[Senate Hearing 108-858]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-858
 
                     FISCAL YEAR 2005 FIELD HEARING

=======================================================================

                                HEARINGS

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               ----------                              

 January 9, 2004--MAD COW DISEASE: INDUSTRY IMPACT AND U.S. GOVERNMENT 
                                RESPONSE


                                     
                                     



           Printed for the use of the Committee on the Budget



                                                        S. Hrg. 108-858

                     FISCAL YEAR 2005 FIELD HEARING

=======================================================================

                                HEARINGS

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

 January 9, 2004--MAD COW DISEASE: INDUSTRY IMPACT AND U.S. GOVERNMENT 
                                RESPONSE


                                     
                                     



          Printed for the use of the Committee on the Budget



                    U.S. GOVERNMENT PRINTING OFFICE
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                        COMMITTEE ON THE BUDGET

                    DON NICKLES, Oklahoma, Chairman

PETE V. DOMENICI, New Mexico         KENT CONRAD, North Dakota
CHARLES GRASSLEY, Iowa               ERNEST F. HOLLINGS, South Carolina
JUDD GREGG, New Hampshire            PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado               PATTY MURRAY, Washington
CONRAD BURNS, Montana                RON WYDEN, Oregon
MICHAEL ENZI, Wyoming                RUSSELL D. FEINGOLD, Wisconsin
JEFF SESSIONS, Alabama               TIM JOHNSON, South Dakota
JIM BUNNING, Kentucky                ROBERT C. BYRD, West Virginia
MIKE CRAPO, Idaho                    BILL NELSON, Florida
JOHN ENSIGN, Neveda                  DEBBIE STABENOW, Michigan
JOHN CORNYN, Texas                   JON S. CORZINE, New Jersey

                Hazen Marshall, Majority Staff Director

                    Mary Ann Naylor, Staff Director

  


                            C O N T E N T S

                               __________

                                HEARINGS

                                                                   Page
January 9, 2004--MAD COW DISEASE: INDUSTRY IMPACT AND U.S. 
  GOVERNMENT RESPONSE............................................     1

                    STATEMENTS BY COMMITTEE MEMBERS

Senator Conrad...................................................     1

                               WITNESSES

Aasmundstad, Eric, President, North Dakota Farm Bureau...........     4
Carlson, Robert, President, North Dakota Farmers Union, Bismarck, 
  North Dakota...................................................     5
Dahl, Jeff, President, North Dakota Stockmen's Association, 
  Bismarck, North Dakota.........................................    13
Duppong, Terry, Duppong's Willow Creek Farms, Glen Ullin, North 
  Dakota; On Behalf of the Ranchers-Cattlement Action Legal Fund, 
  United Stockgrowers of America (R-CALF USA)....................    22
Galbreath, Craig, Dr., Oakes Feed, Oakes, North Dakota...........    28
Schuler, Larry, DVM, State Veterinarian, North Dakota Department 
  of Agriculture, State Board of Animal Health, Bismarck, North 
  Dakota.........................................................    15




     MAD COW DISEASE: INDUSTRY IMPACT AND U.S. GOVERNMENT RESPONSE

                              ----------                              


                        FRIDAY, JANUARY 9, 2004

                                       U.S. Senate,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in the 
Pioneer Room, North Dakota State Capitol, Bismarck, North 
Dakota, Hon. Kent Conrad presiding.
    Present: Senator Conrad.

            OPENING STATEMENT OF SENATOR KENT CONRAD

    Senator Conrad. The hearing will come to order. I am asking 
people to take their seats so that we can begin the hearing.
    Let me indicate that this is an official hearing of the 
Senate Budget Committee, and so the rules of the U.S. Senate 
will be followed in this hearing. That means that we give the 
witnesses our full attention. We ask that there be no open 
expressions of agreement or disagreement with statements made 
by the witnesses, that they be allowed to make their full and 
complete statement without interruption.
    We will then have a time for questions of the first panel. 
We will then excuse the first panel and we will go to the 
second panel. We will allow each of them to testify, have a 
question and answer period, and then if there is time 
permitting, it is my hope that we would be able to open it up 
for people in the audience to make any additional statements or 
comments, or ask questions that they might have.
    The other point I should make is that if people have 
written testimony, if they would provide a copy of that to the 
court reporter. She advises me that that would be of assistance 
to her. So if any of the witnesses have prepared statements, if 
they would make a copy available to the court reporter, I am 
confident that that would help her.
    One other thing I would like to indicate to you today is 
that C-Span advised my office this morning that this is the 
first congressional hearing on this issue, and as a result, 
substantial national interest will be focused on what we learn 
here today, so this is an important hearing. It is an important 
hearing for North Dakota. It is an important hearing for the 
industry. It is an important hearing for the country.
    As you know, some 40 countries have now banned our exports 
of beef. That is a very serious matter, and something that we 
must move to correct as quickly as possible. That is one of the 
focuses of this hearing, how we can proceed to recapture these 
lost markets.
    Let me indicate that the Committee on the Budget meets this 
morning to assess the impact of the recent case of mad cow 
disease, and the Federal Government's response to that 
incident.
    It was just over 2 weeks ago that the United States cattle 
industry was rocked by the news that a single dairy cow in 
Washington state had been found with mad cow disease, otherwise 
known as bovine spongiform encephalopathy, or BSE. The 
revelation hit our ranchers and feeders like a gut punch, made 
worse by the fact that consumers were just settling in for the 
holidays, and cattle producers, themselves, were just starting 
to enjoy a long-overdue period of profitability. The ensuing 
drop in cattle prices and the subsequent loss of beef exports 
to nearly 40 countries were a shock to our cattlemen and to our 
nation.
    Fortunately, the situation has now somewhat stabilized. The 
immediate free-fall in cattle prices has eased, and by all 
accounts domestic consumer demand for beef remains at a very 
strong level. In this past week, USDA officials confirmed that 
the diseased cow had its origin in Canada, thus the United 
States can continue to assert and assert clearly and 
legitimately that we have not yet had a homegrown case of mad 
cow disease, and we can emphatically reassure our consumers, 
both at home and abroad, that U.S. beef remains healthy and 
safe. That should be the very clear message coming from this 
hearing--U.S. beef supplies are healthy and safe. They are 
healthy and safe for our consumers in this country, they are 
healthy and safe for our export customers.
    Also on the positive side, the crisis has served to educate 
the public on the great importance of the beef industry, not 
just to rural America, but to our entire economy. Beef is, 
indeed, critical to creating jobs and generating income across 
our entire nation.
    This bit of good news is welcome, but the reality remains 
that we have a lot to do to protect this industry and put it 
back on a solid footing. For example, our nearly $3.5 billion 
export market is still at considerable risk, and we are not 
likely to get cattle prices back up to their pre-crisis levels 
until we once again open those export markets. I do know that 
the market was limit up the last 2 days--that is very 
encouraging.
    In addition, many questions remain as to the specifics of 
the mad cow measures that USDA has announced, including their 
impact on both producers and consumers.
    The mad cow case was a harsh reminder that consumer 
confidence is a very fragile asset--one that we can not take 
for granted and one that we must continually work to preserve. 
We can't just react to events as Europe and Canada did after 
their mad cow outbreaks, or we will lose the consumer and see 
our industry devastated. Europe eventually destroyed nearly 4 
million head. Let me repeat that, because that ought to be the 
warning to all of us as to the significance of the threat. In 
Europe they destroyed nearly 4 million head in response to 
their outbreak, most of them in the United Kingdom. We have to 
be ever-vigilant, anticipate events, and make sure that we have 
the proper preventative measures in place to protect this 
industry and our consumers.
    As we know, on December 30th, the USDA announced several 
mad cow safeguard measures designed to maintain consumer 
confidence. Those steps are summarized in this chart.
    [The information referred to follows:]
    Senator Conrad. Let me just direct your attention to those 
steps that have already been announced:
    National Livestock Identification System: Immediate 
implementation.
    Downer Animals: Immediate ban.
    Product Holding: Confirmation must be received before 
tested cattle are marked ``Inspected and Passed,'' and the 
confirmation, of course, is of the test results that have been 
done.
    Specified Risk Material: Immediate, more comprehensive ban.
    Advanced Meat Recovery: Additional restrictions, strengthen 
process control.
    Mechanically Separated Meat: An immediate ban.
    Air-Injected Stunning: An immediate ban.
    These are aggressive steps that were needed to protect 
consumer confidence.
    A case in point is the proposed immediate implementation of 
a national livestock identification system. Back on October 
30th, well before the mad cow case surfaced, I wrote a letter, 
signed by four of my colleagues, to the Chairman of the Senate 
Agriculture Committee, Senator Cochran, asking for a hearing on 
USDA's then-fledgling plans to develop a livestock 
identification system. I wanted to know then the expected costs 
and benefits of such a system, whether it would be made 
mandatory, whether it would be required of imports, how it 
would relate to the new country-of-origin labeling requirement, 
and so on.
    Now events have conspired to force the immediate 
implementation of a national identification system. Presumably, 
such a system will be made mandatory and applied to imported 
livestock and meat, as well. But these basic decisions remain 
unanswered. Neither do we know whether the new ID system will 
be fully funded. This is critical, and it's a central focus of 
this hearing.
    The President is scheduled to release his new budget for 
the coming fiscal year on February 2nd, and I will be examining 
that budget very closely to see that it includes full funding 
for the new national identification system and related mad cow 
prevention measures. My concern is that if these measures are 
not funded by the Federal budget, that the full costs will be 
pushed onto producers. That would not been, in my judgment, a 
fair result.
    I would especially welcome any specific comments from our 
witnesses today on these points.
    Other fundamental questions remain, including the future 
terms of our livestock and meat trade with Canada. I have 
already called on USDA to postpone indefinitely any plans to 
reopen the border to Canadian live cattle, and I am calling on 
them today to reexamine the earlier decision to allow Canadian 
meat imports, especially in the wake of our new mad cow 
safeguard measures, which Canada has adopted only in part. 
These are critically important points:
    No. 1, the border should remain closed to Canadian live 
animals.
    No. 2, USDA ought to review their earlier decision to allow 
Canadian boxed beef into this country, because Canada has not 
yet adopted the full measures that we have to protect consumers 
in our industry.
    Our subject this morning is a serious one. We have a lot of 
work ahead over the next several months. We also have a lot at 
stake. Our ranchers are vital to North Dakota and to our 
country, and their future livelihood depends on our ability to 
continually reassure consumers that U.S. beef remains safe.
    I want to thank all of our witnesses for agreeing on very 
short notice to appear here today. I ask each witness to please 
try to summarize your remarks in 10 minutes, or approximately 
that, so we can maximize the time available for questions and 
discussion. A copy of your entire prepared statement will be 
made part of the record.
    In order to accommodate the schedule of our witnesses, we 
have grouped their presentations into two panels. We will now 
begin with the first panel, and I will turn to Eric 
Aasmundstad, who is the head of North Dakota Farm Bureau. I 
very much appreciate your being here today. Please proceed with 
your testimony.

