Nebraska's Livestock Market Faces Death by Big Meat Lobbying
Few images are more emblematic of the American heartland than that of farmers taking their livestock to market. But if Nebraska Governor Pete Ricketts signs a bill passed last month by his state’s legislature, one of the last of the country’s traditional open livestock markets may soon close forever. The bill would remove one of the few safeguards that allow farmers to sell their livestock in a transparent and competitive way.
For decades, nine agricultural states had laws on the books protecting farmers from vertical integration and monopoly power in livestock farming. Those laws took the form of “packer bans,” and basically prohibited slaughterhouse operators from owning livestock and land. The goal was to force those corporations to buy the animals they slaughter in open and competitive markets, at fair market prices.
But over the past 10 years, America’s big meatpacking corporations have successfully pushed to overturn most of those laws. A turning point occurred in 2003, when the Eighth Circuit Court ruled that Iowa’s packer ban violated the Commerce Clause of the Constitution by discriminating against out-of-state corporations. A similar argument was used to overturn South Dakota’s packer ban that same year. Today, the Competitive Livestock Markets Act in Nebraska is the only strong packer ban that remains.
Today, Nebraska’s packer ban is set to be overturned. LB176, first introduced in January 2015 by State Senator Ken Schilz, would allow corporations to own hogs. Two weeks ago, the state’s legislators voted to advance LB176 to a final reading before sending it to the governor’s desk.
“Nebraska is the last state in the union with a cash market,” says State Senator Al Davis, who voted against the bill. “What happens in Nebraska is going to have an impact on the whole nation.”
The bill is not expected to immediately change the mechanics of Nebraska hog farming in a radical way. On the contrary, most of the same farmers who now raise hogs would continue to raise hogs. But they would do so as “contract growers” for multinational corporations, rather than as independent farm businesses. Under the contract model, farmers raise animals that are technically owned by the meatpackers, and then transport the animals back to the packer when they’re ready for slaughter.
Senator Davis notes that contract farming has become more prevalent in livestock states where packer bans have been overturned, and that the experience in those states shows that the contract model can be dangerous for farmers.
He says that many farmers who sign these contracts “think, ‘this is going to be a great thing.” But farmers often must take on huge loans to pay for the infrastructure required to meet packers’ demands for large herds. And the process by which farmers are paid is highly opaque, with little opportunity for farmers to negotiate a higher price.
When a farmer “can’t market your hogs in any other way besides going through a big corporate entity, you’re going to have to take the price that they offered,” Davis says.
When LB176 was first introduced by Nebraska’s unicameral legislature in 2015 the bill failed to advance beyond the floor debate. This year, the bill advanced to a final reading by a vote of 32-12.
Many opponents of the bill have focused on the role played by Smithfield, the country’s largest pork producer. “This bill was not brought by farmers. It was brought by Smithfield Foods,” says State Senator David Schnoor, who voted against LB176. In the highly consolidated pork industry, Smithfield is one of just four companies—the others being Tyson, JBS, and Cargill—that control 65% of the market. In many regions, only one or two companies dominate.