[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW THE STATE OF THE BEEF INDUSTRY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
LIVESTOCK, DAIRY, AND POULTRY
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
APRIL 6, 2011
__________
Serial No. 112-8
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
FRANK D. LUCAS, Oklahoma, Chairman
BOB GOODLATTE, Virginia, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
TIMOTHY V. JOHNSON, Illinois TIM HOLDEN, Pennsylvania
STEVE KING, Iowa MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas LEONARD L. BOSWELL, Iowa
K. MICHAEL CONAWAY, Texas JOE BACA, California
JEFF FORTENBERRY, Nebraska DENNIS A. CARDOZA, California
JEAN SCHMIDT, Ohio DAVID SCOTT, Georgia
GLENN THOMPSON, Pennsylvania HENRY CUELLAR, Texas
THOMAS J. ROONEY, Florida JIM COSTA, California
MARLIN A. STUTZMAN, Indiana TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio KURT SCHRADER, Oregon
AUSTIN SCOTT, Georgia LARRY KISSELL, North Carolina
STEPHEN LEE FINCHER, Tennessee WILLIAM L. OWENS, New York
SCOTT R. TIPTON, Colorado CHELLIE PINGREE, Maine
STEVE SOUTHERLAND II, Florida JOE COURTNEY, Connecticut
ERIC A. ``RICK'' CRAWFORD, Arkansas PETER WELCH, Vermont
MARTHA ROBY, Alabama MARCIA L. FUDGE, Ohio
TIM HUELSKAMP, Kansas GREGORIO KILILI CAMACHO SABLAN,
SCOTT DesJARLAIS, Tennessee Northern Mariana Islands
RENEE L. ELLMERS, North Carolina TERRI A. SEWELL, Alabama
CHRISTOPHER P. GIBSON, New York JAMES P. McGOVERN, Massachusetts
RANDY HULTGREN, Illinois
VICKY HARTZLER, Missouri
ROBERT T. SCHILLING, Illinois
REID J. RIBBLE, Wisconsin
______
Professional Staff
Nicole Scott, Staff Director
Kevin J. Kramp, Chief Counsel
Tamara Hinton, Communications Director
Robert L. Larew, Minority Staff Director
______
Subcommittee on Livestock, Dairy, and Poultry
THOMAS J. ROONEY, Florida, Chairman
BOB GOODLATTE, Virginia DENNIS A. CARDOZA, California,
STEVE KING, Iowa Ranking Minority Member
RANDY NEUGEBAUER, Texas DAVID SCOTT, Georgia
K. MICHAEL CONAWAY, Texas JOE COURTNEY, Connecticut
STEPHEN LEE FINCHER, Tennessee TIM HOLDEN, Pennsylvania
TIM HUELSKAMP, Kansas LEONARD L. BOSWELL, Iowa
SCOTT DesJARLAIS, Tennessee JOE BACA, California
CHRISTOPHER P. GIBSON, New York KURT SCHRADER, Oregon
REID J. RIBBLE, Wisconsin WILLIAM L. OWENS, New York
Michelle Weber, Subcommittee Staff Director
(ii)
C O N T E N T S
----------
Page
Boswell, Hon. Leonard L., a Representative in Congress from Iowa,
submitted resolution........................................... 37
Cardoza, Hon. Dennis A., a Representative in Congress from
California, opening statement.................................. 2
Rooney, Hon. Thomas J., a Representative in Congress from
Florida, opening statement..................................... 1
Prepared statement........................................... 2
Witnesses
Strickland, James A. ``Jim'', President, Florida Cattlemen's
Association; Member, National Cattlemen's Beef Association;
Owner, Strickland Ranch, Myakka City, FL....................... 3
Prepared statement........................................... 5
Burkholder, Anne G., Vice Chairman, Cattle Health and Wellbeing
Committee, National Cattlemen's Beef Association; Owner, Will
Feed, Inc., Cozad, NE.......................................... 10
Prepared statement........................................... 12
Bull, Kenneth, Vice President for Cattle Procurement, Cargill,
Wichita, KS.................................................... 19
Prepared statement........................................... 21
HEARING TO REVIEW THE STATE OF THE BEEF INDUSTRY
----------
WEDNESDAY, APRIL 6, 2011
House of Representatives,
Subcommittee on Livestock, Dairy, and Poultry,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 9:34 a.m., in
Room 1300 of the Longworth House Office Building, Hon. Thomas
J. Rooney [Chairman of the Subcommittee] presiding.
Members present: Representatives Rooney, Goodlatte, King,
Neugebauer, Conaway, DesJarlais, Gibson, Cardoza, Scott, and
Holden.
Staff present: Patricia Barr, John Goldberg, Tamara Hinton,
John Konya, Debbie Smith, Pete Thomson, Michelle Weber, Nathan
Fretz, Liz Friedlander, Mary Knigge, Robert L. Larew, and Jamie
Mitchell.
OPENING STATEMENT OF HON. THOMAS J. ROONEY, A REPRESENTATIVE IN
CONGRESS FROM FLORIDA
The Chairman. This hearing on the Subcommittee on
Livestock, Dairy, and Poultry to review the state of the beef
industry will come to order.
I would like to thank my Ranking Member, Mr. Cardoza, for
working with us in preparing this hearing today. I would also
like to welcome our witnesses and thank them for taking the
time out of their busy lives to participate in this process. I
would also like to thank Mr. Scott for joining us today, and I
look forward to his comments and questions as well.
Today's hearing is structured to provide an overview of our
nation's modern beef production sector. We have tried to span
the range of this complex business in a brief hearing with
three witnesses who represent a cow-calf operation in my home
State of Florida, a family-owned 6,000 head feeding business in
Nebraska, and a large beef packer headquartered in Kansas.
I learned an interesting fact recently. The United States
domestic cattle herd represents seven percent of the global
inventory while producing 20 percent of the global beef supply.
Clearly, our constituents are doing amazing work in the beef
sector.
Our witnesses have been asked to provide a description of
the beef production system from their perspective, discuss the
economic situation as they see it today, and list some of our
public policy challenges. This hearing and those in the
planning stages for other sectors is intended to lay the
foundation for the work of the Livestock, Dairy, and Poultry
Subcommittee.
The animal agriculture industry is very complex, and the
issues of importance are numerous. We hope these initial
hearings will provide our Subcommittee with the frame of
reference and perspective that will guide our work throughout
this Congress.
As the session proceeds we will wade into more topics in
greater detail, and I appreciate the interest and the input of
my colleagues regarding these matters. I will continue to
welcome and encourage everyone to offer suggestions as we move
forward with our Subcommittee's agenda.
[The prepared statement of Mr. Rooney follows:]
Prepared Statement of Hon. Thomas J. Rooney, a Representative in
Congress from Florida
I would like to thank my Ranking Member, Mr. Cardoza, for working
with us in preparing for this hearing today. I would also like to
welcome our witnesses and thank them for taking time out of their busy
lives to participate in this process.
Today's hearing is structured to provide an overview of our
nation's modern beef production sector. We have tried to span the range
of this complex business in a brief hearing with three witnesses, who
represent a cow-calf operation in my home State of Florida; a family-
owned, 6,000 head feeding business in Nebraska; and a large beef packer
headquartered in Kansas.
I learned an interesting fact recently: the United States domestic
cattle herd represents seven percent of the global inventory, while
producing 20 percent of the global beef supply. Clearly, our
constituents are doing amazing work in the beef sector.
Our witnesses have been asked to provide a description of the beef
production system from their perspective, discuss the economic
situation as they see it today, and list some of their public policy
challenges.
This hearing, and those in the planning stages for other sectors,
is intended to lay the foundation for the work of the Livestock, Dairy,
and Poultry Subcommittee. The animal agriculture industry is very
complex and the issues of importance are numerous. We hope these
initial hearings will provide our Subcommittee with a frame of
reference and perspective that will guide our work throughout this
Congress.
As the session proceeds, we will wade into more topics in greater
detail. I appreciate the interest and input of my colleagues regarding
these matters. I will continue to welcome and encourage everyone to
offer suggestions as we move forward with our Subcommittee's agenda.
The Chairman. I would now like to recognize Ranking Member
Cardoza for his opening statement.
OPENING STATEMENT OF HON. DENNIS A. CARDOZA, A REPRESENTATIVE
IN CONGRESS FROM CALIFORNIA
Mr. Cardoza. Thank you, Mr. Chairman, and thank you for
having this hearing today. Thank you to our witnesses for
taking time out of your busy schedules and sharing with us your
experiences in the industry.
If we watch the news and read the headlines, we would
believe that all of agriculture is flying high these days.
However, those of us who grew up in farming communities
understand the inner workings of the industry and know that
each commodity is different. That is why I am very happy to
hold this hearing and participate in this hearing today to
discuss beef production, the trends in the industry and the
problems this Committee should focus on as we move forward.
In California, we have seen volatile prices and increased
input costs. This trend is disturbing, but numbers alone do not
tell the whole story. Through successful farm bill programs
like EQIP and Water Conservation Fund, cattlemen in California
and across the country have worked tremendously hard to
conserve water, protect our land, and improve our air quality
while also feeding the families of America and the world.
We as a Committee have a responsibility to promote policies
that will keep the industries alive and thriving. A healthy
beef industry not only puts affordable food on our table, it
provides good jobs for our workers and strengthens national
security by making us less dependent on other countries for our
food supply. Nonetheless, in this tight budget climate we need
to prioritize programs that are economically and efficiently
working for our farmers. We need to focus our resources on
initiatives that best help our cattlemen and the beef industry
as a whole.
I look forward to hearing from our witnesses today about
what is and what is not working. Thank you again for being here
with us.
The Chairman. Thank you, Mr. Cardoza. The chair would
request that other Members submit their opening statements for
the record so the witnesses may begin their testimony and
ensure that there is ample time for questions.
I would like to welcome our panel of witnesses to the
table, and it is, from left to right, Mr. Jim Strickland, Owner
of Strickland Ranch, on behalf of the Florida Cattlemen's
Association, Myakka City, Florida; Ms. Anne Burkholder, Owner,
Will Feed, Inc., on behalf of the National Cattlemen's Beef
Association in Cozad, Nebraska; and Mr. Ken Bull, Vice
President for Cattle Procurement, Cargill, Wichita, Kansas.
We will begin with Mr. Strickland. Mr. Strickland, please
begin when you are ready.
STATEMENT OF JAMES A. ``JIM'' STRICKLAND, PRESIDENT, FLORIDA
CATTLEMEN'S ASSOCIATION; MEMBER, NATIONAL CATTLEMEN'S BEEF
ASSOCIATION; OWNER, STRICKLAND RANCH, MYAKKA CITY, FL
Mr. Strickland. Good morning. Mr. Chairman and Ranking
Member Cardoza, my name is Jim Strickland and I am President of
the Florida Cattlemen's Association and I am pleased to be here
with you.
I raise cattle as a family business, but being a small
producer does not mean my business is simple. In addition to
managing my herd, I must manage land, water, and other
resources. I compete in foreign and domestic markets. Like all
other producers, I have to care for the health of my cattle and
deal with weather extremes. Additionally, because I focus on
producing pedigree cattle, some sold for breeding rather than
harvest, I also concern myself with genetics.
I care about the environment. My business depends on clean
air, clean water, and clean country and healthy stock. Right
now, the EPA is in the process of reviewing its National
Ambient Air Quality Standards for coarse particulate matter,
more commonly called dust. With their track record, EPA's
promise of not regulating rural dust gives us in rural America
no comfort. Making this standard twice as strict will put
entire regions of this nation's agriculture production in
violation of the standard, at a time when we are supposed to be
feeding a growing world population.
Preventing farming and ranching activities because we kick
up too much dust goes against all logic. EPA's numeric nutrient
criteria restrictions in my home State of Florida strike me and
many others as being based on dubious background data and their
impact on water quality is unproven.
One element is not debatable, and that is some farmers and
ranchers will be forced off the land. Another challenge that I
have in just keeping my operation whole, most of my worth is in
land, land that is necessary to what I do to earn my living. It
is not readily divisible and is far from liquid. If I sell off
a chunk of my ranch for any reason, my economic model falls
apart.
My son is in the Army and is in a combat zone as we speak.
I do not know if he will stay in the Army or if he will choose
to follow me into the cattle business or not, but I want him to
have that option. In order to do that, a permanent end to the
estate tax is required, but if you cannot find a way to do
that, please find some kind of exemption for those of us that
work the land.
Even with these challenges, there are still opportunities.
I raise cattle, but my business is selling beef. Like most of
my fellow ranchers and fellow competitors, I must be in tune
with what the consumers want to see in the meat case at their
local market. By recognizing the importance of consumer
preferences, cattle producers have created innovative marketing
programs, improved the quality of beef, and given the consumer
what he or she wants. In the old days, all cattle in a pen were
auctioned off for the same average price. Cattlemen had no
incentive to produce a value-added product. Why invest to
produce a higher quality steak when you receive no more for a
quality steer than the next man gets for an animal of lesser
quality?