  STATEMENT OF ERIC AASMUNDSTAD, PRESIDENT, NORTH DAKOTA FARM 
                             BUREAU

    Mr. Aasmundstad. Chairman Conrad. I thank you for it 
opportunity to be here this morning to represent more 26,000 
member families that are North Dakota Farm Bureau.
    North Dakota Farm Bureau is very concerned that the USDA-
APHIS proposed rules to allow the importation of Canadian 
cattle in the United States are not stringent enough to prevent 
another BSE incident in our country. We believe that all 
importation of cattle from Canada should be suspended until the 
current investigation regarding the Washington state animal is 
completed, and then only if those findings say that--and the 
science says it is OK.
    The OIE recommends that the ban on the feeding of ruminant 
protein to ruminants should be in place for 7 years to classify 
a country or region as minimal-risk area for BSE. This 
recommendation is recognized by the WTO as an international 
recommendation for animal disease control. And Canada has not 
had a ban in place for that length of time. A case of BSE 
verified in Canada less than a year ago and the animal found 
now in the United States with BSE originated in Canada, and we 
submit Canada is not a minimal-risk country, and therefore, 
cattle imports should be banned from the United States from 
Canada.
    There are rumors circulating that a feed mill in Alberta 
has been including animal protein in ruminant feeds as recently 
as the past year. Now, we haven't been able substantiate that, 
and we certainly hope that it is not true, but until this can 
be disproved or substantiated, we have to error on the side of 
caution so that our livestock, our cattle producers don't have 
to suffer the same damages that the Canadian producers have.
    You know, Canada has made the efforts to minimize the risk 
of BSE. I think they have probably fallen short, but they have 
done, in part, quite an exemplary job of finding and isolating 
and preventing the spread of this disease in their country, but 
we have to ask ourselves, have they done enough so that we dare 
go there, so we dare import anything from Canada? We don't 
think they have. And we think that the case of this cow showing 
up in Washington was an exclamation point behind that.
    The devastation the U.S. livestock market has experienced 
because of this discovery, cannot, must not be ignored. U.S. 
producers are not willing to risk further harm by allowing 
imports of Canadian cattle.
    We support the animal identification from the standpoint of 
food safety, being able to quickly trace where and when an 
animal may have contracted disease, and being able to identify 
suspect animals quickly will provide a safer, healthier food 
supply.
    Implementation of an animal identification program must 
have producer safeguards to be readily acceptable. The program 
cannot simply be a mechanism to pass all liability back to the 
producer. Once the original owner sells or relinquishes control 
of the animal, the owner's liability must also be removed. The 
identification program must not force the costs of 
implementation, administration and/or regulation entire upon 
the producer. The expense of identification devices, whatever 
they may be, cannot be totally borne by the producer, either. 
Consumers, as well as producers, benefit from this program, and 
both should share in the cost.
    The authors of the proposed animal identification plan left 
a small window of opportunity for other types of 
identification. They mentioned tattoos, but provided no 
details. We believe tatoos, various types of brands, and 
etcetera, could be used by the original owner to identify the 
animal. Until more is known, we reserve further comments, 
however, we are generally supportive of the concept, if carried 
out properly.
    We support COOL. This may not be a food safety issue in and 
of itself, but if an infectious outbreak occurs, we will be 
able to more readily identify where that product originated. 
COOL is a consumer issue, and as such, will provide broader 
consumer confidence, especially in conjunction with measures 
being taken to assure food health and safety. Once again, I 
must reiterate that it cannot affect only producers, but the 
packers as well.
    We are very appreciative of the USDA-APHIS's efforts in 
responding to this crisis. They have done an exceptional job of 
reassuring the public that control measures are in place and 
working. The agency and the media are to be commended for 
projecting a positive attitude and bolstering consumer 
confidence in the safety and wholesomeness of our meat supply.
    Once again, Senator, thank you. I will try to answer any 
questions after.
    Senator Conrad. Thank you very much, Eric. Thank you very 
much for being here and testifying on what is really a very, 
very important subject to North Dakota and the nation.
    Welcome to Robert Carlson, President of the North Dakota 
Farmers Union. I am very pleased that you are here, as well. If 
you can proceed with your testimony.

