"Independent livestock producers should have the opportunity to receive a fair price. Producers need a consistent spot market for information and access," Grassley said. "The last few years have led to widespread consolidation and concentration in the packing industry. Add on the trend of vertical integration among packers and there is no question why independent producers are losing the opportunity to market their own livestock during profitable cycles in the live meat markets."
Grassley's legislation would require 25 percent of a packer's daily kill to come as a result of purchases made on the daily, open market or spot market. By requiring a 25 percent spot market purchase, the Mandatory Livestock Reporting system would be able to provide consistent, reliable numbers about what is being purchased from the spot market and, thereby, improve the accuracy and transparency of daily prices. In addition, independent producers would be assured a competitive position due to the packers need to fill the daily 25 percent spot market requirement.
"This legislation would improve price transparency and bring more accurate Mandatory Price Reporting data so independent producers can have a fair marketplace to sell their livestock," Grassley said. "We must increase competition between livestock processors, develop consistency in the Mandatory Price Reporting program, and assist processors with determining prices for certain livestock market contracts."
In 1994, the CEO of IBP explained that the reason packers own livestock is that when the price is high, the packers use their own livestock for the lines and when the price is low the packers buy livestock. Grassley said this means that independent producers are most likely being limited from participating in the most profitable ranges of the live market. This is not good for the survival of the independent producer.
The Transparency Act was cosponsored by Sen. Russ Feingold, of Wisconsin, and would complement Grassley's proposal to ban packer ownership of livestock. The packer ownership ban was taken out of the 2002 Farm Bill during conference negotiations despite twice passing the Senate.
Grassley said his new proposal would guarantee that contracts packers make to assure sufficient kill numbers at their plants are based on legitimate information. A packer's contracts typically are related in some fashion to the Mandatory Price Reporting data. Under Grassley's legislation, the contracts could not be manipulated, giving livestock producers a contractual fair shake.