STUDY SHOWS PACKER OWNERSHIP BAN EFFECTS
A new economic study concludes that a proposed national ban on packer ownership and feeding could cost the cattle and beef industry as much as $3.5 billion, the National Cattlemen's Beef Association (NCBA) said. The analysis also showed the proposal, part of the farm bill now before a House-Senate conference committee, could cost the pork industry $7 billion.
The proposed national ban makes it unlawful for meat packers to own, feed or control livestock for more than 14 days prior to slaughter. Over the longer-term, the amendment would be unlikely to benefit any sector in the domestic beef or pork industries, and especially not livestock producers who expect wider margins and greater independence to result from this proposed legislation, according to William Motes, senior vice president, Sparks Company, Inc., the firm that did the study. "The end result likely would be lower producer prices, higher costs, smaller markets and diminished returns for the foreseeable future. Losses for cattle and hogs could be as high as $10.9 billion and $3.5 billion of that cost would be on the beef industry."
The study examines changing business relationships for today's cattle and beef and hog and pork industries. Sparks conducted the study in late February and early March 2002 based on extensive reviews of economic studies and reports, along with interviews with all segments of the cattle industry. This is the first study to apply economic costs to the Johnson Amendment. The study was commissioned by the NCBA and National Pork Producers Council.
Motes also said the proposal likely would result in immediate and long-term negative impacts for all sectors of the U.S. pork industry, from independent producers to packers. "No segment can expect to benefit, and each would likely face significant losses. Losses for pork could be as high as $7.4 billion. Losses for hogs and cattle could be as high as $10.9 billion," he said.
Initial divestiture impacts would be severe but temporary, the study shows. For hogs, costs could range from $600 million to $1.8 billion depending on market conditions. Capital costs increase across the industry as lenders increase their risk premium. For hogs, the range would be between $34 million and $133 million. The cost to producers from reduced domestic demand for meats, for hogs, could range from $119 million to $595 million.