Participating in marketing arrangements brings other
benefits. Most importantly, we have the best price risk tools
ever. The path from calf to porterhouse is strewn with
opportunities to lose money. Forward contracting contracts
permit me to shift some of the risk to others, but these
opportunities are at risk due to the proposed GIPSA rule which
I oppose. Under existing law, you must show that a packer or
processor harmed the market by engaging in illegal actions such
as collusion, price fixing, et cetera. This is known as showing
competitive injury. Under the new definitions included in the
proposed rule, competitive injury and the likelihood of
competitive injury are redefined and made so broad that mere
accusations without economic proof will suffice for USDA or an
individual to bring a lawsuit against a buyer, packer, or
processor.
Anyone who has ever raised a child or listened to
schoolyard bickering knows that fair is an elastic term. The
rules of eight U.S. circuit courts have upheld the need to show
competitive injury to the market before you can sue. Do we want
to throw out these? The best thing Congress can do to ensure a
fair and competitive beef industry is use its oversight power
to see that the laws on the books are uniformly and carefully
enforced, and that is not the case today.
The failure of Eastern Livestock Company last fall left
ranchers and livestock auction barns holding the bag on more
than $130 million in bad checks. Hundreds were affected, and
several cattle operations may yet go under. This might have
been avoided, had GIPSA been faithfully executing a statutory
responsibility to audit and oversee the Eastern situation.
While it is an honor to be here today representing United
States cattlemen and women, I would rather be home with my wife
raising cattle. I appreciate your invitation. It is my duty to
be here and give voice to these policy discussions, and I thank
all of you for your service to our country, and for your time
and consideration.
[The prepared statement of Mr. Strickland follows:]
Prepared Statement of James A. ``Jim'' Strickland, President, Florida
Cattlemen's Association; Member, National Cattlemen's Beef Association;
Owner, Strickland Ranch, Myakka City, FL
Mr. Chairman, Ranking Member Cardoza, and Members of the
Subcommittee, my name is Jim Strickland. I am President of the Florida
Cattlemen's Association and am pleased to be with you today.
America's cattle producers range from giant operations to very
small family ranches where producers raise cattle to supplement their
income from a wage paying job. I raise cattle as a family business. I
do a few other things but like the vast majority of other producers in
the United States, I am a small producer.
However, let me be clear. Being a small producer does not mean my
business is simple. In addition to managing my herd, I must manage
land, water and other resources. I compete in foreign and domestic
markets. Like all other producers, I have to care for the health of my
cattle and deal with weather extremes. Additionally, because I focus on
producing pedigreed cattle, some sold for breeding rather than
slaughter, I also concern myself with genetics.
In addition to all of this, I spend a lot of my time thinking about
government, laws, and regulation. I do not do this because I am a
political philosopher but because government at all levels--in this
country and abroad--has created a multitude of rules that affect the
way I do business.
But I am not here to engage in a diatribe about ``big government''
or to push a partisan or ideological agenda.
I know enough American history, to know that many regulations are
enacted for excellent reasons--healthier food products, cleaner water,
fighting rapacious business practices and more. I know that business
practices change and that new laws and regulations are sometimes needed
to ward off new ills.
With these cautions voiced, I must say over the past century, we
have seen far more regulations and laws added than taken off. We have
learned that laws and regulations have unintended consequences and that
they can introduce wasteful habits that benefit few and harm many.
With that off my chest, here are my personal views on some of the
government-related issues I face in my business.
Conservation and the Environment
Let me begin by stating that cattlemen who knowingly and willfully
violate the Clear Air and Clean Water Acts should be prosecuted. These
criminals gain unfair advantage in their competition with honest
producers and degrade life for all.
I care about the environment. My business depends on clean air,
clean water, clean ground and healthy stock. I admire and respect the
professionals at the Environmental Protection Agency (EPA). They have
an extremely complicated job as they try to understand the nearly
infinite interrelationships of the ecosystems upon which all of us
depend. Even so, I think they often overreach on evidence that does not
meet the test of clear and accepted scientific standards. Their actions
damage producers without evidence of benefit to the environment or
public well-being. The cumulative effect is to force agricultural
producers out of the business with little corresponding benefit.
Right now, the EPA is in the process of reviewing its National
Ambient Air Quality Standards for coarse particulate matter, more
commonly called dust.
I would like to clear some things up related to the review of EPA's
dust standard First, EPA claims they are not and have no intention of
regulating dust. Unfortunately, dust is already regulated under the
current coarse particulate matter standard. Therefore they are already
regulating farm dust but at a level that, while challenging, is
manageable. Second, while EPA has not officially proposed a lower
standard, farmers and ranchers can see the writing on the wall. Under
the current ``review'' of the dust standard, EPA's staff recommended to
Administrator Lisa Jackson that she could either keep the standard the
way it is, or make it twice as stringent. With their track record,
EPA's promise of not regulating rural dust gives us in rural America no
comfort. Lastly, making this standard twice as strict will put entire
regions of this nation's agricultural production in violation of the
standard. At a time when we are supposed to feed a growing world
population, preventing farming and ranching activities because we kick
up too much dust goes against all logic.
The total maximum daily load (TMDL) action surrounding the
Chesapeake Bay and the numeric nutrient criteria restrictions in my
home state of Florida strike me and many others as being based on
dubious background data. Their impact on water quality is unproven. One
element is not debatable, however, is that these actions will have
severe, negative effects on production agriculture in the affected
areas. Some farmers and ranchers will even be forced off the land.
Taking some land out of agricultural production will eventually
increase pressure to change land use regulations to permit more
residential and industrial development around the shores of the
Chesapeake and the beaches of Florida. The EPA says these water issues
affect a limited area, but experience and intuition tell me that they
are likely to spread to other watersheds across the country.
All of us, especially those in charge of protecting the
environment, must recognize that human beings and civilization change
the environment. Before Columbus, there were no cattle in this
hemisphere. The Great Plains had never been plowed. No reasonable
person wants to unwind these changes. Our challenge is to manage these
changes with a reasoned, scientific approach that proceeds in a manner
that affords adequate protections without destroying productivity.
Trade
International trade in cattle began long before the United States
of America. The ancestors of the Devon Red cattle George Washington
raised were imported to what became the United States about 100 years
before he was born.
American cattlemen have always been strong believers in
international trade. We support aggressive negotiating positions to
open markets and to remove spurious ``health regulations'' and other
trade barriers intended to keep our products out of foreign markets. As
you are aware, we continue to fight to recover the market share we once
had in many countries, including Korea, China and Japan. We ask that
you continue to help us by ending pseudo-scientific trade barriers
designed to exclude us from foreign markets. International trade is
vital to the sustainability of the U.S. cattle industry. We must look
to the 96 percent of the world population outside our borders as
markets for our products. We applaud and encourage the Subcommittee's
continued oversight of the enforcement of any trade pact to which
American agriculture is a party. And we ask that you fight to pass of
the South Korea, Panama and Colombia trade agreements.
Research
Research in new production methods, nutrition and animal diseases
is an important part of Federal agricultural policy. The U.S.
Department of Agriculture's (USDA) research is critical in all aspects
of our business. The research and extension activities help identify
new cattle production methods that make our business safer and more
efficient. Animal health research aids in the control and eradication
of animal diseases, prevents intrusion of foreign animal diseases and
helps to preempt new diseases. These activities keep our national herd
healthy and enhance the export of our beef and cattle. Nutrition
research validates that lean beef plays a critical role in a well-
balanced, nutrient-dense diet.
I want to emphasize the importance of USDA's Agricultural Research
Service (ARS) centers in all regions of the country. I was very
dismayed recently to learn of the possible closure of the Sub-Tropical
Agricultural Research Station in Brooksville, Fla., which is one of
only three ARS Beef Cattle Research Stations in the country. The other
two are located in Nebraska and Montana. The work of the Florida center
cannot be replicated or replaced by the other two centers because of
the vast differences in cattle genotypes, soil types and unique
environments. The Brooksville center has the potential to impact nearly
\1/3\ of the beef cow population in the nation. It seems very unwise to
shut down this important part of the national animal research
infrastructure.
Additionally, I would reiterate that the collaborative research
USDA's ARS conducts cooperatively with the nation's land grant
universities is vital to the future of the cattle industry, the
environment and safety of the food supply. The combination of research,
teaching and extension must be maintained as America assumes a growing
role in feeding a rapidly growing global population.
Energy
I live and die by the market. President John F. Kennedy once said
agricultural producers are the only people in our country who ``have to
buy at retail, sell at wholesale and pay the freight both ways.''
That makes the economics of raising cattle a tough balancing act.
However, what is already tough is made worse by a government's thumb on
the scale. I am speaking of laws and policies that subsidize corn-based
ethanol production. When I buy a bushel of corn, I am competing against
someone whose purchase is subsidized by my tax dollars.
I understand why soaring oil prices, dependable energy supplies,
and other factors caused our national experiment with subsidizing
ethanol. But 30+ years and more than $30 billion of subsidies have
failed to create a self-sustaining economic model for ethanol. After
30+ years of rising oil prices and increasing oil imports, we can say
the experiment failed.
An August 2009 U.S. Government Accountability Office report titled
``Biofuels--Potential Effects and Challenges of Required Increases in
Production and Use'' is evidence that the corn-based ethanol industry
is mature and that the VEETC should be allowed to expire. According to
the report, ``the VEETC's annual cost to the Treasury in forgone
revenues could grow from $4 billion in 2008 to nearly $7 billion in
2015 for conventional corn starch ethanol.''
The USDA's Economic Research Service release a report in 2008 that
reported feed costs for livestock, poultry and dairy reached a record
high of $45.2 billion--an increase of more than $7 billion over 2007
costs. Further, a September 2008 Congressional Research Service report
stated that the dramatic increase in livestock production costs was
attributed to feed. The cattle feeding sector has lost $7 billion in
equity from December 2007 to February 2010 because of high feed costs
and economic factors that have negatively affected beef demand.
I have two specific requests on ethanol:
1. Let corn-based ethanol compete on the same terms I do. If
ethanol producers can make money without a subsidy paid with my
tax dollars, I will be happy for them.
2. Oppose the Volumetric Ethanol Excise Tax Credit (VEETC) and the
tariff on imported ethanol.
Taxes
I know both sides of the estate tax debate. I do not claim to be
comfortable with billionaires passing vast wealth through generations
untold. But as a rancher, I have issues that do not apply to
financiers, bankers, real estate magnates, oil producers or software
geniuses.
Most of my worth is in land--land that is necessary to what I do to
earn my living. It is not readily divisible and is far from liquid. I
am not a land speculator and while I try to behave in a gentlemanly
fashion, I am no gentleman farmer. If my heirs or I sell off a chunk of
my ranch for any reason, my economic model falls apart.
My son is in the Army and is in a combat zone right now. I do not
know if he will stay in the Army or if he will choose to follow me into
the cattle business or not, but I want him to have that option.
A permanent end to the estate tax is the simplest way to resolve
the matter, but if you cannot find a way to do that, please find some
kind of exemption for land that is worked by its owners. According to
USDA, the death tax is one of the leading causes of the breakup of
multi-generational family operations. Agricultural production in
America is heavily dependent on inheritance, but the death tax makes it
difficult and in some cases impossible for a farmer or rancher to pass
his land on to the next generation.
Transportation
A safe and efficient transportation system is an important
component of cattle ranching in Florida and the rest of the East. We
raise our cattle and then ship many of them to the feedlots in Kansas,
Oklahoma and Texas. Of course, trucks and fuel to move them are part of
our cost. To make things worse, the animals lose weight and ``shrink''
in transit. This is tough when you sell by the pound. We ask that you
support an increase in trailer weights, with the addition of a third
axle. We especially ask that you move to standardize these weight
limits across state lines. The current patchwork requires circuitous
routes as we move to our markets.
Marketing Issues
Beef producers embrace free markets. The cyclical ups and downs of
the market can be harsh, but the system works. We remain steadfastly
committed to a competitive market system.
Those who implement policies that set prices, underwrite
inefficient production, or manipulate domestic supply and demand
readily cite supposed benefits. But a review of economic history
suggests that government distortions of the market far too often throw
the economic balance wheels out of kilter.
Marketing cattle has grown very complex. Market factors from energy
costs, consumer preferences, feed costs and many others have ended the
old system of raising what you can and hoping for good prices when your
animals hit the market. Most of the cattlemen who thought they were in
the business of raising cattle and praying for decent prices have gone
broke.
I raise cattle, but my business is selling beef. Like most of my
fellow ranchers (and fellow competitors), I must be in tune with what
the consumers want to see in the meat case at their local market. By
recognizing the importance of consumer preferences, cattle producers
have created innovative marketing programs, improved the quality of
beef and given the consumer he or she wants. We have also become more
profitable and efficient. Some of these innovations have come in the
form of alternative marketing arrangements (AMAs) such as forward
contracting, marketing alliances and packer ownership. These
arrangements offer me a better opportunity to be compensated for the
value I add to my animals.
