The 2002 Senate Farm Bill: The Ban on Packer Ownership of Livestock

The packer ownership amendment is a congressional attempt to address existing problems in the competitive environment of the livestock industry. Because the amendment permits contractual arrangements between packers and producers unless the producer no longer materially participates in the management of the operation with respect to the production of livestock, the claimed harms arising from the amendment are likely to be less significant than claimed offsets by the potential benefit to the marketplace. If any negative market effects occur, such effects will likely be the result of packers exercising power over the marketplace. The economic fundamentals, apart from strategic behavior, do not warrant such dire claims. In addition, irrespective of the merits of the economic argument that contracting and alliances in livestock production are essential to efficiency and competition, the amendment?s ban on packer ownership will not bar producers and packers from entering into such agreements.