 STATEMENT OF ROBERT CARLSON, PRESIDENT, NORTH DAKOTA FARMERS 
                 UNION, BISMARCK, NORTH DAKOTA

    Mr. Carlson. Thank you very much, Senator Conrad, for 
holding this hearing on this important issue that in some ways 
is dividing the farmers and ranchers that produce beef in our 
state into two camps--those that sold before the 23rd of 
September, and those that sold after.
    I could preface as my remarks--I guess two things: First of 
all, I have provided written testimony but I am not going to 
read it; and second, I am pleased to say that the position of 
the North Dakota Farmers Union is very much similar to what Mr. 
Aasmundstad has just stated is the Farm Bureau position, so 
that is always a happy occasion when that occurs.
    There is some talk in the country about how consumers and 
the media and government officials are overreacting to the 
single incident of BSE, and they say, you know, really, we 
haven't scientifically proven the link between BSE, eating an 
animal with BSE, and the variant Creutzfeld Jakim disease and 
others have said, you know, your risk of contracting BCJD from 
eating beef is about equal to your risk of being buried in an 
avalanche. That may be so, but people can avoid an avalanche by 
staying away from the mountains, and we don't want people to 
stay away from beef. They need to feel assured that beef is one 
hundred percent safe for them to eat, so we must take actions 
that really provide safe beef, and give assurance to consumers 
that it is safe.
    We support the actions that you outline, Senator, that the 
USDA has taken and FDA have taken so far. We proposed early 
on--in fact some cases they have exceeded what we proposed 
early on that no meat from downer cattle go into the retail 
system until the test results were in, and that all animals 
should be tested. The Secretary banned all downer cattle from 
the food supply, which, I think, looking back, was the 
appropriate decision to make to satisfy consumers that their 
food was safe.
    In addition to the measures recently initiated by USDA and 
FDA, let me enumerate a few steps, and if you have the written 
testimony, I am starting on page 4 here, and sort of not 
reading it, but hitting some of the points that are bulleted.
    We would like to see additional testing of cattle, 
particularly of imported beef. We believe that there is not 
enough testing. We need to do more testing, particularly of the 
beef that is imported into this country, the boxed beef and the 
live animals. I believe that this is already being done, but we 
also ask that the U.S. immediately ban the processing, blending 
and shipment of meat from any animal that has been tested for 
BSE until the test result are returned.
    Another point: USDA should suspend its current rulemaking 
process which was initiated to establish regulations governing 
the resumption of live cattle imports from Canada. Simple 
prudence dictates that the first Canadian BSE incident was not 
isolated, and that a much more concerted effort must be put in 
place to the prevent further expansion of the disease into the 
U.S. production and market system.
    USDA should rescind its prior rules and regulations 
governing the importation of beef products from Canada. And so 
I am agreeing with you, Senator, and with the Farm Bureau on 
this issue with the Canadian imports.
    We also believe that the Bush Administration should rapidly 
pursue the finalization of reasonable, cost efficient and 
workable rules for the implementation of mandatory country-of-
origin labeling, and seek congressional action supporting an 
expedited schedule for its implementation, rather than 
encouraging further delay, as has been the case. Mandatory 
country-of-origin labeling will help restore any loss of 
consumer confidence in our food safety protection system by 
providing additional information to our domestic and foreign 
customers while improving the traceability of products through 
the food chain.
    Frankly, Senator Conrad, Farmers Union members are 
frustrated with the U.S. House, which voted December 8th to 
delay the implementation of country-of-origin labeling for 2 
years, and we are hopeful that the U.S. Senate will take a more 
thoughtful approach to COOL when it resumes work on the omnibus 
appropriations bill, perhaps later this month.
    Another point: If market prices do not recover, we would 
urge the Bush Administration and Congress to consider emergency 
economic assistance for producers who suffer economic and 
market losses as a result of the BSE incident. Without a 
commitment of Federal assistance, many beef producers in rural 
communities which rely upon them are likely to suffer 
irreparable damage as a result of a problem beyond their 
control.
    We urge speedy implementation of a mandatory animal 
identification system that spans the food chain from producer 
to consumer. This program is integral to homeland security. As 
such, we ought to use the resources of the Federal Government, 
resources meaning financial resource, to assist producers in 
implementing such an identification program. We must restrict 
access to this data base to ensure it serves the interests of 
the producers and consumers.
    Here are a few specific concerns about a mandatory animal 
identification program.
    No. 1, liability provisions: Producers should not be made 
scapegoats for every food-contaminated recall of products. For 
example, a cow processed with e-coli in its digestive system 
does not itself contaminate the meat. Meat becomes contaminated 
during processing. Packers and processors could try to escape 
liability by stating the owner of the cow is at fault. Unless 
there is willful negligence or fraud, producers should not bear 
liability.
    Program costs: Considering that the Secretary of Homeland 
Security has stated the U.S. needs mandatory animal 
identification to combat terrorism--along with concerns about 
animal health and food safety--it only makes sense that the 
Federal Government pay for creating and maintaining the data 
base, and compensate producers for costs of implementing animal 
identification.
    Country-of-origin labeling: We ought to require USDA to use 
this system and implement it immediately, along with the animal 
identification system.
    Use of proprietary information: This is important. Any 
animal identification program should be governed by clear 
limits as to how the information may be used and by whom. The 
information should not be used by packers to affect prices paid 
for livestock, nor should it be given out to telemarketers or 
made available to the public. One concept calls for restricting 
this information to public officials only for purposes of 
tracing animals or health or diseases, with the exception that 
country-of-origin labeling follow through to consumers.
    Data base control: This information must be kept and 
controlled by the government or government agency, and not 
subcontracted out to new or established private entities.
    Farmers Union stands ready to provide any assistance to 
implement these initiatives which we believe will be useful in 
restoring our nation's reputation as a supplier of high-quality 
products.
    We also recognize that this process and the information 
surrounding it is constantly evolving and changing, and the 
recommendations that we make today may be added to and probably 
will be added to in the near future. I look forward to any 
questions. Thank you.
    Senator Conrad. Thank you very much for the excellent 
testimony from both of you. I appreciate that.
    I have talked about four specific measures, and I would 
like to review each of them with both of you and get your 
response.
    No. 1: I have said, immediately in the aftermath of this 
event, that we ought to continue the ban on all live cattle 
coming in from Canada to this country, as a prudent measure to 
protect our consumers and our industry. Do you agree with that 
position?
    Mr. Aasmundstad. Absolutely.
    Mr. Carlson. Absolutely.
    Senator Conrad. The second point I had made is I have 
called on the Secretary to review her decision to allow boxed 
beef to come into this country from Canada. Again, it seems to 
me, as a prudent measure, that decision ought to be reviewed 
and overturned.
    Mr. Aasmundstad, what would your position be?
    Mr. Aasmundstad. I would tend to agree with that, Senator, 
for the time being, until they can prove that the Canadian 
supply of boxed beef is safe. You know--and there, again, this 
will go back to the rumor of the feed mill in Alberta has not 
been following the ban on ruminant products and feed.
    Another thing that we should possibly do is demand that the 
Canadian government do a review of their inspection system 
regarding feeds and feedstuffs, to guarantee that they are 
following the international rules that apply to the feeding of 
ruminant by-products or ruminants. That, to me, would be 
another good step.
    Mr. Carlson. Reviewing the imports of the boxed beef, yes, 
I think that is a prudent thing the do. There has been the 
assumption that in animals 30 months of age and younger, there 
is not a threat of BSE in that meat, and yet about the time I 
thought that that seemed to be the scientific case, we 
slaughtered, euthanized, lethally injected and then buried in a 
landfill, 440-some calves that were I think under a year old, 
so I think, as Eric said, the issue of science there does need 
to be reviewed.
    Senator Conrad. I do think that is a reasonable and prudent 
step. I know Canada will mightily resist it, but, you know, our 
first, I think, obligation is to assure our consumers and our 
industry that every step has been taken to protect them.
    The third point I have made is that with respect to a 
national identification system, that that should be borne, the 
cost of that should be borne by the Federal Government. The 
Federal Government is imposing the requirement in the national 
interest, I agree with that, but that tells me it should be 
paid for by the Federal Government, not shifted to the 
industry.
    What would the position of Farm Bureau be on that?
    Mr. Aasmundstad. I would certainly say that if it was a 
move by the Federal Government that benefited only the 
producers, then maybe there would be an argument for the 
producers to pay for it, but this doesn't affect only the 
producers and benefit them. It benefits them, it benefits the 
packers, it benefits the entire chain through the consumers, to 
our foreign customers, what have you, so certainly, as we said 
in our testimony, we don't think that this should be borne by 
the producers, but rather the Federal Government would be a 
place to do that.
    Also, when we talk about identification systems, I think 
that every safeguard that can be made has to be taken to assure 
that this is not used as a transfer of liability back to the 
grower. That is an absolute must. If we can look at a national 
mandatory animal identification system as a marketing tool, if 
you will, for the safeness of U.S. beef products, then we are 
going down the right road, but if we are going to use it as an 
industry means for transfer back to the producer, then we have 
missed the mark.
    Senator Conrad. Very good point.
    Robert?
    Mr. Carlson. I would just say ditto to all that. This is an 
issue of national security, homeland security, so it is 
appropriate that the Federal Government pay for implementation 
of the system.
    Senator Conrad. The fourth point that I think is critically 
important is the connection to country-of-origin labeling. If 
we are going to have a national identification system, 
obviously that is connected to country-of-origin labeling. You 
can't very well have a system without an ability to say what 
country it came from. In light of the Canadian experience, it 
seems to me even more clear that country-of-origin labeling is 
critically important to protecting our consumers and our 
industry.
    Eric, your reaction?
    Mr. Aasmundstad. The most important thing we can do, 
Senator, as producers of foodstuffs, is to make sure that our 
consumers are given a safe product. Now, if we are going to 
guarantee to our customers worldwide and to our consumers here 
at home that our domestically grown beef is safe, then by all 
means, we need to identify that meat in all of our other 
products in the United States, so that we can differentiate our 
products from those products that come here from the rest of 
the world. If we are going to go out there and say, ``Buy from 
the U.S. because we are the safest,'' then we have to have a 
way of proving it, and country-of-origin labeling is probably 
the only way that we can do that.
    Senator Conrad. Robert?
    Mr. Carlson. We have been working for country-of-origin 
labeling since 1993, and I think that history is on our side, 
and that sooner or later we are going to overcome all the 
resistance and we are going to have it, and the sooner we have 
it the better. I am mystified by some groups that still find it 
objectionable.
    Senator Conrad. If I can, just for the record, insert here 
a letter that I sent to the Secretary yesterday, I said, in 
part: ``I ask that USDA reexamine its earlier cost benefit 
analysis of the feasibility of implementing country-of-origin 
labeling. The reason for my request is straightforward. 
According to USDA's previous analysis, much of the assumed cost 
of country-of-origin labeling is associated with the record 
keeping involved in identifying livestock and meat as it moves 
through the food chain. However, implementation of a livestock 
ID system would put in place a foundation that can only 
facilitate country-of-origin labeling implementation. Thus, 
whether one supports country-of-origin labeling or not, having 
a livestock ID system in place would likely change the 
feasibility of implementing country-of-origin labeling in a 
fundamental way. Therefore, I ask USDA to reevaluate the costs 
and benefits of country-of-origin labeling, with the assumption 
that a livestock identification system will be made operational 
as announced by USDA.''
    I think that is just a very important point to make.
    The fifth point and final point that I would make is on the 
question of providing assistance to those producers affected. 
For example, we know herds are going to be destroyed, already 
have been, are in the process of being. Should that full cost 
be borne by the producers, or there should be some assistance 
to those who could potentially be wiped out through no fault of 
their own?
    Eric, what would be your judgment?
    Mr. Aasmundstad. Inasmuch as the identification system 
would be a Federal mandate that you, yourself, Senator, feel 
should be paid for by the Federal Government because it is a 
Federal mandate. Also the destruction of livestock associated 
with this or any other catastrophic disease is controlled by 
the Federal Government, mandated by the Federal Government, we 
certainly think there should be assistance from Federal 
Government to ease those producers through the time that they 
have to struggle with while their herds are destroyed and 
transition into something else, certainly.
    Senator Conrad. Robert?
    Mr. Carlson. It isn't the producer's fault. The producer 
had no hand in wilfully injecting BSE into this herd, and I 
think there are precedents in other cases for compensating 
producers whose herds or animals have been destroyed because 
they are carrying disease.
    Senator Conrad. One other issue I wanted to raise with you, 
and that is the question of downer cattle, because there is, I 
think, a legitimate question whether or not there has been 
somewhat of an overreaction. There is now a complete ban on 
downer cattle, and I think all of us would agree that downer 
cattle that are diseased should not go into the food chain. But 
I think its also the case, I think everybody here knows the 
reality is there are some cattle that are not diseased that are 
classified as downer cattle. They are cattle that have a leg 
broken in a pen, they are cattle that have been injured before 
they ever get to slaughter and that are perfectly healthy, and 
that could easily be subjected to testing that would then tell 
us whether or not it is appropriate for them to go to slaughter 
or not. I would just like your reactions on that question. It 
is the one thing that has troubled me a bit about USDA's order, 
and it was very important that we take aggressive action, but I 
also think we don't want to abandon facts and we don't want to 
abandon science, and we should not be restricting animals that 
are fully healthy, other than they may have an injury. We 
certainly don't want cattle that are ill, we don't want cattle 
that present any kind of real threat to the food supply, but on 
the other hand, I don't think it is wise to be preventing 
cattle from going into the food supply that have been fully 
tested and are healthy.
    Eric, your reaction?
    Mr. Aasmundstad. Certainly, as in a lot of things, the 
details are in the definitions. Now, the steps that were taken 
to ban all downers needed to be done--at that moment in time it 
probably did. As we react to things so often, the pendulum goes 
so far one way, then it has to come back before we find any 
reason in it. But I would agree, Senator, that we have to 
define what a true downer is. We agree there shouldn't be a 
wanton waste of perfectly good meat just because an animal is 
injured. So certainly there has to be some moderation, and 
science can't be ignored.
    Senator Conrad. Robert?
    Mr. Carlson. To answer the question, it is a case of 
perception and reality. A steer that is injured in shipping, 
you know, is, if it was tested, that there would be nothing 
wrong with that meat and can be put on a retail counter. The 
perception, though, I noticed even the Bismarck Tribune kind of 
in the heart of cattle country, in a recent editorial talked 
about how great it was to ban all downer animals, and they even 
went on to say that they don't want any meat from those animals 
fed to Fluffy and Fido, either. So I guess the reality is that 
testing would be the proper thing to do in terms of determining 
the safety.
    The word ``downer'' animal in itself is not a very 
marketable concept, so maybe this is a cost that has to be 
borne, you know, for awhile, at least to get consumer 
confidence back.
    Senator Conrad. The thing that struck me is the use of 
language. Downer cattle, nobody wants to have any association 
with downer cattle. Maybe what we need is a better use of the 
language, and a more careful definition. What we need to be 
banning are unhealthy critters, whether they are downer or 
whether they are still ambulatory. That should not be the 
issue. It seems to me the issue is healthy or unhealthy. Those 
livestock that are unhealthy should not enter the food chain in 
any way. I think that would be our overwhelming agreement, the 
consensus. On the other hand, healthy animals should not be 
prevented from going into the food chain. I think all of us 
know, from growing up in this part of the country, that there 
are perfectly healthy animals that are designated as downers, 
and they have maybe broken a leg in shipping. Those animals 
should not be prevented from going into the food chain, and 
what we need is a more careful definition of what the real risk 
is.
    Any final thoughts or statements either of you would want 
to make?
    Mr. Aasmundstad. I would just say, again, that the animal 
identification system, COOL, is of the utmost importance not 
only to the livestock industry but also our business of 
providing raw materials for food, the business of farming. We 
can't wait until we have a wreck in another segment of our 
industry. We have had one here, and thankfully it is not as bad 
as it could have been, and like you said, getting better. But 
let's not wait until we have a wreck in vegetables or table 
grapes or something along that line that come in from Chili or 
Argentina, or what have you. Let's get done what we need to do, 
and do it now.
    Mr. Carlson. There seems to be, at least kind of generally, 
a lot more interest in food safety. I noticed this morning on 
CNN talk about salmon, and talk about certain vegetables and so 
forth, and it seems to me that we are going to need to have 
USDA do more testing of a lot of food products in addition to 
beef. As I understand, today, administration officials, and so 
on, are meeting with a Japanese delegation about reopening beef 
sales. It will be very interesting to hear what comes out of 
that meeting, but I would be very surprised if it didn't call 
for a large, large increase in our testing regime.
    Senator Conrad. It is very interesting, if you look at 
country-of-origin labeling, there is no delay recommended for 
catfish, but there is a 2-year delay on beef. You know, I don't 
think that difference can be justified, especially in light of 
USDA's call for us to move ahead with respect to an 
identification system.
    If we are going to have an identification system, clearly, 
you are going to have to identify what country the cattle come 
from. I think that is just clear. So, hopefully, we will be 
able to move ahead in a way that makes sense for consumers and 
makes sense for the industry.
    I think it is very clear we send a clear, consistent 
message to USDA on these issues. I certainly think both of you 
have done that here this morning, and I appreciate it, and I 
thank you for the testimony.
    Mr. Carlson. Thank you.
    Mr. Aasmundstad. Thank you.
    Senator Conrad. We will call now on the second panel, 
including Jeff Dahl, President of North Dakota's Stockmen's 
Association; Terry Duppong, representing R-CALF; Dr. Larry 
Schuler, State Veterinarian, North Dakota Department of 
Agriculture; and Dr. Craig Galbreath, Doctor of Veterinary 
Medicine from Oakes Feed, Oakes, North Dakota.
    As they are coming forward, I would like to just take a 
moment on a personal note, if I could, to congratulate Wade 
Moser, who has been named Agriculturalist of the Year, chosen 
by North Dakota State University Saddle and Sirloin Club for 
that honor. And, Wade, we would like to just publicly 
acknowledge that significant honor, and say it is well-
deserved. It is in the record of the U.S. Senate, so 
congratulations to Wade. That is something you can be forever 
proud of.
    I am just delighted at the next set of witnesses that we 
have, because we are bringing to the witness table not only 
representatives of the industry, but also medical 
professionals, those who know this subject intimately and know 
it well, and I am just delighted that Dr. Schuler, the State 
Veterinarian, is with us; that Dr. Craig Galbreath, also a 
veterinarian from Oakes Feed, somebody that understands the 
feed side of this issue is with us; and, of course, Jeff Dahl, 
our outstanding President of the North Dakota Stockmen's 
Association; and Terry Duppong, representing R-CALF.
    I thank you all for being here. I think this testimony is 
going to be very important to the record of the committee, and 
to help with an understanding of the public of precisely what 
has happened.
    With that, I would ask Jeff to begin with your testimony, 
if you would, Jeff, and then we will go to Dr. Schuler, and 
then we will go to Terry, and finally we will ask Dr. Galbreath 
at the back to clean up. OK?
    Jeff, welcome.