In the old days, all cattle in a pen were auctioned for the same
average price. Cattlemen had no incentive to produce higher quality
beef. Why invest to produce a leaner steak when you receive no more for
a quality steer than the next guy gets for a four-legged bundle of fat
and gristle?
As our industry struggled through decreasing demand in the 1970s,
1980s and early 1990s, the government was not pushing us toward leaner,
more consistent beef. Producers, including myself, began to overhaul
our practices so we could produce high quality lean beef. I invested in
genetics, management and herd health to meet the demand some of us had
begun to recognize.
I paid for my investment by demanding a premium price for my
premium product. Meeting this demand for a premium product has produced
the current system of value-based marketing, a system with a multitude
of premiums, discounts, grids, contracts, formulas, and alliances that
have become commonplace in the beef industry. You recognize some of the
many names given to premium products:
Certified Angus Beef.
U.S. Premium Beef, Ltd.
Ranchers' Renaissance.
Harris Ranch.
These are just a few of the innovative marketing programs
available. Many of our country's ranchers have chosen to participate in
one program or another in order to become more competitive in a market
controlled by consumers. These arrangements are led by producers but
driven by markets and consumers. There are many more, particularly in
areas where producers are teaming with other segments of the industry
to take advantage of national, regional, and even niche market
opportunities ranging from breed or genetics programs to natural and
organic production. Process and source-verified programs use electronic
identification of animals and this, in turn, leads to efficient
production of healthy animals yielding beef for which consumers are
willingly paying a premium.
Participating in these marketing arrangements brings other
benefits. Most importantly, we have the best price risk tools ever.
Price or market risk is not avoidable. The path from calf to
porterhouse is strewn with opportunities to lose money. Forward
contracting permits me to shift some of the risk to others. In return
for a guaranteed price, I forfeit some opportunity for outsized
profits. I am happy to do it. If I know the price I am going to receive
down the road, I can plan and operate more efficiently. Instead of
fretting over what live cattle will be worth in several months, I can
focus on day-to-day operations and herd improvement. Whoever buys my
future delivery is protected against a spike in prices and the buyer
too appreciates the stability. Furthermore, these contracts are
voluntary. If I do not like the offering price, I can walk away and
find another buyer, either now or later.
All these changes ease financial operations. Ranchers who need
operating capital get a much friendlier reception from their banker
when they can show evidence of a marketing plan and a firm price for
their product.
These webs of marketing arrangements are sometimes complex, but
they bring efficiency. Feedlots can report how cattle perform when
being fed. Packers can report yield and quality. And I use this
``actionable intelligence'' to manage my herd.
This not smoke and mirrors. The benefits have been demonstrated. In
2007, USDA's Grain Inspection Packers and Stockyards Administration's
(GIPSA) Livestock and Meat Marketing Agency released a government-
funded, 3.5 year study based on more than 500,000 transactions
representing more than 58 million head of cattle. According to the
study, producers participate in alternative marketing arrangements to
buy or sell higher quality cattle, improve supply chain management and
obtain better prices.
The study demonstrates that a market-driven system works. The
study's overwhelming conclusion is that overall alternative marketing
arrangements help all sectors of the industry.
Auction markets are also a critically important part of the U.S.
cattle industry. They have been the primary arena for marketing cattle
for more than 100 years. In this marketing method, a willing seller
takes the highest bid for his cattle when he decides it is the right
time to bring them to the auction barn. Ranchers who market this way
cite several reasons for their choice. One reason is independence. By
using the cash or spot market, producers have no restrictions or cattle
quality concerns that would keep them from selling your cattle--unlike
marketing arrangements that require certain criteria be met before
cattle qualify for filling the contract. Flexibility is also important
to these producers. Selling on the spot market gives ranchers the
opportunity to participate in market rallies. Those who have already
contracted their cattle lose that opportunity because they are locked
into a price agreement.
Even with traditional means of marketing, we have seen innovations
and improvements that have been market-driven. One of these innovations
is video livestock auctions. With this method, ranchers can auction
their animals by video and reach customers in other parts of the
country and even in other countries. This style of spot market stemmed
once again from ranchers who produce a higher quality product and want
to make sure they are getting paid for the value they are adding to
their cattle.
The GIPSA study concluded that reductions or restrictions on AMAs
would cause a decrease in the supply of cattle, a decrease in the
supply and quality of beef and an increase in retail beef prices.
Who needs that?
Given the results of this study, I have no idea why GIPSA is
proposing its competition rule, which is a rule I oppose.
This rule goes beyond the intent of Congress in the 2008 Farm Bill
and proposes major changes to the Packers and Stockyards Act (PSA) that
will damage our ability to market cattle.
Under existing law, you must show that a packer or processor harmed
the market by engaging in illegal actions such as collusion, price
fixing, etc. This is known as showing ``competitive injury.'' Under the
new definitions included in the proposed rule, ``competitive injury''
and ``likelihood of competitive injury'' are re-defined and made so
broad that mere accusations, without economic proof, will suffice for
USDA or an individual to bring a lawsuit against a buyer (packer or
processor). In this case, a producer need only say that he was treated
``unfairly'' to sue a packer or processor. There is no definition of
what ``fair'' should be. Anyone has ever raised a child or listened to
school yard bickering knows that ``fair'' is an elastic term. The
rulings of eight U.S. Circuit Courts have upheld the need to show
competitive injury to the market before you can sue. Do we need to
throw these well-defined rules out the window and watch for a decade or
more as our courts attempt to sort out what ``fair'' means?
Under the proposed rule, order buyers will only be able to
represent one packer. It is at quite possible that the loss of
efficiency from requiring a single buyer for multiple packers will end
up hurting producers like me. I do not envision packers flooding
livestock barns with exclusive buyers. In fact, I see some barns having
no buyers at all.
The best thing Congress can do to ensure a fair and competitive
beef industry is to use its oversight power to see to it that the laws
on the books are uniformly and carefully enforced.
That is not the case today.
The failure of Eastern Livestock Company last fall left ranchers
and livestock auction barns holding the bag on more than $130 million
in bad checks. Hundreds were affected and several cattle operations may
yet go under. This might have been avoided had GIPSA been faithfully
executing its statutory responsibility to audit and oversee Eastern.
If we need legislative or regulatory action in the beef industry,
it is a need to faithfully execute existing laws and regulations. If
GIPSA and USDA need more money to enforce the PSA, I ask that you give
to them. But please ensure they improve their current performance
before letting them take on dubious new responsibilities and
authorities.
As a member of the National Cattleman's Beef Association, I support
NCBA's position in favor of a free market system with reasonable
regulation. We trust the American ranchers' ability, adaptability and
innovative skills over those of well-intentioned regulators.
Make no mistake. I rely on Federal regulators to ensure that the
marketplace is free from monopolies, collusion, price fixing and other
illegal activities. But I am worried that current plans will poke a
stick in the wheels of commerce and destroy a productive system that
has benefited everyone.
Like other business operators, cattle producers want access to
business opportunities and higher profits. We believe we have them now
and proposed regulations with reduce them. That is why I ask that you
recall that for every agreement made by a packer; on the other side of
the deal is an individual rancher or feeder who has decided that the
agreement is in his or her best interest. That opportunity will help to
continually improve their herd management, genetics and long-term
profitability. The opportunity to engage in and benefit from new
advances is good for the individual producer and good for the industry
as we strive to supply the consumer with beef products they demand.
Conclusion
This is not fun for me. By temperament and practice, I would rather
buy, sell and especially raise cattle than come here to testify. I have
come here not in furtherance of some partisan or ideological agenda. I
accepted your invitation because I thought it my duty to participate in
public policy discussions and to give voice to the concerns I share
with most of my fellow ranchers.
I thank you for your service to our country and for your time and
attention.
I welcome any questions you might have.
The Chairman. Well, thank you for your service as well.
We will move on now to Ms. Burkholder. Go ahead.
STATEMENT OF ANNE G. BURKHOLDER, VICE CHAIRMAN,
CATTLE HEALTH AND WELLBEING COMMITTEE, NATIONAL CATTLEMEN'S
BEEF ASSOCIATION; OWNER, WILL FEED, INC., COZAD, NE
Ms. Burkholder. Good morning, Mr. Chairman, Ranking Member
Cardoza. My name is Anne Burkholder. I am a cattle feeder from
Cozad, Nebraska. I am an American, a wife, a mother, and a
cattle feeder. I care for and raise animals that will be
harvested to feed to my family, your family, and families all
over the world.
I spent the majority of my life only being a consumer of
beef. It is only in the last 14 years that I have been actively
involved in the production of beef. I am a native of West Palm
Beach, Florida, and like many of my fellow consumers, grew up
with no direct ties to production agriculture. My husband and I
met while studying at Dartmouth College, and following
graduation, we returned to central Nebraska to be the third
generation to work on his family's diversified farm. Shortly
after our return to Nebraska, my father-in-law decided to sell
the cattle feedyard. I asked him to keep it and to allow me the
chance to learn how to manage it.
Today I am the proud owner and manager of Will Feed
Incorporated, the feedyard that finishes approximately 5,500
cattle annually. The first week at the feedyard I learned an
exceptionally important lesson: never to judge a group of
people or an industry without gaining an educated understanding
of exactly what you are judging. I may have had a degree from
Dartmouth, but I didn't know a thing about the cattle business.
My father-in-law took a chance on me and allowed me to learn at
the feedyard.
Living on a farm, caring for animals and growing food is
something that is very difficult to understand from the outside
looking in. It cannot only be learned from a textbook because
Mother Nature is our single largest challenger, and she is very
unpredictable.
I am in the business of caring for animals that raise beef,
and my top two priorities are animal care and food safety. The
feedyard that I manage today does not look the same as it did
when it was built in the early 1970s. It is not managed the
same way, either. Our farm continues to evolve in order to
provide better care for our animals and a safe, high quality
beef product for all consumers to enjoy, all while continuing
to protect the environment.
Cattle producers are the first line of defense in
protecting the land, the environment, our natural resources.
Unfortunately, EPA is plowing down a path of burdensome
regulations that do not have the science to support them.
Current proposed coarse dust regulations, twice as strict,
would put regions like mine in violation of the standard. More
importantly, EPA's charge under the Clean Air Act is to protect
public health, and there is no scientific evidence that farm or
ag dust has adverse effects on public health.
Healthy cattle are not only the foundation of a safe food
supply, but they are the foundation of the beef industry. To
keep cattle healthy, producers utilize important tools like
vaccines, antibiotics, good nutrition programs and herd
management practices. Prevention of disease is a cornerstone in
both animal and human medicine. This allows us to provide a
higher quality of life to our cattle while keeping our food
supply safe. We utilize a holistic care program at the feedyard
which focuses on comprehensive animal health, and is based on
the understanding of a prey animal, his thoughts and his
behavior.
Cattlemen fully support an open, free, and competitive
marketplace. Over the past 10 years, I have worked hard to
develop a niche for my relatively small cattle feedyard. I have
established relationships with a group of cow-calf producers
who want to follow the performance of their calves from birth
to harvest. For this to be economically feasible for both the
cow-calf producer and me, the calves that we produce must be
able to bring a premium over the commodity calf. In addition,
it is necessary for me to have an alternative marketing
arrangement that allows me to collect carcass data so that we
can continually improve the cattle that we ship to harvest.
I participate in an AMA with U.S. Premium Beef and also
work with certified Angus beef, as well as forward contracting.
Many other cattlemen and I have made the choice to participate
in a program that will offer us an opportunity for a larger
share of the consumer's dollar, while managing market risk and
volatility.
I adamantly oppose the proposed GIPSA rule for several
reasons. Specifically, the rule bans packer-to-packer sales of
livestock. This applies to individual packers and any
affiliates or subsidiaries that they may own. Since I own stock
in U.S. Premium Beef, am I then considered a packer? If so,
then I would be limited to marketing all of my animals to U.S.
Premium Beef and National Beef under this new rule. That takes
away my freedom to market my cattle as I choose. If marketing
arrangements are greatly reduced, cattlemen like me are the
losers.
In closing, my fellow cattle producers will continue to
fight for a market-driven business climate that is free from
government intrusion. Like I said a few moments ago, I learned
early in my career as a cattle feeder not to judge a book by
its cover. I am here to ask you all to do the same thing. Going
forward, as you work with Federal agencies, I ask that you
allow those of us with the firsthand knowledge of the industry
to work with you to ensure a sustainable future for the U.S.
cattle industry. Please, collaborate with me as I work to feed
the world and pass my farm down to my children, the fourth
generation.
Thank you.
[The prepared statement of Ms. Burkholder follows:]
Prepared Statement of Anne G. Burkholder, Vice Chairman, Cattle Health
and Wellbeing Committee, National Cattlemen's Beef Association; Owner,
Will Feed, Inc., Cozad, NE
Mr. Chairman, Ranking Member Cardoza, and Members of the
Subcommittee, my name is Anne Burkholder and I am a cattle feeder from
Cozad, Nebraska. I am also the Vice Chair of the National Cattlemen's
Beef Association's (NCBA) Cattle Health and Well Being Committee, the
Chairman of the Nebraska Beef Quality Assurance Advisory Committee and
the 2009 National Cattlemen's Beef Quality Assurance award winner. It
is my pleasure to testify before your Committee to discuss the cattle
feeding sector of the beef industry.
