compass one of the nation’s major cattle-producing regionsand all the landholdings of the plaintiffs in this case. The findings of a 1974 study made by the U.S. Packers and Stockyards Administration reveal that four meat packers control 78 percent of the Amarillo-area market; the obvious consequence, as the PSA points out, is that there is very little price competition locally. If feedlots have little to say about prices, ranchers have even less. Thousands of small cattle-raising operations dot the Panhandle, producing an average of 67 head annually. Their proprietors are fiercely independentabout the only practitioners of free enterprise in the beef economyand they are paying for their independence. A June 1977 report prepared by agricultural economists at Texas A&M observes that any price pressure applied on feedlots from above is passed directly backward along “the path of least resistance”the ranchers. The supermarket conspiracy Come now 168 of these folk before the bar, praying for relief, as the lawyers say. They charge that the likes of Safeway, A&P, Kroger, Winn-Dixie and Piggly Wiggly have not been content just to exercise their dominant market muscle in legitimate fashion, but have conspired among themselves and with meat packers to fix prices at the packer level, thus keeping beef prices paid to ranchers below fair market values. The plaintiffs say this price fixing has been going on for at least 14 yearssince 1963though the focus of their case is on business activity from 1973 to the present. The challenged transactions involved some 391 million pounds of beef. The ranchers’ particular charges include one that a handful of major supermarkets serve as “price leaders” for various beef-producing areas of the country: during any given week, they allege, the leaders agree on the price they will pay, offer that amount to packers a day in advance of offers made by other chain stores, then promulgate their “set” price through an industry publication called The Yellow Sheet.* Other buyers follow the leaders, paying nothing more nor less. The ranchers say that Safeway is generally the price leader for West Coast buyers and that A&P sets the pace on the East Coast; other chains act as price leaders at other times and in other places, the suit claims. It is the ranchers’ contention that the packers not only are aware of the conspiracy, but are parties to it, serving to push the low, fixed prices onto ranchers. * This weekly sheet, with a subscription rate of $180 a year, reports livestock prices all over the country. Publihed by National Provisioner, been around for some 50 years. In addition to controlling prices through The Yellow Sheet, the supermarkets are charged also with manipulation of beef supplies. Most packers do not have warehousing facilities to store perishable beef for long periods and generally move their supply out within 24 hours of slaughter. The dominant grocery chains, however, have extensive warehousing facilities that allow them to store enough beef to keep rancher and packer prices depressed. It is alleged that because of their storage capacities supermarket chains are in a position to, say, stock up only on hind quarters for a while, thus leaving an excess of front quarters on the market. Such a maneuver causes front quarter prices to drop, at which time the big retailers return to buy them. The ranchers’ beef It’s these business practices, say the ranchers, that are losing them money and driving many out of business. To substantiate their charges, they point to aberrant market behavior, such as that which occurred between May and July of 1973, when the price for finished beef dropped from 56 cents a pound to 34 cents. During that same period, consumer prices for beef galloped over the horizon. “It’s hard to figure that the same animal was worth over $400 one day and less than $250 the next,” says one of the plaintiffs who lost more than $50,000 over that three-month span. “Somehow we held in,” he says, “because we didn’t have all that many head on feed. But a lot of folks lost anywhere from a thousand dollars to a quarter of a million, and it’s easy to see that they didn’t stay in business if they didn’t have some other kind of collateral to borrow off of.” The present agricultural depression has brought so much unrest to the High Plains that farmers and ranchers in several states are ready to go on strike Dec. ‘ 14. Those set to strike say they will not buy farm equipment, sell commodities, or even plant next spring’s crop unless their prices improve. It’s all aeO g ned to get the attention of the lawmakers and officials in Washington who establish price supports for crops. But the West Texas cattlemen’s suit promises to cut even closer to the bone than a strike for higher prices knight because it challenges the economic structure that has produced the paradox of falling farm incomes and rising consumer prices. It takes a measure of courage to take on the supermarkets, especially wheii they have the power to turn the screws on your economic livelihood. Of course, the 168 ranchers stand alonenone of the Dolph Briscoes, Reagan Browns, Billy Claytons, John Hills, Lloyd Bentsens, Bob Kruegers, or any of the other drugstore cowboys who go regularly to the Panhandle on political forays \(declaring their empathy for the any inclination to stand with them against the big food marketers. These battles are not easy to win. A lot of money is at stake, and the supermarkets and packers will have a corral full of lawyers. Safeway, meanwhile, has flatly denied any use of The Yellow Sheet. Public relations manager Felicia del Campo, in an interview from Safeway’s corporate headquarters in Oakland, Calif., said, “We don’t subscribe to it. We buy carcasses by the author and acceptance method, which means individual transactions between our buyers and meat packers. They offer a price and we take it or leave it; no bargaining. I’m sure our meat people know about [The Yellow Sheet], but we don’t use it.” The ranchers do stand a chance, though. A similar suit brought by Colorado cattlemen was won in 1974, when a federal jury found A&P guilty of price fixing and awarded $11 million to six ranchers for losses they had suffered. Safeway and Kroger both had been named defendants in that case, but they settled with the plaintiffs rather than go to court. At least someone is attacking the problem at the source. Consumers spent $31.4 billion for beef in food stores and restaurants in 1976; of this amount $17.6 middlemen. The fat in America’s food budget will be found at the marketing level, a j nd Crump Ferrel, Jana Posey, Dana Lock and Cloyce Box are doing us all a favor by attempting to trim it. Ron Butler works 1,64e it e Texas Farmers Union at its Waco headquarters. In terms of economic structure, there are thousands of ranchers selling to hundreds of feedlots selling to a few packers selling to a handful of supermarkets. It is a funnelshaped arrangement that places pricing power at the narrowest point of the funnel. THE TEXAS OBSERVER 13
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