  STATEMENT OF JEFF DAHL, PRESIDENT, NORTH DAKOTA STOCKMEN'S 
              ASSOCIATION, BISMARCK, NORTH DAKOTA

    Mr. Dahl. Thank you, Senator Conrad, for the opportunity to 
provide you with our comments today. Let me start by thanking 
you on behalf of the North Dakota Stockmen's Association for 
the factual, positive statements you have made on behalf of the 
beef industry about the BSE situation over the last couple of 
weeks.
    It appears that the situation is beginning to stabilize, as 
is usually the case when calm thinking prevails. The BSE issue 
does present some problems that need to be addressed, and with 
your permission, I would like to touch on them before I discuss 
our budgetary concerns. We believe they would have required 
some government action.
    First, it is our belief that the expanded limits on cattle-
futures contracts need to be removed. The expanded limits 
resulted in a knee-jerk reaction that cost cattle producers 
about 20 percent in equity in 5 days. If the original $1.50 
limit had been maintained, it would have taken 10 days of 
limit-down to reach the same level. In this case, the amount of 
information gathered in those five extra days would have done a 
lot to alleviate concerns in the marketplace. We feel that 
government involvement may be needed to accomplish the removal 
of the expanded limits.
    Second, on the issue of trade, Stockmen's Association would 
like to see that any proposed free (fair) trade agreements are 
delayed, and that the government and the livestock industry 
aggressively pursue resumption of trade with our international 
customers, which you already indicated is being done. 
Stockmen's Association also seeks to delay any implementation 
of live-cattle imports from Canada.
    In regard to BSE, specifically, Stockmen's feels USDA-APHIS 
should take a proactive stance by requiring any country that 
wants to trade with the United States to have in place a 
similar feed ban and BSE surveillance program.
    Third, on country-of-origin labeling, COOL appears to be 
the major sticking point in passage of the omnibus 
appropriations package. As we discussed earlier, our members 
support COOL. At the same time, they realize that COOL needs to 
be implemented in the least-cost manner for producers. When we 
visited last, we proposed that one of the ways to implement 
COOL at very low cost--or whatever the cost is to do a rule 
interpretation change--is to remove cattle from the J-list and 
to change the interpretation of beef's ``final purchaser'' as 
the retail customer, rather than the importer.
    We, as an organization, do have some concerns about how the 
existing law will be implemented, and we have attended several 
meetings to discuss alternative means of implementation.
    In regard to the budgetary issues, Stockmen's Association 
would like to address three items that deal with food safety 
and agricultural programs. For decades, North Dakota has 
produced leaders, people in the forefront with ideas that have 
advanced our industry. As you will see, there are projects in 
the development stages here in North Dakota, that if properly 
funded, could accelerate the results that are needed not only 
in this country but worldwide.
    First of all, we urge that funding be provided to USDA for 
research to find a reliable tests for BSE that can be conducted 
without having to destroy the animal. We would also like 
funding to be provided to do genetic research to determine if 
there are cattle that are genetically resistant to BSE, much 
like there are sheep that are resistant to scrapie. Beef System 
Centers of Excellence is a project underway in the state that, 
if properly funded, would go a long way toward developing 
economic opportunities in North Dakota, and would also be able 
to do research to address the industry priorities, such as 
alternative rendering procedures, other food safety issues, 
such e-coli, and new product development.
    We recommend that you consult with Dr. Ken Odde, North 
Dakota State University Animal and Range Science Department 
chairman, about what level of funding Beef Centers of 
Excellence needs to get off the ground and to get working on 
these important issues.
    Second, the Stockmen's Association feels that the National 
Animal Identification Program needs to be implemented as soon 
as possible and, since it is a government-mandated program, the 
government should provide the majority of funding. The proposed 
budget of the draft ID plan calls for $70 million in the second 
year of the program. However, if implementation of this program 
is accelerated, we feel $100 million will be needed for it to 
be implement properly.
    Stockmen's Association had the foresight 3 years ago to see 
the benefits of this program, and supported legislation that 
was passed addressing animal identification here in North 
Dakota. Pilot projects need to be instituted for the National 
Animal Identification Program to work out problems with the 
program on a small scale before it is mandated on a national 
level, when fixing problems will be more difficult.
    North Dakota is in a position to run a pilot project. 
Because producers will bear some of the cost of the ID program 
and because the technology it employs is capable of managing 
multiple data bases, we recommend that duplicate government-
mandated programs be eliminated. Examples of this might be the 
brucellosis and back-tag programs and health certificates for 
interstate movement.
    Cattlemen are willing to share information to keep the U.S. 
and world food supply the safest in the world, but are 
concerned about keeping their records confidential. We urge 
that safeguards be put in place to protect the integrity of the 
records.
    And finally, Stockmen's Association is weary about the 
Senate reopening the omnibus appropriations bill for fear of 
losing drought provisions and funding for food safety and rural 
development programs. Most of North Dakota went into this 
winter in a very seriously dry condition, and if the drought 
conditions continue into this spring and summer, producers will 
need help to feed their livestock, and the necessary funding 
needs to be available in a timely manner to do the most good.
    With that, in closing, I thank you again for giving us this 
opportunity to provide comments today, and if Stockmen's can be 
of any help in the future, please contact us.
    Senator Conrad. Thank you very much, Jeff. Excellent 
testimony.
    Dr. Schuler, thank you for being here. Please provide your 
testimony.

  STATEMENT OF LARRY SCHULER, DVM, STATE VETERINARIAN, NORTH 
DAKOTA DEPARTMENT OF AGRICULTURE, STATE BOARD OF ANIMAL HEALTH, 
                     BISMARCK, NORTH DAKOTA