I am an American, a wife, a mother and a cattle feeder. I care for
and raise animals that will be harvested to feed to my family, your
family, and families around the world. I've spent the majority of my
life only being a consumer of beef. It is in the last 14 years that I
have played an active role in producing beef. I am a native of West
Palm Beach, FL and, like many of my fellow consumers, grew up with no
direct ties to production agriculture. My husband and I met while
studying at Dartmouth College. Following graduation, we returned to
central Nebraska to be the third generation to work on his family's
diversified farm. My husband is an engineer by trade and a farmer by
heart. Shortly after our return to the farm, my father-in-law decided
to sell the cattle feedyard because my husband had no interest in
running it. This is where I got my start in the beef industry. I asked
him to keep the feedyard and allow me the chance to learn how to manage
it. Today, I am the proud owner and manager of Will Feed, Inc., a
feedyard that finishes approximately 5,500 head of cattle annually.
I arrived at the feedyard with bachelor's degree in psychology, an
open mind and a solid work ethic instilled in me during years of
athletic training in swimming and running. I had no working knowledge
of how to care for animals or how to run a business. The first week at
the feedyard, I learned an exceptionally important lesson: Never judge
a group of people or an industry without gaining an educated
understanding of what you are judging.
In the days and months to come, I learned how to care for and
understand cattle; how to give vaccine injections and administer animal
health products; how to ``read bunks'' and determine nutritionally what
my animals needed; how to drive the feed truck; how to run a scoop
shovel; and how to work as hard as my crew. I also witnessed how much
pride my crew took in doing their jobs to the best of their abilities
365 days out of the year. I learned when you care for animals; your
life and your world revolve around them. In the past 14 years, I've
worked closely with my veterinarian and my ruminant nutritionist, and
used my own background in psychology to build a ``holistic animal
care'' program based on Beef Quality Assurance (BQA) practices. The BQA
program was established in 1987, and sets forth principles and best
management practices to use every day to ensure animals are given
proper care and attention. BQA provides guidelines for livestock care
and handling, nutrition and veterinary treatment and incorporates
current EPA, FDA and USDA regulations as well as Hazard Analysis
Critical Control Points (HACCP) principles. Today, the BQA program
influences more than 90 percent of cattle in the United States. My
incorporation of the BQA practices ensures that my animals are healthy
and that the beef that they produce is of the highest quality. I have
also built vertically collaborative relationships with my cow-calf
producers in order to trace animal performance from birth to harvest
and work to continually improve the beef that our animals produce.
The U.S. cattle industry is truly a remarkable entity where a ``one
size fits all approach'' does not work for our management practices and
marketing plans. This type of approach prevents us from providing
consumers with the choices they want and deserve. The simple fact is
the diversity within our industry enables us to raise cattle in
different regions of the United States, with diverse climates and
natural resources, and still meet consumer demands. The diversity and
efficiency of our industry allows us to provide beef products year-
round to consumers. Could you imagine shopping at your local grocery
store and not having your favorite beef variety available because it
was out of its ``growing'' season?
Investments in research, science and technologies have created the
foundation of modern beef production. Cattle spend the majority of
their lives on a grass-based operation. Then, approximately 4-6 months
before harvest, they enter a feedyard similar to mine. The feedyard
structure allows our industry to efficiently use natural resources to
finish cattle enabling us to deliver consistent, wholesome, safe,
nutritious and affordable beef products to families around the world.
My family's diversified farm is sustainable and incredibly efficient.
We utilize our farm ground to grow crops used for animal feed that we
feed animals that produce both nutritious protein to feed to the human
population and natural fertilizer to feed the soil. The cycle goes on
year after year. Its success demonstrates that we are not only stewards
of the land and excellent caretakers for our animals, but we are also
instrumental in feeding the world.
The cattle business is the largest sector of our nation's food and
fiber industry. Our industry contributes approximately $44 billion
annually to the U.S. economy in farm gate receipts. According to the
U.S. Department of Agriculture (USDA), there are approximately 766,350
cow herds and more than 90 percent of cow herds have fewer than 100
animals. Additionally, for the feeding sector of our industry, there
are 142 feedyards (like mine) in the U.S. with 1,000 head capacity or
greater.
America's cattle producers are an innovative group of individuals
and families who put the needs of their cattle before their own every
single day. With the global population growing exponentially, the
demand for high quality, safe, nutritious and affordable beef will
continue to increase. The U.S. cattle industry is prepared to meet this
opportunity as we continually look for ways to find efficiencies in our
modern production system. Science is a critical component of the beef
industry. Through science-based improvements in animal genetics,
management practices, nutrition and health, beef production per cow has
increased from 400 pounds of beef in the mid-1960s to 585 pounds of
beef in 2005. This achievement is also noteworthy among our
international trading partners as the United States has the largest
productivity advantage in the world. The United States has seven
percent of the world's cattle population but we are able to produce 20
percent of the world's beef production. Our closest competitor is
Australia who has two percent of the world's cattle population and four
percent of the global beef production. The United States continues to
outpace our international trading partners because we have invested in
the research and science to find efficiencies within our modern
production system. Cattlemen will continue to increase efficiencies
based on science in order to produce high-quality beef using fewer
resources. In addition, our industry continues to focus on our long-
term efforts to improve our knowledge and ability to produce healthy
cattle, which are the foundation of a safe food supply.
I'm in the business of caring for animals that produce beef. The
knowledge that I've obtained was passed down from my father-in-law, and
the professional consultants who bring new technology and science to my
farm. The feedyard that I manage today does not look the same as when
it was built in the early 1970's. It is not managed the same way
either. Our farm continues to evolve in order to provide better care
for our animals and a safe, high quality beef product for consumers to
enjoy, all while continuing to protect the environment.
Living on a farm, caring for animals and growing food is something
that is very hard to understand from the outside looking inward. It
cannot be learned only from a textbook because Mother Nature is our
single largest challenge and she is very unpredictable. While I
understand that some government regulatory oversight is necessary, it
needs to be responsible and educated oversight that is based on sound
science. And, I would like to see it be collaborative instead of
combative in nature. I believe that if we take a moment to better
understand each other, then we will realize that our goals are very
similar and that we will be most effective in achieving those goals if
we collaborate.
When cattle producers hear the words ``government overreach'' one
of the agencies that comes to mind quickly is the Environmental
Protection Agency. Regulations currently being proposed by this
Administration are some of the beef industry's biggest challenges.
Cattle producers are the first line of defense in protecting the land,
environment and natural resources. We are a livelihood that depends on
the land to not only provide for our families but also our fellow
Americans and consumers around the world. Cattlemen understand the need
for science based environmental regulations that help protect our
natural resources. Unfortunately, the EPA is plowing down a path of
burdensome regulations that do not have the science to support its
recommendations. The EPA is currently reviewing the standard for coarse
particulate matter, commonly known as farm dust. A fact, and not a
myth, is that one of the EPA's staff recommendations is to double the
stringency of the current standard which will have a devastating
economic impact on agriculture and rural areas. Regulations at levels
twice the stringency would put entire regions, including my area, in
violation of the standard. If EPA follows the staff recommendation,
expensive mitigation measures would be required, including installing a
million dollar sprinkler system at my feedyard. More importantly, EPA's
charge under the Clean Air Act is to protect public health and there is
no evidence that farm dust has an adverse impact on human health.
The Clean Water Act is another opportunity for the EPA to legislate
through the regulatory process. As you know, in both the 110th and
111th Congresses, the Clean Water Restoration Act was introduced. This
legislation would have expanded the jurisdiction of the EPA and the
Corps of Engineers to virtually every body of water throughout the
United States no matter the kind, size or shape of the water body.
Fortunately, this legislation was never considered by the full House or
Senate and cattlemen appreciate Congress realizing this bill was an
extreme Federal power grab. However, it has recently come to our
attention that the EPA is using a guidance document to expand its own
jurisdiction based on the legislation that never became law. The
guidance document is at the Office of Management and Budget and
essentially allows EPA field staff to apply a number of approaches to
make a jurisdictional determination. This is yet another example of the
costly, overly burdensome regulations that are being disguised as
``guidance,'' but history shows that this will be enforced as yet
another regulation. These are just two current examples of government
overreach by the EPA that will make it more challenging for those of us
living in rural America to produce food for a growing global
population.
In fall 2000, my feedyard was ``inspected'' by the EPA. The
inspection began with one of the EPA agents holding out his badge and
telling me that I was going to go to jail if I lied to them. This
``combative'' attitude was both unnecessary and offensive. I was
operating my feedyard in compliance with the issued National Pollutant
Discharge Elimination System (NPDES) permit, and had routinely had
inspections performed by the Nebraska Department of Environmental
Quality to ensure I was in compliance. Further into the inspection as
we toured my feedyard, one of the EPA agents announced, ``I've never
been this close to a cow before!'' He then proceeded to ask, ``What are
those mounds in the middle of all of your pens? Is that manure?'' The
mounds he was referring to were dirt mounds that make up the
construction of our cattle pens in order to maximize cattle comfort
during adverse weather conditions.
When you combine the combative nature of the agents with their
apparent lack of knowledge about agriculture, you are left with
ineffective, offensive and non-science based regulation. While my
feedyard was not issued a penalty following the inspection, I was
forced to submit further information directly to EPA for a lengthy
period of time because they did not like my record-keeping system. One
of the complaints regarding my record-keeping system was on my weather
records because I was not writing down ``zero'' on the days that our
facility received no precipitation. I was only marking down the
rainfall on the days that we actually received precipitation.
Unfortunately, examples such as this one are not unusual and they
are a source of great frustration and unnecessary stress to cattlemen.
In fall 2010, I voluntarily constructed a new Livestock Waste Control
Facility (LWCF) at my feedyard because I wanted to use new technology
to protect the environment and improve the drainage of my cattle
feedyard. I partnered with the Natural Resources Conservation Services
(NRCS) office and used Environmental Quality Program Incentives (EQIP)
funding to cost-share on the project. This cost-share plan allowed me
to be able to afford to construct a new, lined, larger LWCF and is a
great example of what we can achieve collaboratively to protect the
environment. It is my opinion that tax dollars spent on collaborative
projects such as these are the most effective way to continue to reduce
the environmental footprint of CAFOs (Concentrated Animal Feeding
Operations) like mine. It would be difficult to argue that the cost of
the EPA inspection in 2000 that resulted in different record-keeping
practices (writing down ``zeros'' on the days that it does not rain)
had a positive impact on the environment. However, the cost-share
dollars that allowed me to construct a new LWCF that will protect
ground water had a tremendously positive impact on my environmental
footprint. The difference is regulatory combativeness versus regulatory
collaboration.
Unfortunately, the current Administration has chosen to focus on
emotionally based regulatory combativeness rather than science based
regulatory collaboration. The far overreach of the Federal Government
is becoming more and more of a commonality. The regulations coming out
of Federal agencies like the EPA, the USDA and the Food and Drug
Administration (FDA) continue to strain rural economies and family-
owned operations like mine. Rural America is where our food is grown,
and regulations that negatively impact rural areas force farmers and
ranchers to leave agricultural production. This continues to be a
growing trend and the cattle business is not an exception. Since 1987,
nearly 300,000 producers have left the cattle business and we are now
looking at the smallest cowherd since World War II. Our industry
continues to feel the effects of burdensome regulations, drought,
increased input costs, skyrocketing land values and struggling rural
economies.
Animal health and well-being are top priorities for cattlemen
across the country. My family is one of many, in the cattle business,
that waits until after the cattle have been fed and taken care of to
open our Christmas gifts. It's more than a responsibility; it's a
commitment we have to the cattle to care for their needs. To keep
cattle healthy producers utilize important tools like vaccines,
antibiotics, good nutrition programs and herd management practices.
Prevention of disease is a cornerstone in both animal and human
medicine. In the feedyard, we continually monitor the cattle for any
early signs that might indicate an animal is not at their peak
performance. Just as important as prevention is the control and
treatment of disease. This allows us to provide a higher quality of
life to our cattle, while keeping the food supply safe. Working with my
veterinarian and consulting ruminant nutritionist, I have put together
a treatment protocol book at our feedyard with best management
practices and protocols for everything that we do at the feedyard. From
vaccination protocols, cattle handling techniques, ``acclimation''
protocols, feeding protocols, feedstuffs management, animal health
product use protocols, euthanasia and non-ambulatory protocols and to
biosecurity practices my treatment protocol book is the ``bible'' at
the feedyard. It is based on BQA and the basic principle that healthy
and well cared for cattle make healthy beef. We utilize a holistic care
program at the feedyard, which focuses on comprehensive animal health
and is based on an understanding of prey animal thought and behavior.
