Source:  Tom Johnston, MEATINGPLACE.COM, 11/10/10

A meat industry-commissioned economic analysis of proposed livestock marketing rules in the Packers & Stockyards Act estimated a $1.5 billion reduction in the nation’s annual gross domestic product, prompting trade groups to urge USDA to withdraw the regulation.

The study, prepared for the National Meat Association and other industry groups by Informa Economics, also projected a loss of nearly 23,000 jobs and $359 million in tax revenues, largely based on assumed reductions in marketing agreements that generate premiums and related declines in demand for beef, pork and poultry.

Last month the American Meat Institute commissioned a similar study, which projected the proposed GIPSA rules would cost $14 billion in GDP, $1.36 billion in lost tax revenue and 104,000 U.S. jobs.
The results of both studies contrast sharply with GIPSA’s analysis that the proposed rules would cost less than $100 million, which is below the threshold that would have mandated USDA conduct a further economic impact study.

The Informa study broke out costs – mainly to producers -- among specific species, and accounted for direct and indirect one-time and ongoing costs that could result if the GIPSA rule were implemented.
Rob Murphy, senior vice president for Informa, said at a news conference today that the indirect costs, such as lost efficiencies and damage to demand, are where the “real punch” hits – to the tune of $800 million annually in beef, $335 million per year in pork and $341 million per year in poultry (chicken, turkey).
“[B]eef will suffer the most in terms of what we like to describe as demand destruction as packers pull back on use of alternative marketing agreements,” Murphy said, noting that the costs for all species will be ongoing for at least 10 years, peaking in about the third or fourth year following implementation.

Based on interviews with dozens of stakeholders among all species and throughout each one’s supply chain, Informa made several predictions. Among them was packers will reduce marketing agreements to avoid the potential legal liability presented by a provision in the rule that makes it easier for contractors to sue packers for paying different prices to different contractors.

Negative impact
Bill Donald, a Montana rancher and president-elect of the National Cattlemen’s Beef Association, said at the news conference that a reduction in premiums paid to producers for better product will result in either the producer taking less money or the consumer paying more for product.

“If you look at the impact of lowering costs paid to producers and/or raising prices consumers pay, you can only [conclude] this is going to have a negative impact,” he said.

Donald and representatives of NMA, National Pork Producers Council and National Turkey Federation called on USDA to withdraw the proposed rule and re-start the process.

Donald said the study will be sent to the federal Office of Management and Budget, which can then consider whether to conduct its own economic analysis.

The comment period for the proposed rule ends Nov. 22. Colin Woodall, NCBA’s executive director of legislative affairs, said USDA could publish an interim final rule or final rule by mid-December, but based on the volume of comments that the agency has received a more likely time would be late 2011.

To view the entire Informa study, click here. 

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