    Dr. Schuler. Thank you, Senator. I appreciate your inviting 
us here today and allowing us to comment on the recent case of 
bovine spongiform encephalopathy in the United States and 
issues related to prevention of new cases and also to further 
protect the animal and human health of this country.
    We would like to begin our comments by saying that we 
believe that the U.S. beef supply is safe. There is very little 
risk to the beef-consuming public. The fire walls that the U.S. 
has erected in the past are effective fire walls, and based on 
the 2001 Harvard University Center for Risk Assessment report, 
which in laymen's terms says that if BSE was imported into the 
United States, the existing control measures would eliminate 
the disease within 20 years, and during that time human 
exposure would be extremely small.
    We can also use the United Kingdom as an example of how BSE 
behaves in a population. At the peak of the BSE epidemic in the 
UK, they were reporting approximately a thousand cases of BSE 
per week.
    Senator Conrad. A thousand cases in the----
    Dr. Schuler. In the United Kingdom.
    Senator Conrad. In the herds?
    Dr. Schuler. In the cattle, yes. I am sorry. During that 
time, or at the beginning of that epidemic there were very few 
control measures in place to prevent human exposure, and yet in 
history, there have been only been an approximately 140 cases 
of human variant CJD, even based on what we would classify now 
as extreme exposure, so a single case in the U.S. would expose 
human health, the human population of this country at 
exponentially smaller levels.
    Senator Conrad. It would be almost mathematically--it is 
almost impossible to state, isn't it? I mean the risk is so 
infinitesimal.
    Dr. Schuler. You are absolutely right. In regards to our 
reaction to the response of the USDA to date, we do support 
what USDA has done to date. The diagnosis was made quickly. The 
animal was slaughtered on December 9th, the announcement was 
made December 23rd. That is a very good turnaround on a routine 
surveillance animal.
    We support what USDA has done with the cooperation of the 
State of Washington to control the spread of the disease and 
prevent the movement of the animals out of the herd. And we 
support the safeguards Secretary Veneman announced, and you 
have already outlined on the board here. We do think that in 
some ways they have not gone far enough to address all of the 
concerns, and we will address those in a little bit.
    One other issue that has happened is that state officials 
have been meeting state veterinarians who, for the most part, 
felt a bit out of the loop on information on BSE because our 
first knowledge of the BSE case was when we heard it on CNN, 
and we subsequently--all of the information that we have 
received to date has been from the technical briefings that 
USDA has done for the media. This leaves us, as state 
officials, at a disadvantage because we are receiving 
information at the same time as the media, and don't have a lot 
of time to react to it. USDA frequently refers to state 
officials as partners. In this particular situation, we felt a 
bit like spectators rather than partners. That is probably my 
issue, we would have felt more involved if we would have been 
notified.
    Some of the priority issues that we would like to bring 
forward: First and foremost, our primary concern has to be 
consumer safety. As I said earlier, we believe our beef supply 
is safe but we think USDA and its partners need to review the 
beef production system and take the necessary steps to close 
loopholes that could possibly result in human or animal 
exposure.
    Second, we believe the next highest priority for USDA 
should be to reestablish export markets. Exports of beef sales 
makes up 9 percent of the beef industry sales. Loss of these 
markets has resulted in a substantial loss to livestock values. 
The industry can withstand short-term market drops, but 
longterm price drops would be devastating to the industry. This 
loss would make a difference in the survival of the cattle 
industry producers, who prior to this BSE case were 
anticipating and needed record prices for their animals.
    We believe USDA should respond to the BSE case in 
Washington much the same way that Canada responded to the BSE 
case in 1997 that recalled the British imports. Basically, at 
that time the affected herd was depopulated and tested for BSE, 
all animals were traced out of that particular herd, and we 
believe this is what should occur in the U.S., and including 
the 81 animals that were imported with this animal. Congress 
should provide funding for the appropriation of testing, and 
indemnity of the owners. We estimate this would probably 
companies 7 to $10 million, which is a small price to pay for a 
lost export market in excess of $3 million.
    Additionally, we believe that we should trace back Canadian 
animals that have been imported into the U.S. There are an 
estimated 300,000 or 400,000 breeding animals in the U.S. 
imported from Canada, and this would appear to be an 
insurmountable task, however, the traceback could be focused on 
cohorts of the Canadian animals that have been identified with 
BSE, and traceback of animals over 5 years of age that were 
imported from the province of Alberta and Saskatchewan.
    Senator Conrad. Repeat that for me once again. I want to 
make sure I understand that point. When you are talking about 
traceback, you are talking about 5 years. Explain that to me.
    Dr. Schuler. Actually, what I am saying is that we believe 
that USDA and state officials should attempt to trace Canadian 
breeding animals that are present in the U.S. in an effort to 
inform our trading partners that we have taken the steps 
necessary to make sure the BSE isn't existing in the beef 
population. There are 3 to 400,000 breeding animals in the U.S. 
from Canada, and that would be a major task, but what I am 
saying is we can focus the traceback on animals that would be 
cohorts of the animals that have been identified as BSE 
animals. They both originated in Alberta, virtually, so if we 
focused our traceback to older animals that were both 6 and 7-
1/2 years of age, so if we build in a safety factor of tracing 
animals that are 5 years of age and older, and animals from 
Alberta and Saskatchewan.
    Senator Conrad. That would dramatically narrow it, wouldn't 
it? Instead of 3 to 400,000, you might be down to 30 or 40,000?
    Dr. Schuler. That is correct. Actually, in our office we 
are starting that process. We have hired a temporary person to 
go through health certificates, and we are trying to develop a 
list and see what number of animals would be in North Dakota.
    Senator Conrad. Why do you pick 5 years or older? Why 
wouldn't you pick 3 years, or more than 30 months, for example?
    Dr. Schuler. Actually, we were looking at animals that 
would have been born before the ban and----
    Senator Conrad. I see what you are saying.
    Dr. Schuler. And built in a little bit of safety factor 
into that, so rather than saying 6 years, we are saying 5 years 
as a bit of a safety factor.
    Senator Conrad. Because if Canada took steps going back 
that far, that would dramatically reduce the risk.
    Dr. Schuler. Yeah, a Canadian feed ban, ruminant protein 
feeding ban went into effect in August 1997.
    Senator Conrad. 1997? That is where you get the 6-years?
    Dr. Schuler. Yes.
    Senator Conrad. OK.
    Dr. Schuler. We also believe the U.S. should set import 
standards that are at least equal to international standards.
    Senator Conrad. Can I just stop you for another minute. 
Have you communicated with USDA on this traceback issue?
    Dr. Schuler. We are just starting to communicate on it. 
There has been some discussion in the past. Most of USDA's 
response was that it would be too hard of a task, tracing the 3 
to 400,000 animals would be more of a task than what could be 
accomplished. The idea of focusing, on the traceback, on the 
cohorts of the affected animals is something that is new and we 
haven't had the opportunity to do that yet.
    Senator Conrad. I would encourage you to do that, because I 
think that has merit, and that is really very focused. You are 
talking about a specific geographic area, you are talking about 
specific age. That would clearly dramatically reduce 3 to 
400,000 to a much more manageable number, and something that 
could realistically I think be accomplished, if we are talking 
in the range of 30 to 40,000 head. That may well be something 
that has real merit. Obviously, we want others to review the 
proposal and the specifics, but I think a traceback mechanism 
focusing on those that are the highest risk, that strikes me as 
having some merit.
    Dr. Schuler. And as I said, I am not sure of the numbers we 
would be looking at. We are still trying to pull that 
information together in our office, just to get an idea of what 
would be present in North Dakota.
    Senator Conrad. I think we could probably guess it would be 
a very dramatic reduction from the 3 to 400,000, wouldn't you 
agree?
    Dr. Schuler. Absolutely.
    Senator Conrad. We would be then focusing on really a 
fraction of that number, based on the screens that you have 
suggested here. OK?
    Dr. Schuler. With regards to being at least equal to 
international standards, the proposed rule regarding BSE 
Minimal Risk Regions allowed a standard that was less than 
international standards. OIE, Office of International 
Epizootics has standards for regions, particular standards, and 
we believe that having standards lower than international 
standards will actually make our hope of reestablishing export 
markets slim. We have seen the response of our major trading 
partners to the Canadian case and to the U.S. case. We are 
concerned that unless we maintain a ban that is at least equal 
to international standards, we will have a difficult time 
justifying reestablishing----
    Senator Conrad. And what share of our total market, our 
exports--my understanding is it is roughly 10 percent.
    Jeff, would you agree with that?
    Mr. Dahl. 10 percent on a dollar value? It is probably 
closer to 15.
    Senator Conrad. On a dollar value it is a little more, 
because what we are exporting are the higher grade cuts, 
especially to Japan. OK.
    Dr. Schuler. Another issue with regard to establishment of 
trade is the ruminant feed ban and the potential loopholes that 
are in it. The European Union has a Scientific Steering 
Committee that conducts an assessment of Geographic BSE Risk 
Assessment, or GBR. Nations or regions are classified according 
to the risk level that exists based on the factors that the 
Scientific Steering Committee has developed. Currently both the 
U.S. and Canada are classified as GBR Level II. That means, in 
the eyes of Steering Committee, BSE is unlikely to exist but 
they can not exclude it totally. When the Scientific Steering 
Committee reconvenes, Canada will, based on the criteria, move 
to GBR Level III. GBR Level III says it is likely to have BSE 
or it is present at a lower level. Based on the number of 
Canadian imports of live-cattle and feed in the U.S., the U.S. 
will probably also go to a GBR Level III.
    Senator Conrad. When would that occur?
    Dr. Schuler. Sometime after Christmas is the date I have 
heard.
    Senator Conrad. This coming Christmas?
    Dr. Schuler. No.
    Senator Conrad. This last Christmas? So we are talking 
about something that might occur in the near future? That would 
have consequences for our regaining export markets, would it 
not?
    Dr. Schuler. Yes, it will, because we will have slipped a 