We understand what is important to our animals and we handle them
accordingly in a way they can understand. We take care of our animals
so they can maintain mental, emotional and physical fitness. While
animal health products, such as antibiotics, play a role in the herd
health management at my feedyard, they are only one component and are
supplemented with many other tools and practices to ensure good health.
For instance, we track vaccine history for each set of calves all of
the way through the lifecycle to ensure each calf maintains a healthy
and strong immune system. We also acclimate calves coming into the
feedyard to give them extra exercise and help them to attribute comfort
to their new home. Both of these management tools enable me to optimize
the good health of my animals and limit the amount of antibiotics that
are used at my feedyard. That being said, it is important to realize
that as an animal caregiver and a grower of food, I need to be able to
judiciously use antibiotics in order to ensure good animal welfare and
food safety. If I were to loose the ability to judiciously use
antibiotics, the result would be decreased animal welfare and health,
which would be detrimental to the human food supply as healthy cattle
are the foundation to safe and nutritious beef products.
Ongoing activist and media reports suggest the use of animal health
products in animal agriculture is often inappropriate and that the use
of these products is poorly controlled. Misleading statements like
these have put an undue spotlight on animal health products and
threaten to undermine the science-based approval process we have for
these products. It is important to recognize that animal health
products go through a rigorous, multiple-layer, science-based testing
process before being approved for use. Additionally, all products
approved by FDA for use in food producing animals must first pass
significant human food safety benchmarks. Cattlemen are committed to
animal health interventions focused on prevention of disease, control
of disease pressure and therapy of animals with disease. Our industry
believes the use of these products come with much responsibility and
that is why we have worked together to create the BQA program as well.
The success of programs such as BQA shows our industry's commitment to
cattle health. This commitment cannot be overlooked by those who want
to end or restrict the use of animal technologies without having any
credible information to base their accusations.
With 96 percent of the world's consumers living outside of the
United States, access to foreign markets for our beef products is
vitally important for our industry to grow and our businesses to help
revitalize rural America. Cattlemen have long supported aggressive
negotiating positions with our trading partners and all efforts to
remove non-tariff trade barriers for our products. We fully support
immediate passage of the South Korea, Panama and Colombia trade
agreements and encourage Members of the Agriculture Committee to
aggressively support the passage of all three agreements. Korea is the
fourth largest export market and in 2010 accounted for more than $500
million in sales. The current tariffs these three trading partners have
on U.S. beef is the greatest hindrance to market access. Korea has a 40
percent tariff, Colombia's tariff is 80 percent and Panama has a 30
percent tariff. If our government does not take action to ratify these
trade agreements we will continue to lose market share to our
competitors like Australia. Additionally, we appreciate the Agriculture
Committee's strong and vigilant oversight of the enforcement of our
trade pacts that involve agriculture. We also want to thank the
Committee for its investment in animal production research, which has
provided a strong science foundation for governments and industry to
rely on when negotiating trade agreements. We continue to recognize the
critical role livestock production research has within our Federal
agricultural policy. USDA's research is a cornerstone in every aspect
of our business from animal health, food safety, animal and human
nutrition, and with our international trading partners.
Cattlemen fully support an open, free and competitive marketplace.
We know that the marketplace offers many adequate risk management tools
and that it is not in our best interest for the government to create
policies that set prices, underwrite inefficient production or
manipulate domestic supply, demand, cost and/or price. Cattlemen are
committed to energy independence. However; this commitment continues to
create challenges for cattle producers. Corn-based ethanol production
is significant to the cattle industry because of its direct impact on
feed grain prices. From December 2007 to February 2010, the cattle
feeding sector of the beef industry lost a record $7 billion in equity
due to high feed costs and economic factors that have negatively
affected beef demand. Between 2005 and 2008, corn prices quadrupled,
reaching a record high of more than $8 a bushel. This volatility in the
marketplace was a direct result of competing demands for corn and
higher energy prices. For more than 30 years the U.S. ethanol industry
has been subsidized by the American taxpayer at a cost of more than $30
billion. In 2010, the U.S. ethanol industry realized record exports of
E10 reaching 46 million gallons and distillers dried grains with
solubles (DDGS), a co-product of U.S. ethanol production, reaching
nearly 9 million metric tons. This is a mature industry and it is time
to level the playing field for all users of corn. We are simply asking
for the ability to compete on a level playing field for a bushel of
corn.
Additionally, the market is a very powerful tool that allows beef
producers to meet consumer needs, preferences and, most importantly,
choice of beef products. This re-energized focus on consumer choice has
enabled beef producers to create innovative marketing programs to meet
this demand while enhancing their business models. We find ourselves in
a value-added business that is driven by our consumers. Some of the
innovative marketing tools that producers may willingly enter into are
alternative marketing arrangements (AMAs) such as forward contracting,
marketing alliances and packer ownership allow producers the
opportunity to get paid for the value and investment they add to the
animal.
Over the past 10 years, I have worked hard to develop a niche for
my relatively small cattle feedyard. My management philosophy is based
on quality and not quantity. I searched long and hard for a business
model that will enable that to work for me. Because of my focus on high
quality animal care and high quality beef, I have established
relationships with a group of cow-calf producers who want to follow the
performance of their calves from birth to harvest. For this to be
economically feasible for both the cow-calf operator and me, the calves
that we produce must bring a premium over a ``commodity'' calf. In
other words, the additional value that we put into the animal that
results in higher quality beef must be passed back to us so that we can
continue to operate. In addition, it is necessary for me to have an AMA
that allows me to collect carcass data on the cattle that I ship to
harvest. Without the carcass data (the grade and yield information
about the quality of the beef), I cannot supply my cow-calf operators
with all the data they need in order to continually improve the
genetics and management practices on their farms.
Historically, cattle were marketed in lots or pens with every
animal in the lot receiving the same average price. Since producers did
not benefit from providing higher quality beef, they had no incentive
to supply a higher quality product or meet consumer demands. As our
industry struggled through the 1970s, 1980s, and early 1990s with
decreasing demand, we did not see any market driven signals to produce
the leaner, more consistent beef consumers demanded. Many producers,
like me took significant steps to produce high quality lean beef by
making investments in genetics, management, and herd health to meet the
demand we began to recognize. To pay for this investment, producers
demanded a premium. This demand for premiums has manifested today into
a system of value-based marketing that is reflected in the multitude of
premiums, discounts, grids, contracts, formulas, and alliances that are
now commonplace in the beef industry. Some of the marketing programs
that producers participate in are:
Certified Angus Beef.
U.S. Premium Beef, Ltd.
Ranchers' Renaissance.
Harris Ranch.
Laura's Lean Beef.
These are just a handful of the innovative marketing programs
available. I participate in an AMA with U.S. Premium Beef, Ltd and also
work with Certified Angus Beef. Many other cattlemen and I have made
the choice to participate in a program that will offer us an
opportunity for a larger share of the consumer's dollar. These
arrangements are market and consumer driven, and are all led by
producers. There are many more, particularly in areas where producers
are teaming with other segments of the industry to take advantage of
national, regional and even niche market opportunities ranging from
breed or genetics programs to natural and organic production. Process
and source verified programs are utilizing today's technology, such as
electronic identification of animals, allowing producers to become more
efficient at raising high quality animals that yield the beef that
consumers will pay a premium for.
There continues to be a growing number of innovators in the beef
industry working together to create marketing strategies to ensure the
viability of the beef industry. This group includes a variety of
ranchers, feeders and packers working in a collaborative manner and you
can see the success of this innovation in the meat case. Consumers not
only demand leaner, tender and more consistent products, but they also
demand convenience as well. The meat case is beginning to be filled
more so by pre-prepared products and those ready for the microwave.
In addition to being responsive to our consumers, participation in
these marketing arrangements provide producers with several tools to
help improve their operations and herd management in an effort to
capture the premiums I mentioned above. The ability to manage price
risk is probably one of the most valuable of these tools. Taking
advantage of marketing arrangements, such as forward contracting,
allows producers to make a price that allows them to be profitable. If
the price does not fit their needs, they can walk away and find another
buyer. Being a ``price maker'' rather than a ``price taker'' puts
ranchers in control of their business. Traditional routes of cattle
marketing do not always offer that flexibility. Knowing that you have a
guaranteed buyer and a price you can live with makes it easier to
manage your day-to-day business and focus on operational improvements
instead of always worrying where your money will come from.
Over the past 5 years, the volatility in the marketplace has become
extreme. However, taking advantage of AMAs and the ability to forward
contract is a marketing arrangement that enables me to stay in
business. Without the ability to do this, my feedyard would not be
financially viable. The benefits of alternative marketing arrangements
are being seen every day in the cattle business and they were supported
by the results of the Grain Inspection, Packers and Stockyards
Administration's (GIPSA) Livestock and Meat Marketing study conducted
by RTI International and released in February of 2007. This 3\1/2\ year
study was funded by $4.5 million taxpayer dollars and was billed as the
``definitive answer'' on these issues. The study supports what many
ranchers across the country have known all along--a market-driven
system works. This study was based on more than half a million
transactions representing more than 58 million head of cattle. The
overwhelming conclusion of this study is that overall, alternative
marketing arrangements help all sectors of the industry.
The report states that the leading reasons producers participate in
alternative marketing arrangements are the ability to buy or sell
higher quality cattle, improve supply chain management and obtain
better prices. All three of these tie into the topics we discussed
above--higher quality cattle produce the beef products that the
consumers demand. Providing this consumer preferred product allows us
to capture more of that consumer dollar in the form of a premium. That
bigger share of the consumer dollar is being passed down to the
producer. The producer is getting a better price for their cattle and
can use that money to continue to improve their operation and sustain
it for future generations. The study concludes that reductions or
restrictions on alternative marketing arrangements would cause a
decrease in the supply of cattle, a decrease in the supply and quality
of beef, and an increase in retail beef prices. These are results that
would set our industry back rather than move it forward. The study
continues by concluding that feeder cattle prices would decrease
because of higher operating costs resulting from restrictions on
alternative marketing arrangements. That means that in the end, it is
the individual cow-calf producers and feeders across this country who
will bear the brunt of government restrictions. In a time of these
additional costs and strains on the bottom line, the last thing we need
to do is add more burdens to our ranchers and feeders.
When talking about improved supply management, we have to once
again go back to the consumer. The consumer does not go into their
local grocery store looking for Certified Angus Beef only on Tuesdays.
The consumer demands that convenience any day of the week. To meet that
demand, the retailer and packer need a steady and consistent supply of
cattle that meet the qualifications of the store-branded program. This
allows them to ensure this product is available daily. If the packer is
limited in its ability to source these cattle, they cannot ensure that
there will be a steady supply of cattle entering their processing
plants. In turn, they cannot supply Certified Angus Beef every day and
the consumer chooses another source of protein for the center of the
plate.
For this reason, we oppose the proposed GIPSA competition rule.
This rule goes far beyond the intent of Congress in the 2008 Farm Bill
and proposes major changes to the Packers and Stockyards Act (PSA) that
will negatively impact our ability to market cattle. Under existing
law, you must show that a packer or processor harmed the market by
engaging in illegal actions such as collusion, price fixing, etc. This
is known as showing ``competitive injury.'' Under the new definitions
included in the proposed rule, ``competitive injury'' and ``likelihood
of competitive injury'' are redefined and made so broad that mere
accusations, without economic proof, will suffice for USDA or an
individual to bring a lawsuit against a buyer (packer or processor). In
this case, a producer need only say that he/she was treated
``unfairly'' to sue a packer or processor. There is no definition of
what ``fair'' should be, and the term is so broad that no definition
could be applied in the instance of cattle marketing because each
producer has his own perception of what is ``fair.'' Furthermore, this
change contradicts the rulings of eight U.S. Circuit Courts of Appeals
that have upheld the need to show competitive injury to the market
before you can sue. This will be a bonanza for trial lawyers.
The proposed rule bans packer-to-packer sales of livestock. This
applies to individual packers and any affiliates or subsidiaries they
might own. First of all, if a packer selling to another packer has
resulted in competitive injury to the marketplace, then GIPSA should
penalize violators and enforce existing regulations of the PSA. Second,
this will have severe unintended consequences, especially to smaller
packers and dealers. Prohibiting packer-to-packer sales would encourage
consolidation and displace producer livestock. For example, there is a
beef packer located in the Pacific Northwest who also owns a feedlot in
Southwest Kansas. Under this proposal, that company would be required
to ship all of its Kansas feedlot cattle to Washington State for
processing. Those cattle would displace the local cattle that typically
supply that plant. The proposal would add inefficiencies for the
feedlot through added transportation costs, which could result in the
sale or liquidation of that feedlot, thereby driving consolidation and
less competition. In addition, am I a packer because I own stock in
U.S. Premium Beef? If so, then I would be limited to marketing all of
my animals to U.S. Premium Beef/National Beef under the new rule. That
takes away my freedom to market my cattle as I choose.
