Allowing Sale Barns to Own Small Plants Makes Sense

By Jennifer Hill

Finally, a move towards market freedom that’s supported by most ranching advocacy groups! The Amplifying Processing of Livestock in the United States (A-PLUS) Act has officially received the support of National Cattlemen’s Beef Association, US Cattlemen’s Association, American Sheep Industry Association, Livestock Marketing Association, and National Pork Producers Council. With the growing factional divide amongst American producers this is about as bipartisan as it can get, and what’s better is that A-PLUS really is a great bill.

The A-PLUS Act seeks to counter regulation 9 CFR 201.67, which prohibits livestock auction owners from owning or investing in meat packing businesses by instead allowing ownership or investment of small or regional plants. According to Mark Barnett, President of Livestock Marketing Association the initial regulation banning ownership came from the Packers and Stockyards Act which was developed at a time when most live cattle were transported to market via rail and sold directly into packing houses next to the railyard without the owner present. In today’s market livestock owners play a much more proactive role in the marketing of their animals. Additionally P&S contains other safeguards that would still apply to protect sellers including mandatory notification if the animal is purchased by the sale barn. Barnett, who is hopeful that the Act will help moderate market disparity said in a recent op-ed, “It does not seem right that this prohibition exists and, at the same time, packers can currently buy and shut down livestock auctions and then use the facility as a buying station, which is a fixed facility drop off point for livestock in the country. These buying stations lack the benefit of a transparent auction setting to arrive at true price discovery. Producers are paid what that packer is willing to give that day, and that price becomes less competitive over time.”

Before everyone panics that this bill could also work backwards and allow the Big 4 Packers to get their talons into the auction houses, A-PLUS has that covered. Language in the bill creates a processing cutoff of 2,000 head per day or 700,000 per year to operate both the auction barn and the packer, effectively keeping the big boys out.

If approved, the Act could potentially improve two problems the cattle markets currently battle. Cattlemen everywhere acknowledge that a lack of packing capacity is a major driver of the consolidated and depressed market for fat cattle. While some clamor for increased regulatory burdens and more government interference in the markets this logical, free(er) market minded approach would lead to an increase in small and regional hanger space. For years cattlemen have grown increasingly frustrated with the lack of cattle sold at live auction contributing to a transparent price discovery process. Encouraging sale barns and allowing them to play a bigger role in the industry could potentially lead to a more robust trade, improving price discovery.

With such a logical move towards improved markets and greater freedom hopefully R-CALF will change course and decide that a move that helps ranchers is a good move, even if it means they might have to agree with the other cattle associations on something. Vertical integration doesn’t have to be a bad thing if it helps the little guy compete. Many ranchers also produce their own feed and have expanded into the direct to consumer market, increasing the viability of their operations. Letting sale barns expand is a similar move with similar results.