step in status. The key to regaining our level of status, 
though, is to break the transmission cycle, and as we have 
heard, transmission of BSE from animal to animal only occurs 
through the feeding of ruminant protein. There is some debate 
about maternal transmission to calf, but that is still not 
known for sure.
    Senator Conrad. That is speculative?
    Dr. Schuler. Right. So the primary means of transmission is 
ruminant, ruminant feed. So therefore, eliminating loopholes in 
the ruminant feed ban is a must. As part of our ability to 
reestablish our export markets, some of the things we suggest, 
with Secretary Veneman's announcement that Specified Risk 
Materials will be removed from cattle slaughtered for human 
consumption, SRMs will be removed. Currently, SRM will be 
allowed to be rendered. We believe that the material should not 
be allowed to be rendered, since very few rendering plants have 
dedicated lines for rendering of ruminant products.
    Senator Conrad. So you could get cross-contamination?
    Dr. Schuler. Yes, potential cross-contamination.
    We also believe a poultry litter ban should be installed. 
Poultry litter should not be allowed. Currently that is 
allowed. There is a certain amount of spillage of ruminant 
proteins from poultry feed, and therefore, it gets fed back to 
ruminants.
    We believe that standards for maximum protein levels in 
tallow should be set. The U.S. does not at this time have 
maximum standards for the level of protein in tallow, and that 
would be a source of ruminant protein that--tallow that is used 
for feed.
    We believe that USDA should expand their feed ban 
compliance inspections.
    We also believe that border inspections should be improved 
to prevent the importation of feeds or feed ingredients that 
contain ruminant protein.
    And we also believe that further scientific review of the 
other debatable items, such as blood meal, and plate waste in 
ruminant feed would be considered.
    Another issue is BSE surveillance. The U.S. has to increase 
their surveillance in order to meet the requirements of our 
trading partners and the requirements of our consumers. We need 
to consider stringent standards with regard to those countries 
that impose a higher standard on their own, so we can be at 
least equal to the countries that we are expecting to export 
to.
    The removal of downer animals from slaughter channels has 
actually eliminated a source of samples for BSE surveillance, 
so we need to develop other creative strategies to provide 
adequate surveillance to get adequately statistically 
significant numbers.
    Senator Conrad. Maybe I could just pick up on that point, 
because some have said this ban on downer animals takes animals 
out of the system for testing that would help us identify 
whether we might have a problem or not, and so that we need to 
have some other method of testing those animals so that they 
are within the system, so we have a better data base. Is that 
what you are saying?
    Dr. Schuler. That is correct. We need to develop new 
strategies for obtaining samples on the animals that are no 
longer available because of downer.
    Senator Conrad. OK.
    Dr. Schuler. The U.S. currently uses immunohistochemistry 
or IHC as a standard test for BSE in this country. It is a 
costly test, a time consuming test, and we urge the use of 
quicker tests.
    Senator Conrad. Can you tell me, as a scientific matter, 
how long it takes to get test results using that method? I have 
been told 9 to 10 days. Is that correct?
    Dr. Schuler. I don't believe it is quite that long. It is 
probably more like 5 days. The quicker tests are highly 
sensitive and specific. We don't get a lot of false positives, 
not a lot of false negatives. They can be run in several hours. 
They can be set up to be done on a large scale. The cost is 
roughly $15 a test.
    Senator Conrad. So there is no reason we couldn't go to the 
quicker tests, in terms of kind of a broad screening, and then 
if we get a positive we could do an IHC.
    Dr. Schuler. That's right. That is what we would recommend 
is that the quick test be used and confirm with IHC when it is 
positive.
    There has been considerable talk about the U.S. animal 
identification plan. We are fully in support of that. It will 
provide the U.S. with a system to trace back animals. The goal 
is actually to be able to trace back animals within 48 hours of 
a situation where we need to trace them back. A lot of the plan 
is based on an electronic ID, and there is a U.S. animal ID 
plan that has been written, and there is a website available 
for reviewing that. I have included it in my comments.
    Senator Conrad. All right.
    Dr. Schuler. We do support it, and this document is still a 
document that is changing. It is open for public comment until 
the end of January. Actually, there is a budget attached in 
here that is on page 47 and 48 that I would ask you to review.
    Senator Conrad. Does that have $25 million the first year--
--
    Dr. Schuler. The number I have been working with is $20 
million the first year, but then again, if we do a rapid 
startup, it is going to cost more.
    Senator Conrad. I think Jeff mentioned they anticipate it 
could be $70 million the second year, that if they have a 
speed-up we may be talking about $100 million the first year. 
It is obviously very important, though, how much money needs to 
be allotted in the President's budget for this matter. As I 
heard Jeff say, he thinks it may be as much as $100 million if 
we have speeded up implementation. Would that be a conclusion 
close to your own.
    Dr. Schuler. Based on the projections in this document 
years 4, 5, 6 are $125 to $130 million a year. That is once the 
system----
    Senator Conrad [continuing]. Gets up.
    Dr. Schuler. Yes. I agree with Jeff that if we do a rapid 
startup of the system, it is going to cost more.
    We support solutions in keeping export information and 
keeping the information confidential. From an animal health 
perspective, really only thing we need is who has owned the 
animal, where it is moved to, and that is what our information 
should be restricted to. The United States Animal Health 
Association, which is the association of animal health 
officials of the country, passed a resolution which is attached 
to the testimony that encouraged--that accepted this plan as a 
work in progress, and encouraged its further development.
    Another issue that we don't hear talked about much is 
maintenance of ID. Living in a border state, it is clear to us 
that animals leak out of trade channels from which they are 
imported. It is not uncommon to find slaughter animals outside 
of slaughter channels, or feeder animals outside of feeder 
channels. As a matter of fact, it is not uncommon for ID tags 
to be removed prior to resale to improve market value of the 
animals. There are currently no restrictions on removal of ID 
tags from animals after they are imported into the U.S. We 
believe it is imperative that regulations be developed that 
prohibit the removal of the official ID from animals. USDA must 
enact internal emergency regulations prohibiting removal of any 
official ID from animals imported from a foreign country. A 
meaningful penalty must also be associated with the removal of 
an official ID. Actually, with the Washington case, the 
fortunate part about that is that the official ID still existed 
on that animal and it was a Canadian ear-tag.
    With regards to country-of-origin labeling, we believe that 
it is important with regards to protecting consumer confidence 
in the U.S. food supply. COOL would give consumers at least the 
opportunity to select products which they perceive as safe. We 
recommend COOL be fully implemented, so that U.S. consumers 
would have more specific knowledge as to the origin of the 
beef. This would arguably lead to a smaller decrease in the 
expected demand for beef as a result of a disease situation.
    Increased laboratory capacity is another issue that, 
because we have to increase BSE surveillance, we need to 
increase laboratory capacity. We urge Congress to provide 
funding to build that laboratory structure that is necessary as 
a result of the demands for increased surveillance.
    Along those lines, we urge completion of the USDA-APHIS-ARS 
Master Plan for a new facility at Ames, Iowa, to meet BSE 
surveillance activity, but also to meet other national needs 
for research and diagnosis and product testing.
    Another issue I would like to bring forward is the 
disparity party in USDA's approach to the prevention of the 
introduction of a disease into the country. With regards to 
BSE--or with regards to foreign animal disease, the USDA is 
proactive, meaning we allow importation only after the country 
has proved that they are free of the disease. In the case of 
BSE, we are reactive, in that we don't discontinue imports 
until the country has a case. This is disconcerting to us 
because of the long incubation period of BSE and because of the 
public health issue related to it. We believe that this places 
the U.S. at risk of importing BSE, since we are continually 
reacting to BSE cases. We urge the USDA to clearly define 
proactive standards for trade with regards to BSE.
    We talked about advanced meat recovery. Advance meat 
recovery systems are notorious for containing nervous tissue 
derived from the dorsal root ganglia, which is a specified risk 
material.
    Senator Conrad. I am not sure I even want to know what 
dorsal root ganglia is.
    Dr. Schuler. Dorsal root ganglia are the nerves that come 
off the spinal cord, close to the vertebral column. Just large 
nerves, basically, is are what they are.
    Senator Conrad. Now I know I didn't want to know.
    Dr. Schuler. In the worst case scenario of the Harvard Risk 
Assessment, approximately one-half of the infectious doses to 
which humans would be exposed would be derived from AMR 
products. We strongly urge the prohibition of AMR systems when 
slaughtering animals, or at least, extensive testing should be 
required for determining the presence of nerve tissue in the 
AMR meats.
    Yesterday, FSIS published rules which we haven't had time 
to review yet, but it is related to advanced meat recovery.
    In July of this year the Midwestern Association of State 
Departments of Agriculture, or MASDA, approved a resolution 
concerning BSE. That is attached to the testimony. We helped 
draft and fully support that resolution. That MASDA resolution 
was also sent to the National Association of State Departments 
of Agriculture.
    Senator Conrad. Is that included in your testimony?
    Dr. Schuler. Yes, it is included in the testimony. And that 
was adopted with some minor changes.
    We thank you for the opportunity to provide this 
information. We urge aggressive activity by USDA to reestablish 
our beef export markets. We urge the FDA to reevaluate the 
ruminant feed ban, and ask them to set science-based standards 
for tallow in feeds.
    As I alluded to earlier, the Harvard Risk Assessment says 
that ``Measures taken by the U.S. Government and industry make 
the U.S. robust against the spread of BSE to animals or humans 
should it be introduced to this country.'' However, with a 
finding of a case in the U.S., a reevaluation of the BSE 
prevention strategies is in order, and steps should be taken to 
further assure that all responsible measures have been taken to 
assure the protection of the animal and the public health of 
this country.
    Senator Conrad. Thank you very much.
    Senator Conrad. Terry, good to have you here. Please 
proceed with your testimony.