I also have concerns that the new liabilities associated with this
proposed rule will likely cause buyers to withdraw marketing
arrangements rather than run the risk of litigation, civil penalties,
and potential revocation of their licenses. The threat of litigation by
trial attorneys in regards to whether or not an arrangement is ``fair''
will reduce and inhibit the use of alternative marketing arrangements
that put more money in producers' pockets. If marketing arrangements
are greatly reduced, cattlemen are the losers because it takes away
their ability and incentive to manage risks, finance production and
compete with one another to negotiate premiums. With alternative
marketing arrangements being utilized by nearly 60 percent of the beef
market, this will result in a huge shift in the way cattle are
marketed. Even though the proposed rule does not directly ban the use
of alternative marketing arrangements, the unintended consequences and
the trickle-down effect will impact them.
The membership of NCBA has consistently said that we want access to
business opportunities that will help us improve our bottom line.
Accordingly, keep in mind that for every agreement made by a packer,
there is an individual rancher or feeder on the other side of that
transaction who has decided that the agreement is in their own best
interest, and they should be allowed to conduct that business
privately, just like any other industry. Those cattlemen have exercised
their personal right to willingly engage in that agreement because they
perceive it to add value to their operation, to their business, to
their livestock, and ultimately to their family. That opportunity in
the end will help to continually improve their management, genetics,
and long-term profitability. The opportunity to engage in and benefit
from new advancements is good for the individual producer and good for
the industry as we strive to supply the consumer with beef products
they demand.
A recent experience with GIPSA has shown the agency is not doing a
good job of enforcing the laws under its jurisdiction. The most
effective way for industry and Congress to ensure that the marketplace
stays fair and competitive is to ensure that the laws already on the
books are readily enforced. The PSA was passed to ensure that the
marketplace stays competitive. USDA's enforcement of PSA and other
antitrust laws and regulations are critical in identifying,
investigating, and prosecuting anticompetitive actions by packers,
dealers, markets, and others who fall under its jurisdiction. Last
fall, the failure of Eastern Livestock Company left hundreds of cattle
producers without payment for their cattle. Ranchers and livestock
auction barns both were left holding the bag on more than $130 million
in bad checks. This has threatened the viability of several cattle
operations. It is increasingly looking more like GIPSA was not
providing the audits and oversight of Eastern as it is mandated by law
to do--this lack of oversight contributed to the failure. Why is GIPSA
proposing more rules when it seems they can't enforce the ones they
have?
In closing, my fellow cattle producers will continue to fight for a
market driven business climate that is free from government intrusion.
The beef industry not only plays a significant role in the U.S. economy
but also in rural America. We look forward to working with the
Agriculture Committee to ensure that those of us in the beef business
have the ability to do what we do best produce the world's safest, most
nutritious, abundant and affordable beef products all the while giving
consumer's the choice they deserve. Please collaborate with me as I
work to feed the world and pass down my farm to my children, the fourth
generation. Together we can sustain our country's excellence and
prosperity. I appreciate the opportunity to visit with you today about
a few of the issues impacting the feeding sector of the beef industry.
The Chairman. Thank you, Ms. Burkholder, and we will now
move on to Mr. Bull.
STATEMENT OF KENNETH BULL, VICE PRESIDENT FOR CATTLE
PROCUREMENT, CARGILL, WICHITA, KS
Mr. Bull. Thank you for the opportunity to testify today. I
am a 32 year veteran of Cargill's cattle feeding and processing
operations. My family ranches land in Brady, Texas, that has
been in our family for more than a century.
Cargill currently operates five fed cattle processing
operations in the U.S. and two in Canada. We employ about 2,200
employees at each plant, and process around 25,000 head of
cattle per day. A 4,500 head per day packing plant would cost
around $300 million to build, and $75 million in annual working
capital to operate. We typically invest about $50 million in
new capital every year, with most going toward food safety,
environmental protection, employee safety, product technology,
and serving our customers.
During the last 25 years, we have increased our carcass
segregation system from just four sorts to 32 different grades
and brands, and our product offerings have increased from 300
to over 3,800 in that same time, all in an effort to better
serve our customers and to maximize the value for each and
every part of the animal.
As cattle numbers tighten, the packing industry can face an
overcapacity situation. The negative packing margins from 2004
to 2007 caused two large packing plants to close. Margins
improved into 2010, but we now have the tightest cattle supply
since 1950, and about a seven to ten percent overcapacity
problem that will continue to grow as the herd declines.
The beef packing industry is one of the most heavily
regulated industries in the world. We deal with USDA's FSIS,
GIPSA, AMS, APHIS, FNS. We also deal with the FDA, the EPA, the
DOJ and the FTC. We also work with Labor Department's Wage and
Hour and OSHA agencies, and finally we work with Homeland
Security's ICE and Customs agencies. That is 13 Federal
agencies, not including state and local agencies.
There are some real growth opportunities out there for the
beef industry, and then I want to talk a little bit about how
government policy has us on the verge of squandering it. First,
the opportunity. It is critical that we focus on three themes:
quality and consistency, efficiency, and trade. All three of
these things have a common link, a critical relationship
between the rancher, the feeder, and the packer. In order to
find success, we have to bring the links closer together, not
further apart as some would like to see.
Quality and consistency mean the beef has to taste good and
look good on the plate, that it is nutritious, and that we have
been responsible in our food safety mission. In cooperation
with ranchers and feeders, Cargill has developed a program
called Rancher's Reserve. It is a brand of beef solution
focused on genetics, management practices and processing
practices to deliver a consistent eating experience.
Efficiency is all about having a system that from ranch to
consumer is managing the ways it keeps beef affordable next to
chicken and pork in the meat case. The cost to produce beef
from the ranch to the packer continues to rise, and as costs
rise, it is more important than ever that the segments of the
beef industry work together to increase chain efficiencies.
Trade: Nowhere is trade expansion more critical than the
beef business. We operate essentially a disassembly business,
and profitability means finding the best, highest valued market
for every individual part of the animal. Last week we pulled
together a list of seven beef products that are not
traditionally in high demand in North America, things like
tongues and livers. The trade last week reported that these
products were worth almost $92 in the foreign markets. The same
products, however, were only worth $20 per head in the U.S.
market. As global population approaches eight billion by 2020
and per capita GDP growth accelerates, there will be increased
demand for protein, including beef. There is no better picture
of this than in China, where meat consumption has grown by 600
percent per capita in the last 30 years. Since 1998, beef
consumption has increased by 30 percent per capita in China.
The challenge for the U.S. industry is can we capture that
share for the beef industry?
I would like now to turn to what I believe is the single
greatest policy threat in the U.S. livestock and meat sector in
my 32 years in business. You have no doubt by now heard about
regulations proposed by USDA that will establish strict new
requirements in the marketing of livestock and poultry. While
we do not have time today to get into specifics of the proposed
rule, I would like to share that some of the concepts were
applied in the State of Missouri in 2001, resulting in serious
financial harm to producers and processors alike.
In summary, these are challenging times for the beef
sector. There are avenues to better returns and industry
growth, trade probably being the most important. There are some
policy options that could take us in another direction. I hope
we choose the former.
Thank you very much for your time.
[The prepared statement of Mr. Bull follows:]
Prepared Statement of Kenneth Bull, Vice President for Cattle
Procurement, Cargill, Wichita, KS
Thank you, Mr. Chairman and Mr. Cardoza for the opportunity to
speak today about the state of the U.S. beef industry. By way of
background, I personally am from a family that is in its third
generation of ranching land outside of Brady, Texas that we have owned
for more than a century. I have worked at Cargill for 32 years, all of
it focused on various segments of the beef sector. I currently oversee
the procurement of the cattle for our fed cattle operations.
Background on Packing Industry
Cargill currently operates five fed cattle beef processing
operations in the U.S. and two in Canada. In the U.S., we employ about
12,000 people who process about 25,000 head of cattle daily in order to
serve consumers around the world.
Our facilities average about 2,200 employees--each responsible for
ensuring safe food. We operate three shifts, two for production and one
for sanitation and equipment maintenance. Each facility is divided into
four parts: animal handling; harvest; fabrication; and shipping. All of
our plants are located in small, rural communities.
Beef processing is a capital intensive business. A beef plant that
accommodates 4,500 of cattle daily would cost about $300 million to
build today, and would require about $75 million in annual working
capital to operate. We typically invest approximately $50 million in
new capital in our beef business every year, with most going toward
food safety innovations, environmental protection, employee safety,
product technology, and serving our customers. As you might imagine,
the financial barrier to entry is huge, and simply keeping plants
operating in a time of increasingly tight cattle supplies only
compounds the problem.
This is a complex business. During the last 25 years, we have
increased our carcass segregation system from just four sorts to
today's 32 different grades and brands, and our product offerings have
increased from 300 to 3,800, all in an effort to better serve our
customers and to maximize the value for each and every part of the
animal.
Due to high fixed costs, beef processing margins are tightly linked
to our ability to process as many cattle as possible for maximum
utilization. Of course this is tied to the supply of cattle available
to process. As cattle numbers tighten, as they have been over the last
several decades the packing industry often faces an over capacity
situation. The negative packing margins from 2004 to 2007 caused two
large packing plants to close. With the ensuing ``right sizing'' of
capacity, margins improved until mid-2010. But we're headed back in the
same direction. The tightest cattle supply since 1950 now leaves us
with about a 7% to 10% over capacity problem that will continue to grow
as herds decline.
Additionally, the rising costs to produce beef come from the
critical inputs along the beef chain; grain and energy, labor and
increased regulatory costs are taking their toll. I am highlighting the
costs and the regulatory points because they have huge influences on
the structure, evolution, and health of the industry as well as its
ability to compete on a global basis.
The beef packing industry is one of the most heavily regulated
industries in the world. My colleagues and I deal with USDA's FSIS,
GIPSA, AMS, APHIS, FNS; the FDA, EPA, DOJ, and FTC; we also work with
the Labor Department's Wage and Hour and OSHA agencies; we work with
Homeland Security's ICE and Customs agencies. That's 13 agencies--not
including state and local agencies. So naturally with this kind of
oversight--as valuable as much of it is--we nonetheless have an
environment of additional financial stresses.
Opportunity
There are some real growth opportunities out there for the beef
industry, and then I want to talk a little bit about how government
policy has us on the verge of squandering it.
First--the opportunity. It is critical that we focus on three
themes: quality and consistency, efficiency, and trade.
All three of these themes have a common link--it is the critical
relationship between the rancher, feeder, and the packer. In order to
find success, we have to bring the links closer together, not farther
apart as some would like to see.
Quality and Consistency: Quality and consistency mean that beef has
to taste good and look good on a plate; that it is nutritious; and that
consumers can trust that we have been responsible in our food safety
mission. In cooperation with ranchers and feeders, Cargill has
developed a program called ``Ranchers Reserve.'' The program is all
about raising certain kind of cattle in a certain kind of way, on a
certain kind of diet, and processing them with a certain kind of
technology so that they can fit into a higher value branded beef
program with certain kinds of parameters. This program has been very
successful, even lauded in two Harvard Business Review studies as an
example of increasing efficiency to produce beef while providing a
branded beef solution. This kind of producer partnership has enabled us
to serve some major retailers with nearly 100 percent of their beef
case. This is the kind of innovation that will deliver future success.
Efficiency: Efficiency is all about having a system that from ranch
to consumer is managed in ways that keep beef affordable next to
chicken and pork in the meat case. As discussed earlier the cost to
produce beef from the ranch through the packer continues to rise. As
costs rise it is more important than ever that the segments of the beef
industry work together to increase chain efficiencies. As noted
earlier--the declining calf herd is maybe the most critical enemy of
efficiency we face today.
Trade: Nowhere is trade expansion more critical than with beef. And
it always amazes me that some in our industry are against more open
trade. We operate essentially a disassembly business. And profitability
means finding the best, highest value market for every individual part
of the animal. To illustrate the case, last week we pulled together a
list of seven beef products that are not traditionally in high demand
in North America--things like tongue and liver. The market prices last
week said that all combined, the products were worth $91.65 per head in
export markets. The same products were worth $28.39 per head in the
North American market. We can show this example over and over.
As global population approaches eight billion by 2020, and per
capita GDP growth accelerates, there will be increased demand for
protein including beef. There's no better picture of this than China
where meat consumption has grown by 600 percent per capita in the last
30 years. Since 1998 beef consumption has increased 30 percent per
capita.
The challenge is for the U.S. to win the business--and that is not
at all a certainty. Brazil's herd is now double that of the U.S. But
the U.S. has until about 2004 maintained a production edge because of
its higher carcass weights, but that is now at par with South America.
While Brazil's production numbers are growing, North America is in a
flat holding pattern, to slightly declining. While the U.S. was locked
out of many of our foreign markets after the BSE situation, Brazil was
able to win a lot of new export business--and it is hard to regain lost
ground. Our challenge today is whether the beef industry will have the
opportunity to capture this growing global demand for protein--and the
only way to do it is to grow market access through free trade
agreements.
