benefits to American consumers.

The U.S. Department of Agriculture’s “Livestock and Meat Marketing Study,” conducted in cooperation with the Justice Department, Federal Trade Commission and the Commodity Futures Trading Commission, found that contractual marketing agreements between producers and packers increase the economic efficiency of the cattle, hog and lamb markets and that these benefits are distributed to consumers, as well as to producers and packers. The study also concluded that restrictions on the use of contractual agreements would have a negative economic effect on packers, producers and consumers.

The second study, conducted from the Antitrust Modernization Commission concluded, “Government should not displace free-market competition absent extensive careful analysis and strong evidence that a market failure requires the regulation of prices, costs and entry in place of competition.”

“These are but two recent studies in a long line of similar studies over the past twenty years that have reached the same conclusions about the legality and vibrancy of the livestock marketing system,” Boyle concluded. “And they have all – every one of them, without exception – reached the same conclusions as the two studies I have cited in my testimony: That the livestock and meatpacking market is competitive and that current oversight and enforcement are effective.”

5m Editor