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If you support fair but free market competition, you should be concerned about the regional anti-trust workshops being conducted by USDA and the Department of Justice (DOJ).

At least you should be concerned if the prepared comments of Christine Varney are any indication. She’s the DOJ assistant attorney general in the antitrust division. At the first workshop in Iowa in March – aimed at crop producers – she said, “According to USDA’s most recent figures, net farming income fell by 35% last year, leaving many to scramble to make ends meet or to cover their loans….

“The vast majority of American farms are owned by small family farmers, a large share of overall production comes from these small farms, and they hold almost 70%
of all the farm land and farming assets. The upshot is that unexpected years like the last may not just erase a portion of family income, but a family’s way of life….”

Those numbers aren’t wrong per se, but they are misleading.

According to USDA’s 2007 Census, 5.7% of U.S. farms accounted for 75% of the value of U.S. ag production. The Census accounted for 2.2 million farming operations – defined as having $1,000 or more in gross annual sales. So, 125,400 farms generated 75% of the value of U.S. ag production.

Meanwhile, “Farms, Land in Farms and Livestock Operations” reported that 17% of farms had $100,000 or more in sales for 2009, accounting for 64.2% of U.S. farm, pasture and rangeland.

None of this denigrates the production of the other 94.3% of producers. But the fact is that the ag industry, the one defined by markets in search of the greatest profit and efficiency, is populated by a relative few. That 75% of production makes the market.

The same applies to the beef cattle industry. Last year, according to the National Agricultural Statistics Service, 20.6% (155,000) of operations with beef cows (herds of 50 cows or more) accounted for 71.7% of the nation’s beef cowherd.

Yes, antitrust rules must be enforced, but mustn’t be used to cleave industries into something they aren’t. If DOJ and USDA equate small farms to the industry that makes the market, and falsely believe smaller producers merit artificial and unequal protection, then folks on both ends of the production spectrum should be spooked.

For the cattle business, following the market has generally meant growing herd size in order to accommodate customers – packers and feedlots – growing in size to accommodate wholesale and retail customers also growing in size. It’s meant figuring out how to exploit competitive advantages via vertically cooperative management and marketing arrangements. As in all commodity businesses that are breakeven by definition, economy of size continues to offer advantages in cost efficiency.

For astute, progressive cattle producers with smaller herd sizes, this reality has meant the opportunity to play both ends of the game. They can play bigger by working cooperatively with like-minded peers. Arguably, they also can more consistently build and manage cattle capable of fitting the narrowest, highest dollar niches.

Market forces define what it will reward and how. Everyone with a cow and an acre of ground has the right to compete and is free to exploit market-defined opportunities, relative to their resources. Likewise, everyone can ignore market realities and subsidize their involvement.

Neither the largest nor smallest producers will be served if USDA and DOJ attempt to prevent the market from adapting to evolving realties. That includes government-imposed policies, be it the beef price freeze of the 1970s, broadened food safety liability or the artificial supports for ethanol.

The antitrust workshop aimed at livestock production is scheduled for Aug. 27 in Fort Collins, CO (see
details at http://www.justice.gov/atr/public/workshops/ag2010/).

The unfettered opportunity to compete – not success – should be the right guaranteed for all.

What's Cattle Economics?

Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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