A Critical Challenge
I would like to now turn to what I believe to be the single
greatest policy threat to the U.S. livestock and meat sector in my 32
years in the business. You have no doubt by now heard about regulations
proposed by USDA that would establish strict new requirements in the
marketing of livestock and poultry. One of the most critical is a
concept that would make it easier for parties to sue packers for price
discrimination and jury-awarded damages in Federal courts. This exact
proposal has been ruled against by eight different Federal appellate
courts, and even considered for hearing by the Supreme Court--and
rejected. Any final rule that includes these provisions will be beyond
chilling in the marketplace.
This same kind of law passed in the State of Missouri in the spring
of 1999. Implemented May 29, 2001, the impact on producers was
immediate and severe as packers overnight shifted to purchasing on only
the most basic formulas--rather than value-added or premium programs.
The law remained in effect for 4 short months until the legislature
repealed it in a special legislative session. Some of the implications
of the GIPSA proposal are virtually identical to the provisions of the
Missouri law.
We have extrapolated from a study done by Dr. Ron Plain at the
University of Missouri, the impact of this law on a U.S. national
basis.
Swine: During the implementation of the law in Missouri market hog
prices dropped by 4.4%. The total cost to Missouri swine producers for
the time the law was in effect was roughly $2.7 million for the 5 month
period. If we use only a 2% impact on a nation-wide basis, the result
would be an impact of $424 million annually for pork producers.
Cattle: In Missouri there was a 2% negative impact on cattle
prices. When applied to today's cattle supply the 2% discount
represents an annual loss for cattle producers of $840 million.
Altogether, total losses for U.S. market hog and cattle producers
alone should be expected to be at least $1.264 billion per year. This
does not include losses that would be suffered by our brands.
As I said, this is the single greatest policy threat I have seen in
my career.
Closing
In summary, these are challenging times in the beef sector. There
are avenues to better returns and industry growth--trade being the most
important, and there are some policy options that take us in another
direction. I hope it will be the former.
The Chairman. Thank you, Mr. Bull. I will now move on to
questions. The chair would like to remind Members that they
will be recognized for questioning in order of seniority for
Members who were here at the start of the hearing. After that,
Members will be recognized in the order of their arrival. I
appreciate Members understanding.
I have a couple of questions I will direct specifically,
but then if anybody wants to jump in after the first answer,
feel free.
Mr. Strickland, first of all thank you and your son for his
service in the Army. As a former Army guy, I am especially
appreciative. I would like to ask you a little bit more about
GIPSA, and certainly the other two witnesses can jump in. I
know you touched on it in your opening statement, but I wanted
to try to get a little bit more in the weeds, if we could,
because some have tried to characterize the debate with GIPSA
in the proposed rule on livestock markets producers versus
packers. I sense that the discussion is more complex than that.
Can you delve into that? What is your view?
Mr. Strickland. Yes, sir, I can. I think it is appropriate
that you perhaps started at this end of the table, because I am
the one that makes those decisions at the very onset that I sit
around my kitchen table, if you will, with my family. We decide
what genetics we can afford to buy to better accommodate the
market and all the niche markets and all the opportunities that
there are, to try to capture that largest piece of that market.
In doing so, if I go out and I buy better bulls that will--from
Mrs. Burkholder that will ultimately go to the packer, then I
ought to be certainly financially given precedence over the
other fellows that maybe has the same weight calves, but
doesn't do the things that I do, that they are not going to be
more efficient for both of them. Also if I decide to go into
animal ID as a marketing tool, I don't want to be mandated to
go into electronic identification or mandatory ID, but I want
to use that as a management tool.
Also if I put into practices there on the ranch that are
BQA certified and use best management practices on the ranch
also and bring a product forward, I need to be compensated for
all the decisions and all the work that we do. Once they leave
our farm, a lot of times they will leave--the contract will be
done months before they leave so if they leave in August and
September, I have already forward contracted a certain amount
of my calves to hedge my bet on the futures markets. That is
why I do not believe in the GIPSA rule.
The Chairman. Thank you.
Ms. Burkholder. I would like to answer that as well. The
beef industry is very unique because a calf may travel through
several different producers' hands before it becomes beef, yet
we are all in the beef industry. And so even though we are not
vertically integrated, we must be vertically collaborative, and
AMAs play a very large role in that collaboration.
Over the past 10 years, I have tried really hard to find a
business model or a niche to make my feedyard special, to make
it economically viable, and to accomplish the goals that I
wanted to accomplish. I focus on quality and I don't focus on
quantity. I have worked really hard to find cow-calf producers
that want to trace their calves from birth to harvest so we can
look at the efficiency and the productivity of that calf from
the time that they are born to the time that they hit your
plate.
In order for that collaboration to work, we need to be able
to have marketing arrangements so that I know when I go out and
I work with my cow-calf operators, that I can pass extra money
back to them, like Mr. Strickland spoke of. This way they can
continue to do the best thing on the ranch, continue to
increase the viability and the very positive natures of
genetics that they play with all the time. And then I also need
to know that that animal can perform for me in the feedyard and
then on into the packing plant, because we are all in the beef
industry.
So I believe it is very important that we are vertically
collaborative as an industry, and what bothers me the most
about GIPSA is it shoots a bullet right in the middle of that
collaboration, because it takes away the AMA's that we need in
order to manage risk and manage the business side of our
operations, while also doing the right thing for both our
calves and the consumer.
The Chairman. Mr. Bull, do you want to add anything?
Mr. Bull. No, I think they covered it very well. I think it
is clear, if you look at all of the economic impact studies
that have been done. You know, a large portion of the potential
damages fall to the producers, and that is because the
potential benefits of increasing demand that all of these new
brands and new marketing alternatives have brought to the
table, pass those benefits back. And so they are--really the
lifeblood of the industry is how do we increase demand?
The Chairman. Thank you, and thanks to the panel again.
I would like to now recognize the Ranking Member for his
questions. Mr. Cardoza?
Mr. Cardoza. Thank you, Chairman Rooney. I have two sets of
questions I would like the panel to address, the first one
dealing with conservation programs. To what extent do your
operations, as well as the industry as a whole, use
conservation programs such as the Conservation Reserve Program,
EQIP, the Grasslands Preserve Program? Have these programs
allowed you to implement practices and make changes to your
operation that you otherwise would not have undertaken, and
thus improved the environment and your product? How have these
programs helped you address either Federal regulation or state
regulation, and if the budget for these programs were
significantly cut or eliminated, what effect would it have on
your operation?
Mr. Strickland. Thank you, sir, and yes, I do have an EQIP
program on the ranch and it certainly has been very beneficial.
I do appreciate the funding of those. They are cost-share
funding, where I may spend 50 percent or 80 percent or 90
percent on the practices, but I certainly--I appreciate it.
There are so many issues within USDA and all of the different
cost-share programs that they have. On my ranch, that is the
only one that I have on the ranch, but within those fundings--
and going back to USDA in the State of Florida, we have a USDA
research facility which does water quality research and
nutrient research within the State of Florida. There are three
of those USDA centers within the United States, in Nebraska and
Montana. Those are totally different genetics, totally
different water supplies, totally different rainfall and
environmental concerns that those folks out there have. Right
now, the funding is slated to be cut for my unit, my USDA unit
there in the State of Florida. The unit itself actually does
genetic research also, which covers about \1/3\ of the entire
cattle population of the United States. Without that research
going forward, who would then help with all those programs that
you speak of?
Mr. Cardoza. Thank you. I am going to ask my other
questions so the rest of you can answer it as you go forward,
because I have a limited amount of time. That is about
regulatory burdens on this industry. We have heard a lot of
concern from farmers and producers about regulatory uncertainty
and the burdens they are under. Do you have any personal
experiences with these regulatory agencies that have created
cause for your concern? If you would go ahead?
Ms. Burkholder. Yes, actually those are perfect questions
and they juxtapose against each other very well. I do use EQIP
funding at my cattle feedyard. I am a concentrated animal
feeding operation, which means I operate under EPA's NPDES
permit. As such, I am required to catch all of the liquid
runoff that comes off of my facility when it rains, as well as
have a comprehensive nutrient management plan for properly
applying the solids, the natural fertilizer that my cattle
produce, back on to our farm ground. I built a livestock waste
control facility using EQIP funding just this past fall. I
think that that is a great example of how we can collaborate
together. We can use taxpayer dollars, we can use new science
and technology in order to reduce our environmental footprint
and work to do the best job possible.
I would like to juxtapose that experience against an EPA
inspection that took place at my facility in 2001. One morning
in September in 2001, two EPA agents walked into my office
unannounced, took out their badges and informed me that they
were EPA agents and if I lied to them, I was going to jail. Now
I don't know about you all, but I don't consider that very
collaborative. I consider that combative. I took the gentlemen
through the feedyard. We looked at all the written
documentation that I have to have. We keep weather and rainfall
data, we read the level of water in our holding pond on a daily
basis. I keep a lot of environmental records for my operation.
So we went through both the records and I took them on a tour
of the facility. As we drove past the cattle, one of the
gentlemen looked at me and said I have never been this close to
a cow before. He then looked at my pens, and I have traditional
pens that have mounds in the middle in order to offer our
cattle the best comfort during inclement weather. And he said
well, what are you doing with all that piled manure all over
the place? I said I am sorry, sir, that is not manure. Those
are my dirt mounds.
So I tell you all of this to make a couple of points.
Number one, as I stated this morning earlier in my testimony,
it is very important that we work together and we accomplish a
common goal. I want to take care of the environment just as
much as you do, but we need to be effective and efficient in
trying to do it. Having combative agents show up on my property
without knowledge of my business is not an efficient use of
funds.
Now looking at the EQIP cost-share funding, that is a
tremendously efficient use of taxpayer dollars, because it is
allowing me to build a new livestock waste control facility
that is lined, that is using modern technology and allows me to
protect the groundwater and reduce my environmental footprint.
So my rather longwinded answer to your question is I
believe that we share the same goals and if we can collaborate
together through programs such as EQIP so that I can
continually work to improve my operation, that is a great use
of taxpayer dollars; a much greater use than an Environmental
Protection Agency coming to visit me and sending me a letter
afterwards, telling me that I wasn't keeping my daily rainfall
records correctly because I wasn't writing down zeros on the
days that it did not rain. I was only recording rainfall when
we actually had precipitation. As a result of that record-
keeping ``error'' on my part, I had to submit additional
paperwork to the Agency for better than a year.
Now, I hate to speak for other folks, but I don't think
that did a whole lot for protecting the environment, and it
certainly didn't come close to what me building a new holding
pond using EQIP dollars has done for the environment.
Mr. Cardoza. Thank you for your testimony, and thanks to
the Chairman for giving us some extra time to explore that
answer. I appreciate it very much.
The Chairman. Now we will move to Mr. Gibson.
Mr. Gibson. Well thanks, Mr. Chairman, and thanks for
convening this hearing today. I would like to thank the
panelists. This has already been very informative, and I would
like to echo the comments of the Chairman as far as your
service, Mr. Strickland, as well as that of your son. But, I
also want to commend all of you for what you do for all of us.
You are all servants for us in the producing of our food, and
it is deeply appreciated.
You know, Ms. Burkholder, just listening to your commentary
moments ago, nearly all of my adult life I have been a soldier,
and I started as a private and I learned firsthand what it is
like to do the hard work of a soldier. And even as I rose
through the ranks and ultimately commanded a brigade combat
team, about 3,700 men and women, I never forgot what it was
like to be a private, to be a soldier.
So recently I asked my farmers--I have the great fortune of
representing the 20th Congressional District in New York where
we have over 1,000 farms. I conveyed to them that I really
needed to serve as a farmhand. I needed to learn what it was
like firsthand so I wouldn't have that same serious void in
knowledge and experience. So about 10 days ago or so I got what
I asked for, rising at 3 a.m., on duty by 3:50 a.m., and
milking--being part of milking 400 cows, mixing feed,
delivering the feed, cleaning stalls, feeding baby calves, and
then having a meeting of about 50 farmers. Look, it is 1 day.
That is hard work. I really admire and respect what our farmers
do, and I thought about it the next morning as I was rising
about 6 a.m., they were already at work for 2 hours. So I have
a long way to go to continue to learn, but your point is well-
made, that all of those, whether they be serving in Congress or
serving in Executive Branch, or doing the hard work that you
are doing, we need to collaborate for the betterment of all the
people in the United States of America.
You know, I also want to affiliate myself with the remarks
that I have heard from you today, which is very similar to what
I have heard from our farmers and small business owners, is
that you are not looking for a handout. What you want is some
empathy and for us to address the impediments to growth, taxes,
regulation, healthcare costs and energy costs. When we can
expand--when we attack these impediments your profitability
grows and that allows you to flourish and for all of us to do
better. And towards that end, the remarks by the Ranking
Member, Mr. Cardoza, really accurately describe the farming
situation in my district in that we are having a good year so
far, but it is very tenuous and trepidatious, going forward.
And so one of the issues is high input in feed costs, and I
am curious to know what your thoughts are. If you think that
the ethanol policies that we have, tax credits, renewable fuel
standards and the like, how you think that is impacting the
price of corn feed, and what are your thoughts on policies to
mitigate associated rising costs for inputs?