STATEMENT OF TERRY DUPPONG, DUPPONG'S WILLOW CREEK FARMS, GLEN 
ULLIN, NORTH DAKOTA; ON BEHALF OF THE RANCHERS-CATTLEMEN ACTION 
    LEGAL FUND, UNITED STOCKGROWERS OF AMERICA (R-CALF USA)

    Mr. Duppong. Thank you, Senator Conrad. Together with my 
wife Patty and two sons--Patty is at home doing chores--Ty and 
Casey, we own Duppong's Willow Creek Farms in Glen Ullin, North 
Dakota. We raise registered Angus cattle and finish cattle on 
our full-time ranching operation.
    Our organization has worked tirelessly on behalf of the 
American cattle producer. Our focus has been on protecting and 
promoting the interests of independent cattle producers, and it 
is from that perspective that I come before you today. I 
appreciate the opportunity to provide comments on this issue as 
it is very important to the cow-calf operators, backgrounders 
and independent ranchers who constitute the heart of this 
country's cattle and beef industry.
    The impact of the December 23, 2003 announcement by USDA of 
a presumptive positive case for BSE in a Washington state dairy 
cow was immediate and damaging to the United States live-cattle 
industry. We commend the USDA and its various departments, 
including APHIS, for doing an excellent job in calming consumer 
concerns and clearly explaining the BSE mitigation measures the 
U.S. began implementing in 1989. However, we are disappointed 
that the USDA has thus far ignored the economic interests of 
the United States cattle producers as its actions have of 
resulted in the subordination of U.S. cattle producers' 
interests to other interests, some of whom are our foreign 
competitors.
    Despite the fact that the presumptive positive cow was 
tagged with a Canadian export ear-tag, USDA chose not to 
disclose this factual information until 4 days after its 
announcement of a presumptive positive case for BSE. R-CALF 
U.S.A. had received numerous reports, beginning on December 
24th, from members familiar with the investigation, who 
indicated the cow was tagged with a Canadian ear-tag. On 
December 26, R-CALF contacted USDA urging the release of this 
factual information to prevent the market from overreacting. On 
December 27, USDA finally announced the fact that the cow was 
tagged with a permanent ear-tag indicating the cow was imported 
from Canada. However, this information was provided too late, 
as cattle markets already began to cement its application of a 
worst-case scenario for this situation. This worst-case 
scenario was that the United States likely had a native case of 
BSE, implying that it also had a significant break in its BSE 
prevention program, including the possible of a contaminated 
feed supply.
    This uncertainty in the market, caused largely because the 
market didn't have the factual information necessary to 
mitigate the formulation of a worst-case scenario, was absorbed 
by United States live-cattle producers, who suffered an 
approximate $15.91 per hundred to a drop of $190.92, on a 1200-
pound steerling.
    Senator Conrad. What is that as a percentage, Terry? Is 
that about 20 percent?
    Mr. Duppong. I would say in the neighborhood around 20 
percent.
    Senator Conrad. Around 20 percent?
    Mr. Duppong. Little less.
    Senator Conrad. I was trying to calculate the size of this 
industry in term of cattle sales, and we say we have got $3.6 
billion that we export, and that represents about 15 percent in 
dollar terms of our industry; isn't that right, Jeff?
    Mr. Dahl. Yes.
    Senator Conrad. So that would mean we have got about a $25 
billion industry, just in terms of cattle sales. The entire 
industry more broadly defined, I think, is calculated at $100 
billion. That goes to the next step. That goes to----
    Mr. Dahl. Dealerships----
    Senator Conrad. Hides. I just want to make sure that we get 
these numbers for the record, that we are talking about an 
industry, in terms of sales, it is about a $25 billion 
industry, $3.6 billion of that is export, in an industry that, 
overall, has approximately $100 billion impact on this nation.
    Would both Terry and Jeff agree with that basic outline of 
the diminishes of this industry?
    Mr. Dahl. Yes.
    Dr. Schuler. Yes.
    Mr. Duppong. Not only did the United States domestic cattle 
market receive insufficient information to apply anything but a 
worst-case scenario to the disease situation, but our 
international markets were equally uninformed.
    On December 23, APHIS submitted the United States' 
Emergency Report to the World Organization for Animal Health, 
the international organization that develops animal health 
standards for its 165 World Trade Organization members, 
including the United States. In its Emergency Report, APHIS 
stated that the source of the BSE agent and the origin of the 
infection was unknown, trace-back and trace-out investigations 
have been initiated. Thus, the United States' export customers, 
which are also members of the OIE and respectful of its 
mission, were officially notified that the United States had a 
presumptive positive case for BSE, but they were not informed 
that the infected cow was tagged with a Canadian ear-tag. It 
was not until at least December 28 that APHIS submitted its 
followup Emergency Report to the OIE stating that ``Preliminary 
tracing indicates that the animal may have entered the United 
States from Canada between the 28 August and 25 October, 
2001.'' It is, therefore, the case that the United States' 
nondisclosure of the Canadian ear-tag on the BSE-infected cow 
was assimilated by United States' export customers for at least 
as long, if not longer, than it was assimilated by the domestic 
market.
    Meanwhile, the OIE did not include the United States on its 
international list of ``Territories/Countries Having Reported 
Cases of BSE in Imported Animals Only.'' Instead, the OIE 
classified the United States as having a confirmed case on 
December 23, without any explanatory footnotes.
    The information the USDA provided, as well as the 
information it did not provide in a timely manner to the OIE, 
is significant, because the BSE standard established by the OIE 
and contained in the OIE Code provides that a country's disease 
ranking may not change if BSE is found in an imported animal. 
More specifically, if the United States discovers a BSE case in 
an animal that has been clearly demonstrated to originate 
directly from the importation of live cattle, and all of the 
offspring of the infected cattle are destroyed, then such a BSE 
case does not disqualify the United States from its ``BSE 
provisionally free country or zone'' ranking.
    It is important that Congress realize that if mandatory 
country-of-origin labeling were in place when the presumptive 
positive BSE case was announced, the financial harm experienced 
by United States cattle producers would not likely have 
occurred.
    With respect to the value of the United States beef export 
markets subject to risk as a result of the BSE case, R-CALF USA 
has reviewed the USDA-Foreign Agricultural Service's HS 10-
Digit exports and found that the value of beef and edible beef 
exports worldwide during the first 10 months of 2003 was $2.9 
billion. In calendar 2002, the total volume of United States 
cattle and beef exports was $3 billion.
    A risk analysis was recently conducted by APHIS to assess 
the risks associated with reopening the Canadian border to 
live-cattle and beef. In its analysis APHIS included additional 
risks associated with BSE if trade restrictions were enforced 
against the United States. It estimated that indirect losses to 
the United States firms that support ruminant exports would 
equal an additional $2.5 billion annually.
    In addition, APHIS estimated that more than 33,000 full 
time jobs, accounting for almost $1 billion in wages annually 
could be jeopardized. Thus it appears that $6.5 billion in 
export value is at risk.
    It is important to note that the United States live-cattle 
industry is a supply sensitive industry. If our borders remain 
closed to exports, the 2.4 billion pounds of beef destined for 
export annually will continue to stockpile; and the continuing 
flow of beef imports into the United States, in the amount of 
3.2 billion pounds annually, will certainly compound our 
already depressed cattle prices.
    This is precisely why, on the day of the BSE announcement, 
R-CALF USA sent an emergency letter to President Bush and 
Secretary Veneman urging them to immediately close the United 
States border to all imports of live cattle, beef, and both raw 
and manufactured livestock feed until the circumstances 
surrounding this suspected case are fully disclosed and 
understood. R-CALF USA explained that this measure was needed 
to prevent a market collapse caused by a buildup of excess beef 
supplies. Neither the President nor the Secretary has 
responded.
    The United States does not have a native case of BSE. Our 
efforts should be directed toward preventing the introduction 
of BSE from imported sources. To this end, the immediate 
implementation of COOL is the quickest way to begin accurately 
differentiating domestic live-cattle from imported cattle; and 
should any of our livestock importers have any other disease 
outbreak, we can immediately segregate these animals from the 
United States herd. Removing livestock from the Department of 
Treasury's list of exceptions from the general requirement to 
mark all imported products with a mark of origin, known as the 
J-list, would immediately enable us to accurately identify all 
animals that are not born and raised in the United States.
    Thank you.
    Senator Conrad. Thank you. That is very important 
testimony. I am very hopeful some of the news media that have 
left get that testimony provided to them today, and I am going 
to ask my staff to make sure that that occurs, because what you 
are saying here is very important. You are saying that the 
delay in USDA revealing what they knew put all of us at a 
greater risk in terms of effect in the market?
    Mr. Duppong. Correct.
    Senator Conrad. What you are saying, as I understand it, is 
that USDA knew that there was a Canadian tag on that cow that 
was identified as having BSE well in advance of when they 
released that to the public?
    Mr. Duppong. Correct.
    Senator Conrad. How many days elapsed between the time your 
people were informed that cow had a Canadian tag and when it 
was released to the public?
    Mr. Duppong. We were on conference calls over Christmas, 
but I think they listed it officially as the 26th, in about a 
24-48 hour period when USDA released its information. But the 
thing is, I think, if I can kind of go off the record here, I 
think that----
    Senator Conrad. Let me say, nothing is off the record here. 
This is all on the record.
    Mr. Duppong. And probably other people on this panel--or 
Wade can help me on this: I believe that that cow, December 
9th, was the first time in Iowa that this cow was probably 
determined to have BSE, or the slaughterhouse. At that point in 
time, if this was the tag----
    Senator Conrad. Have you got that?
    Dr. Schuler. If I could, this is a Canadian ear-tag 
(indicating), and what was portrayed to us on one of the early 
conference calls was that she had a small metal ear-tag in her 
ear, and as it turns out it was a Canadian tag. As I look at 
the back of that tag it says Province of Origin, so you would 
have known immediately it was a Canadian ear-tag.
    Senator Conrad. Very clear. It is right on the back. ``H of 
A, Saskatchewan,'' what does that mean, Larry?
    Dr. Schuler. Health of Animals, Saskatchewan.
    Senator Conrad. So that is a Canadian tag, and that has a 
number on the front that would be a tracking number?
    Dr. Schuler. That is correct. Individual number for each 
animal imported on that shipment. That would have been the 
number that would have been listed on the health certificate 
when she came across the border.
    Senator Conrad. This is the first time I heard this. This 
is the first time I heard that they knew this before they 
released it to the public, and the fact is that that affects--
all that information went out to all of those who are our 
buyers, right? All of those who are international buyers were 
not informed at the time they could have been, that this was 
not a U.S. animal at all, that this was an animal that had come 
in from Canada?
    Mr. Duppong. Or even the possibility that this animal was 
from outside our borders; that wasn't even a consideration, 
either, at their opening press conference.
    Senator Conrad. Well, I just say that is a very, very 
important fact that people should know, and I just alert those 
in the news media, I hope they pay very clear, special 
attention to your testimony here today. You are telling me 
something I did not know before this hearing.
    Mr. Duppong. I guess, just from a rancher's point of view, 
if you knew something on December 9th, such as this, where is 
the information trail from the 9th to the 23rd to find out--or 
the 26th, where this cow came from?
    Senator Conrad. Let's go through this. The animal was 
slaughtered on the 9th, was it not? The animal was slaughtered 
on the 9th. USDA made a public statement, not until the 26th 
that this animal had a Canadian tag?
    Mr. Duppong. Or the 27th.
    Senator Conrad. That is 17 days.
    And, Dr. Schuler, you testified it takes 5 days to get the 
test results?
    Dr. Schuler. Yeah, that is an estimation.
    Senator Conrad. When was the test performed on that animal, 
do we know? Is it performed at the time of slaughter?
    Dr. Schuler. Actually, the sample would have been sent to 
the National Veterinary Services Lab at Ames, Iowa, so there 
was time in shipment, since it was routine surveillance, it 
probably wasn't a high priority situation where it was done 
immediately.
    Senator Conrad. So there may have been some gap between the 
time the sample came in and the time the test was done?
    Dr. Schuler. Right.
    Senator Conrad. But what I hear Terry saying is that your 
organization heard before Christmas that this animal had a 
Canadian tag, and yet there was no release to the public, and 
more importantly, perhaps, no release to--well, what is 
critical is that there be a release to the public so that those 
who buy from us know that this was not a domestic animal. That 
is your point, correct?
    Mr. Duppong. Correct. They could have alleviated a lot of 
problems, saying that a case was found in the United States and 
that they are looking at it.
    Senator Conrad. What I hear you saying is that we would 
have had less of a price drop if people had been informed in a 
more timely way that this animal bore a Canadian tag?
    Mr. Duppong. Correct. Because if I am not mistaken, under 
international rules we are still a BSE-free state as a nation.
    Senator Conrad. Because it is not a domestic animal?
    Mr. Duppong. Yeah, if I am not mistaken. Canada had their 
first case in 1993, in which they revealed to the public that 
this cow was from Great Britain, and they released that 
information all at once.
    Senator Conrad. They released it all at once. That they had 
the cow, and that the cow was from Great Britain, so they were 
not adversely affected in the sense of being judged a country 
with BSE?
    Mr. Duppong. Correct. They did not lose their BSE-free 
status.
    Senator Conrad. That is big news. You are making big news 
at this hearing, to be able to tell us that that occurred here. 
That is a serious matter.
    Mr. Duppong. Yes, it is.
    Senator Conrad. We didn't get a presumptive finding until 
Morning Comments on December 29th. 28th, that would have come 
out, and it would have been in the morning news on the 29th. 
Well, that is very unfortunate. I thank you for bringing that 
to the attention of the committee. That is very important to 
understand.
    Why would they have delayed? I really don't understand 
that. Why wouldn't they have said very immediately that this 
animal carried a Canadian tag?
    Mr. Duppong. That is a really good question. Only 
speculation can answer that.
    Mr. Dahl. I asked that question, and the explanation I 
received was ramifications, if they were wrong, would have 
been, on trade, would have been great, so they were being 
cautious. I also was told----
    Senator Conrad. Well, gee, who are they worried about? 
Isn't this the United States Department of Agriculture? I think 
sometimes this Secretary gets confused about which country she 
is looking out for.
    During the Farm Bill fight she invited the Canadian 
Agriculture Minister down to Washington to testify against the 
United States Farm Bill, and now I find out--and this is the 
first I heard of this is at this hearing right now, with, 
Terry, you telling us that your organization knew, days before 
it was released to the public, that this animal carried a 
Canadian tag.
    It would seem to me the very first thing we do, if you are 
our Secretary of USDA, of the United States Department of 
Agriculture, as soon as you knew that, you would state it. If 
they knew that that carried a Canadian tag, that she had an 
obligation to inform the public immediately. That is the most 
disturbing thing I have heard here today. Anything else you 
want to add?
    Mr. Duppong. Some day we will do that off the record.
    Senator Conrad. I tell you----
    Mr. Duppong. I converse with Scott and Tim quite often.
    Senator Conrad. I tell you, Terry, honestly, this is the 
first I heard this was this morning at this hearing, and I find 
that very disturbing; that you knew about this, your 
organization knew about it before the public was informed, and 
by days. I mean that is not right.
    We will go on to our next witness. Are you finished?
    Mr. Duppong. Yes.
    Senator Conrad. We go to our next witness, Dr. Craig 
Galbreath, who is also a veterinarian, who is with Oakes Feed.
    Dr. Galbreath, thank you so much for being here.

  STATEMENT OF DR. CRAIG GALBREATH, OAKES FEED, OAKES, NORTH 
                             DAKOTA

    Dr. Galbreath. Thank you. Senator, ladies and gentlemen. As 
a veterinarian production consultant and producer, I have a 
vested interest in the reputation of our North Dakota 
agricultural products. In the years of my profession, I have 
had numerous interactions with the consumers of our livestock 
products in terms of beef, pork and lamb at all stages of 
development. The reputation of our North Dakota calves command 
respect from feed yards throughout the country. Our ability to 
diversify and capture added value from these products enables 
our farmers and ranchers to realize maximum profits from their 
respective enterprises.
    My position as a veterinarian in the Oakes community for 
the past 27 years has afforded me the opportunity to consult 
with my clients on many aspects of their production enterprise. 
Almost daily I visit with my clients in terms of marketing, 
genetic selection, health care and nutrition, whatever it takes 
to run a cow-calf operation. On these occasions I am often 
confronted with misinformation that causes me some concern for 
the safety and viability of our industry.
    About a year and a half ago I became acutely aware that 
some of our producers were either misinformed or uninformed 
about some of the rules in effect for ruminant feeding. I had 
two occasions where someone recommended using swine feed 
containing animal protein products for feeding cattle. Current 
evidence suggests that this is the single greatest risk for 
transmission of the prion, and breaches the safeguards that we 
have in effect to prevent BSE.
    Senator Conrad. Can I ask you, not the name of the person, 
but where did you hear this? Was this somebody in the business, 
or was this is a rancher?
    Dr. Galbreath. This is directly from the producers. They 
had received information from another party that they should be 
feeding the swine feed to their ruminant animals, and I can 
explain this in a little more depth here later.
    My experience in wearing two hats, both as a part-owner of 
a feed company, or a feed dealership, and also as a 
veterinarian, escalated my concerns over the improper 
nutritional consultations.
    About a year ago, I began a campaign to get feed dealers 
and nutritional consultants either licensed or certified by the 
state so that we had some idea who was out there giving 
information to our producers. If I was to ask Commissioner 
Johnson how many feed dealers we have in the state of North 
Dakota, he would not be able to give me an answer. However, if 
I went to the Department of Health and asked how many barbers 
are licensed in the State of North Dakota, I would get an 
answer. I think there is a disparity there that we need to 
address.
    I visited with our district representatives and senators at 
the state level. I have visited with the state veterinarians 
from both North and South Dakota, and also members of the 
Stockmen's Association, and different opportunities, hoping to 
address this problem at the state level. However, in view of 
the recent events that have occurred, I imagine this is going 
to be more of a Federal mandate than that we are able to keep 
it at the state level.
    Our duty now with the current BSE case is to be sure and 
protect the industry by use of sound scientific evidence to 
prevent further exposure to our cattle population, and instill 
a level of confidence to the consumer that assures them of the 
safety of our products.
    The events of the past 2 weeks have put an urgency to the 
proposals being discussed in the livestock industry. Consumer 
confidence and food safety issues that we previously have been 
comfortable with have been brought into question. Our response 
to these concerns will determine the future of our industry, 
and ultimately, the future of agriculture.
    Fortunately we do have some precedence to use in the form 
of the successful eradication programs for diseases such as 
Brucellosis and TB. At the time, these programs were also met 
with resistance from certain sectors of the animal industry. 
Identification and testing were paramount to the success of 
these programs, however, producer compliance was at times 
compromised and hindering the process. Ultimately, the programs 
worked and the industry has enjoyed the benefits of the 
integrity of our products.
    The current program for eradication of scrapie in sheep and 
goats is another model we can use to plan for the challenges 
confronting us with BSE. At the start of the program there was 
some producer reluctance for the identification process. 
However, with time and education, our producers now can see 
results that, coupled with the technology of DNA, which it was 
alluded to earlier, and I strongly believe that we need to 
continue research along those lines to develop testing of live 
animals, gives us solid ground to move forward toward the goal 
of eradication of BSE in North America.
    Thank you.
    Senator Conrad. Thank you very much. Just excellent 
testimony. I am going to come back to a point you made in a 
moment.
    I would like to recap a number of important statistics here 
for the benefit of the news media people who are here, and 
others that might be interested.
    What we have learned here today is we have got an overall 
industry in terms of cattle sales value of $25 billion a year. 
$3.6 billion of that are exports. It is about 15 percent of the 
total. I believe we have, in overall terms, when more broadly 
defined, when you look at all the elements of the industry--you 
look at feed, you look at hides, you look, at more broadly 
defined, the industry, itself, it is a $100 billion industry in 
total. I think we have heard that there is consensus on those 
numbers.
    I am told that we have about a hundred-million head in this 
country.
    Jeff, is that your understanding?
    Mr. Dahl. Little more than that, but that is fine.
    Senator Conrad. About a hundred-million head. We slaughter 
about 36 million head per year; is that approximately correct? 
How many head do we have in North Dakota?
    Mr. Dahl. 1.2 million.
    Senator Conrad. About 1.2 million head in North Dakota. So 
that gives us kind of a rough understanding.
    I asked the previous panel members, and I would like to go 
to each of you and ask you, as well, I have recommended five 
separate items.
    First of all, that live-cattle imports, that the Secretary 
was considering allowing, be prevented. Let me just go down the 
line.
    Jeff, would you agree with that?
    Mr. Dahl. Absolutely.
    Senator Conrad. Larry?
    Dr. Schuler. Yes,.
    Senator Conrad. Terry, would you agree with that?
    Mr. Duppong. Yes.
    Senator Conrad. Doctor?
    Dr. Galbreath. Yes.
    Senator Conrad. Second, I have called on USDA, in a letter 
to the Secretary, to review the previous decision to allow 
boxed beef from Canada in, until we more clearly know what the 
source of those products are.
    Jeff, would you agree with that position?
    Mr. Dahl. If we say that we are basing everything on 
science, and we say that the causative agent for BSE has never 
been found in the muscle cuts, blood or milk, and we realize 
if--for our export markets out of this country, we use 
protection practices all the time, and Canadian is no 
exception, that they will do the same to us as we do to them, 
basically. It is tough to say let's slam the border completely 
shut, but, however, let me followup on that with a couple 
points. Canada--and I think Larry has got some more information 
on this--is closing the border to all beef products from the 
U.S., including meat, and that is not based on science, that is 
a protectionist attitude. So if they are doing that, I think 
they are shooting themselves in the foot. Will closing the 
border to Canadian meat coming down here help stabilize the 
market? I think it would. So in the end, I am in favor of it.
    Senator Conrad. Larry?
    Dr. Schuler. Yeah, I would agree, and I agree with Jeff it 
has to be science-based. As it is now, we are in the middle of 
an investigation of a BSE case. As you said, we don't know 
clearly what the results of that investigation are going to 
punch out, so at least continue the ban until the investigation 
is complete, so we know the source of feed and the source of 
animals.
    Senator Conrad. I think that is clearly a prudent measure.
    Dr. Schuler. As Jeff mentioned, I did download from the 
Canadian Inspection Agency website the restrictions on imports. 
It does include all live animals, all live ruminants and 
genetics, and ruminant-derived products, including ruminant 
animal beef.
    Senator Conrad. That is pretty clear.
    Terry?
    Mr. Duppong. Yeah, I would agree.
    Senator Conrad. Doctor?
    Dr. Galbreath. I would provisionally agree, kind of the 
same information that Dr. Schuler and Jeff previewed with.
    Senator Conrad. That is, it ought to be science-based?
    Dr. Galbreath. You need to have it science-based. We need 
to know that there is a certain age restriction here, and also 
we need to know about the spinal cord ingredients that may or 
may not be in that boxed meat, under those provisions. And I 
think we have to the remember----
    Senator Conrad. It should be on a provisional basis?
    Dr. Galbreath. Exactly. Because the BSE right now is a 
United States issue, but it is also a North America issue, and 
we need to remember that the border works both directions.
    Senator Conrad. A national ID system that the Secretary has 
ordered implemented immediately ought to be federally funded. A 
Federal mandate ought to be federally funded.
    Do you agree with that, Jeff?
    Mr. Dahl. Yes.
    Dr. Schuler. Yes.
    Mr. Duppong. I agree. I don't know how to get it done, but 
I agree.
    Senator Conrad. Dr. Galbreath?
    Dr. Galbreath. Here, again, I think it should be federally 
funded, but I do think there should be some producer 
cooperation, because there is the opportunity for the producers 
to realize some additional benefit from having individual 
identification on their animals, whether it be traceback to 
them through breeding stock, or if it is the additional value 
of the hides because branding may not be needed any longer if 
this is implemented. The more important thing that comes to 
mind for our practice area is if these animals are individually 
identified, we do have the capability of getting additional 
carcass data back for our producers, as opposed to no 
identification at all. I do think----
    Senator Conrad. And that has a value?
    Dr. Galbreath. That has a value. And I think producers will 
be aware of it, and I think they will be receptive if it is 
approached properly.
    Senator Conrad. OK. Country-of-origin labeling, that there 
is a clear connection in terms of the previous position of 
USDA, that is, on the cost side. If you are going to have a 
system of livestock identification, obviously, that leads you 
to be able to identify country of origin.
    Jeff?
    Mr. Dahl. I agree, it does, and if you can mesh the two 
together, it goes a long ways to solving any of the debate that 
is going on right now.
    Senator Conrad. Larry?
    Dr. Schuler. I agree with country-of-origin labeling. I 
think some of the rules that have been proposed have been a 
little cumbersome, and I think we need to develop some 
different rules.
    Mr. Duppong. R-CALF would be a supporter of COOL. We did a 
real good job of getting it into the legislation in the Farm 
Bill. It is not perfect, but we have to realize as time goes on 
we have to get going at this as things change every day.
    Dr. Galbreath. This is a unique opportunity to implement 
COOL restrictions along with the national ID system, so by all 
means.
    Senator Conrad. Let me go to a fifth point I have made, and 
it is relatively small in terms of cost, but I think there is a 
principle involved, and that is those ranchers, those producers 
who have herds that are affected ought to have a substantial 
part of their costs covered. That is, these people have a 
potentially catastrophic financial problem through no fault of 
their own. Certainly that is the case with respect to the herd 
in Washington, and that as a matter of principle there ought to 
be compensation.
    Jeff, your reaction?
    Mr. Dahl. I agree. There is precedence for both federally 
and in state on indemnity for cattle that are put down for 
disease reasons. So I think it is already, the mechanism is 
already there.
    Senator Conrad. It is in place. It needs to be implemented.
    Larry?
    Dr. Schuler. I agree with Jeff. Historically speaking when 
the other eradication programs, when animals were destroyed 
because of tuberculosis, for example, those producers were 
indemnified the value of the animal.
    Senator Conrad. How did it work? Was it a full 
indemnification?
    Dr. Schuler. Previously, it was a set amount regardless of 
the value of the animal. In today's world we are dealing with 
appraised values, yes.
    Senator Conrad. Appraised values? OK.
    Terry?
    Mr. Duppong. I think it would be good, and I think one 
standpoint is because the people that do have cattle from 
Canada, we don't want to scrutinize them. We want to give them 
a tool that will bring it to the forefront to admit they have 
these cattle to identify them. It is estimated that between 15 
and 20 percent of the cattle that have come in through Canada 
have lost importation tags.
    Senator Conrad. Let me stop you on that, and make sure I 
understand what you are saying. You are testifying here that 
from what you have learned, that some significant portion of 
cattle coming in from Canada have lost their identification 
tags?
    Mr. Duppong. Correct.
    Senator Conrad. And how does that occur?
    Mr. Duppong. It just gets ripped out of the ear, the long 
fence lines, so I think we need a tool to make these people 
want to come forward and identify these cattle.
    Senator Conrad. OK. Let me just go back to the matter on 
Canadian boxed beef. What I have called for and what I wrote 
the Secretary is I asked her to review the decision to allow 
boxed beef into this country, in light of our new safeguard 
measures, and asked the fundamental question: Does Canada have 
equivalent measures? You know, none of this is going to work if 
we have got a system but there is all this leakage--you know 
what I am saying--across the border, and they have got a lesser 
standard than we do. In light of that, I would ask the 
question.
    Dr. Galbreath, do you know about the Canadian compliance on 
the feed ban? We have heard a lot of rumors, and there have 
been some discussed here today, with respect to there not being 
close evaluation and scrutiny on the ban they have in place. 
What have you heard? What is your understanding?
    Dr. Galbreath. All I cite is some of the reference studies 
that were done back in 2002, when they actually did surveys in 
the United States and Canada for compliance, and basically, 
FDA--the United States gave a rather glowing report in favor of 
the compliance; however, if you look at the numbers, you find 
that certain feed mills and certain feed establishments were 
inspected, whereas some of the smaller family operations or 
smaller industry operations were not inspected. So there is a 
little problem with that right away. Then as you read the 
numbers, the initial numbers, you find, if my memory serves me 
correct, about an 8 percent noncompliance either in terms of 
labeling or actually having the product in their meat and bone 
meal, and then extrapolate that to the small mills and the 
small operations that aren't even inspected. There is a 
potential for some risk. I can't speak for the Canadian sector 
because I really don't have any information on those.
    Senator Conrad. Do you think that the same standards that 
apply here ought to apply there?
    Dr. Galbreath. Yes. The ruminant ban that came in in 1997 
is a North American ruling, and needs to be addressed both in 
terms of the Canadian influence and also the United States 
influence.
    Senator Conrad. Just to repeat, Larry, your understanding 
is, from what you have drawn down from the Canadian website, is 
that they have imposed a ban not only on live animals going 
from our country to theirs, but also on boxed beef?
    Dr. Schuler. That is correct. And there is no 30-month 
limit. They will accept boxed beef from Canada on less than 30 
months of age. There is no mention of a 30 month restriction.
    Senator Conrad. Well, I tell you, to me it is very clear we 
ought to impose that precise same requirement on them, and on 
both sides it ought to ultimately be science-based, and maybe 
we need to bring them to their senses. This cow came from 
Canada. This was not a U.S. cow, and they have put at risk our 
entire industry, $25 billion industry just in terms of cattle 
sales, in terms of the broader effect in this economy, a $100 
billion industry. As we know, agriculture is the dominant part 
of North Dakota's economy. It is the biggest part of our 
economy. We have about two-thirds of our agricultural income is 
crop income, about one-third is livestock. We are talking about 
a very substantial threat to the economic well-being of our 
state, and certainly of this industry. And we have got to take 
the steps to protect our consumers, without question, and to 
protect our industry, and I hope that message comes from this 
hearing loud and clear.
    I want to thank all of you. We have come to the end of our 
period for this hearing. I want to thank each of you for 
testifying, it is certainly valuable to the committee, and I 
believe the U.S. Senate will benefit from the knowledge that 
you have imparted through this hearing.
    With that, I will adjourn the hearing.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]

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