Ms. Burkholder. Well, I really respect you for spending a
day on the farm. I think that is a tremendous thing to do and,
as you know, we face a population in the United States where
less than two percent of us are actively engaged in feeding the
country, that gap that exists between rural America and urban
America really is problematic for us, so I really commend you
for doing that.
I do grain fed cattle. I live in central Nebraska. Our
natural resources are such that we grow crops and then we
finish our cattle in concentrated feeding operations like mine.
My husband is a farmer. He grows both alfalfa and corn, a
little bit of wheat and some soybeans. So we are a diversified
operation.
I believe in entrepreneurship and I believe that we always
need to be thinking outside the box and looking for better ways
to do things. At the same time, I do think that there is a
point in time where an industry needs to be able to stand on
their own. We have had ethanol subsidies in this country for 30
years now, and I think that the market is such now that it is
probably time to say goodbye to those. I am very grateful to
the ethanol industry because a co-product coming out of those
plants is wet distillers grains, and that is an absolutely
fabulous cattle feed. Nutritionally it is very good for the
cattle, and it is just a fabulous feed. So we certainly in
Nebraska have greatly benefited by being able to feed wet
distillers grains to our cattle, and at the same time be able
to harvest ethanol from that corn plant. But I do believe that
it is probably time to let that go. If you pay any attention to
the markets at all, you will notice that we have had severe
volatility over the past 4 or 5 years, and that is very
difficult to manage. I am in the margin part of the business
and so I am acquiring calves and I am preparing them for
harvest. And so as feed costs go up, that makes a tremendous
impact on my business. Five years ago we could put 100 pounds
of gain on a calf for $40. Today is it going to cost me $100.
So it makes a tremendous impact.
I believe it is time for us to all be playing on the same
level field.
Mr. Gibson. Well I thank you very much for that commentary,
and again, Mr. Chairman, I appreciate the hearing. I yield
back.
The Chairman. Thank you, Colonel Gibson. Now we will move
to Mr. Scott.
Mr. Scott. Thank you, Mr. Chairman, and welcome, panelists.
I would like to ask each of you your opinions, very briefly. It
has been about 2 years now since the country of origin labeling
has gone into effect, and I would be very interested to get
your response to how that has impacted your business in terms
of any process changes, any problem areas.
Let us start with you first, Ms. Burkholder.
Ms. Burkholder. The very short answer to your question is I
have not seen country of origin labeling improve my business.
It has added cost, certainly, especially at the packing plant
and the fabrication sector of the industry. I don't really
believe that I have realized any gain from it.
Mr. Scott. All right.
Ms. Burkholder. That being said, as I said before, we
always need to think outside the box and we always need to find
ways to add value to what we produce, and I spend an awful lot
of time doing that. I do track my animals from birth to
harvest. In fact, 100 percent of the cattle that are on feed in
my feedyard right now can be traced back to the source of
origin and a birth date. Those animals are individually tagged
and we are following their performance all the way through the
life cycle. So I have chosen to use that as a niche, a higher
quality niche for my business. I am actually marketing those
calves as age and source verified product. Ironically enough,
most of that product is getting shipped to Japan because that
is what the market is dictating at the moment.
Mr. Scott. Mr. Strickland?
Mr. Strickland. Yes, sir, I am going to echo exactly what
Anne has said. Bottom line, which is what keeps me in business,
gives me the ability to take my ranch on to further
generations, I have not seen one dime more for that program,
which was so costly and met with so much debate. No, sir, I
have not.
Mr. Scott. Okay. Let me ask you, Mr. Bull.
Mr. Bull. Yes, just really briefly. I think from our
standpoint, obviously, we have had to add some carcass
segregation sorts to manage the cattle by country of origin
labeling. In order to keep those costs as small as we possibly
could, we have chosen to do that only at one of our southern
plants and one of our northern plants. And so it not only adds
costs in the processing level, it certainly starts segregating
which plants are available for some producers who choose to
have an animal that is born in Canada or Mexico in their
feeding operation. If you are in Kansas, you have no marketing
outlet for those type of cattle.
Mr. Scott. Well let me ask you specifically about the
Canadian situation. As you know, the Canadians have brought
suit with the WTO. Give me your thoughts on that. Do you feel
they have a case to stand on? Are their points legitimate? Each
of you, how do you feel about that? Do the Canadians have a
beef with this?
Mr. Bull. I think they probably do, but from our
standpoint, obviously if you add a regulation that adds costs
to a system, like country of origin labeling certainly did, but
there is no benefit on the revenue side, then that cost has to
be borne somewhere in the system. And today, that is being
borne in a lower price, particularly of the Mexican feeder
cattle coming across the border. They are now trading at a
bigger discount to U.S. animals, and that discount is due to
those added costs of segregating those animals going into
country of origin labeling.
Mr. Scott. So do you--the answer to the question is that
you do believe that the Canadians have a point here?
Mr. Bull. I think it has created a disparity in the value
of the animals, outside of just the quality of the animals.
Mr. Scott. So the Canadians do have a point, that is what I
am trying to get to.
Mr. Bull. Yes, sir.
Mr. Scott. All right. Is that true with you, Ms.
Burkholder?
Ms. Burkholder. I don't believe that I know enough to be
able to accurately give you an opinion.
Mr. Scott. Okay, Mr. Strickland?
Mr. Strickland. Sir, I am going to have to answer the exact
same way that Ms. Burkholder did.
Mr. Scott. All right, thank you very much, Mr. Chairman.
The Chairman. Thank you, Mr. Scott.
I will move to Mr. DesJarlais.
Mr. DesJarlais. Thank you. It is DesJarlais.
The Chairman. Sorry, sir.
Mr. DesJarlais. That is okay. Everybody screws that up.
Thank you all for coming today. I am a family practice
physician by trade, but I grew up in western South Dakota,
obviously a heavy ranch community there. I moved to Tennessee
in 1993, and my father-in-law raises beef cattle in southern
Tennessee. I wanted to bring some questions to you today from
the Tennessee Cattlemen's Association. In anticipation of this
hearing we reached out, and so hopefully the questions aren't
redundant, but I did want to speak on their behalf.
Mr. Bull, we will start with you. The importance of exports
to the economic health of the beef sector has been well
established. The question that came forth to me was how would
Mexican retaliatory trade restrictions affect the beef market
in the USA?
Mr. Bull. You know, the Mexican market is really an
interesting one. Obviously, Mexican feeder cattle come across
the border to the United States, they are fed in the United
States by American feeders using American grains, processed in
American plants. Quite a bit of the product actually goes back
to Mexico. I know during the BSE time, Mexico was probably our
number one market for beef, and is still a very viable market
today. It is--they are a trading partner from the standpoint of
buying and consuming more meat. And, what we see around the
globe is as any country's GDP starts to grow, their per capita
growth then fills their desire for their consumers to actually
buy higher valued proteins, and certainly we have seen that in
Mexico. The market that we had in Mexico 20 years ago is
dramatically different than the market we have today, and they
are a growing and vibrant market for our products out of the
United States.
Mr. DesJarlais. Okay, thank you.
Mr. Strickland, it is almost impossible to have a
conversation with anybody in production agriculture and have it
not somehow turn to issues regarding Environmental Protection
Agency. One of the issues has already been addressed here in an
amendment sponsored by Kristi Noem from South Dakota and
cosponsored by many of us, including myself, and that is the
dust regulations. Under the proposed EPA regulations, would the
EPA be able to come on to your farm in dry weather when cattle
kick up dust?
Mr. Strickland. Sir, there are two of us here. One is from
Nebraska which has considerable dust concerns and then there is
me. Our rainfall down in Florida--and most of our cattle are
free ranging. Are we concerned about that? Absolutely, because
what costs money and undue regulations for the folks that I
send my cattle to affects my bottom line, absolutely. In
Florida, we worry about that and you are absolutely right. We
have dealt with the EPA on numeric nutrient criteria down in
Florida, and we found that some of those overriding,
overreaching, unobtainable goals, if you will, within EPA--and
I have jumped from dust to water, but it appears to be somewhat
of a trend that we are concerned about, yes, sir.
Mr. DesJarlais. Thank you.
Ms. Burkholder, I had some questions with you about over
burdensome government regulations, but after your testimony a
bit ago I don't know that I want to go there, because I only
have a minute left and I think we need about 5 days. I
empathize with you. The question that was sent was dealing with
the GIPSA, and I guess what we will do just briefly here, what
is the cost and burden of the paperwork and compliance
associated with the GIPSA rule changes, as you see it?
Ms. Burkholder. The biggest thing for me with GIPSA is I
don't have a business model anymore, so how do you put a number
to that? So that is a very good question, but a very hard
question for me to answer. I am all about paperwork. I keep a
lot of paperwork. Whether we are talking about agent source
verification records, preconditioning vaccine records,
antibiotic use records, records for the EPA, I keep a lot of
records. That is part of my job. To put a dollar figure on what
that is going to cost me, it is going to ruin my business. I
may not be here next year.
Mr. DesJarlais. Thank you very much, and----
Ms. Burkholder. May I address the dust issue briefly as
well? Is that okay?
Mr. DesJarlais. Oh, yes, please.
Ms. Burkholder. We have a lot of dust in Nebraska. In fact,
in Nebraska cattle outnumber people 4:1. My kids absolutely
love that quote. They think it makes them very special. My
feedyard is located out in the country, so to speak, and we are
about 6 or 7 miles from two towns. Each town is roughly 3,000
people, so I live in a very rural area. Dust is something that
we live with. Most of the roads that I travel on are gravel
roads. I would tell you that we have more dust coming off of
our gravel roads than we do coming out of our feedyard. If EPA
pushes this through, we will be continually out of compliance.
I could, I suppose, spend $1 million on a sprinkler system to
put in my feedyard, but that is not going to control the dust
coming off the road right next door. So it really doesn't
attain anything for us, and I would tell you that there is no
way that Nebraska is ever going to be able to be in compliance.
Mr. DesJarlais. Thank you, and thank you, Mr. Chairman, for
the additional time.
The Chairman. Thank you, sir.
The gentleman from Iowa, Mr. King.
Mr. King. Thank you, Mr. Chairman, and I thank the
witnesses for your testimony.
I turn first to Mr. Bull, and just ask as we have gone
through the BSE debate over the years and we have watched
things ramp up and ramp down, just taking a little temperature
check on the industry. Is the industry closer to or further
away from an RFID proposal than they were, say a year or 2 or 5
ago?
Mr. Bull. Great question. I would have said--I forget the
exact year that I was testifying here on country of origin
labeling and I thought there was more appetite in the House
Agriculture Committee for an animal ID system than there was
for country of origin labeling, and I was optimistic that we
were moving in that direction quickly. Unfortunately, it
certainly has met roadblocks over the years. There appears to
be a bit of a ground swell of desire potentially for animal ID
and traceability improvements that I think could bring enormous
value and benefit to the industry. But I would hesitate to say
that we are very close today to getting that accomplished.
Mr. King. Mr. Bull, would you think we have slipped further
from that over the last couple of years, or which direction is
that line of scrimmage going?
Mr. Bull. I would say it is still pretty far away. Whether
it has gone further away, there appears to be at least a
glimmer of discussion starting again potentially for animal ID,
but I would still call it a glimmer. So no significant
movement.
Mr. King. And where I see it from where I sit, it is that
we are probably an animal health crisis away from that, if that
should happen. Let us hope it doesn't happen. I am okay if
there is no crisis, so my urgency is going in proportion to
that as well.
But I wanted to ask Ms. Burkholder, do you use an animal ID
system in your feed lines?
Ms. Burkholder. We do. As I said, we trace calves
individually from birth to harvest. For the most part, we are
using a visual tag. I use Sampson, Incorporated as my PBP
supplier, and as part of their program they have a very large
visual individually numbered program compliant tag. That is
mainly what we are using. I am using that because that is a
great tool for my cowboy. When you are up on a horse and you
are checking cattle and you can write down a number, you can't
stand up there with your wand. So yes, we are using an
individual ID system through our feedyard. In fact, many of the
calves are carrying three different individual identifiers in
the yard, but we are--we do use a little bit of the RFID
technology. I have some cow-calf producers who are putting
those tags in on the ranch. We are not using a lot of it in our
feedyard because of those reasons that I just mentioned.
Mr. King. What is your advice for the industry?
Ms. Burkholder. Allow the market to drive it.
Mr. King. Thank you. Mr. Strickland?
Mr. Strickland. That last comment of Anne's really stole my
thunder, by the way, Anne.
Not only do we down in Florida raise cattle for the
domestic market, but we also ship live animals around the
world. Whether it is--right now we are working on a dairy
shipment to Pakistan or we are working on horses to go to
Guatemala, it goes back to that same concept of traceability.
There are various ways of doing traceability because I know we
have a lot of brand states here that feel firmly that they need
to stick with the brand aspect of it. But right now, whenever
we see other countries opening up their market, and if that
country drives the boat, so to speak, and mandates that you
shall, then I think that those producers, like myself and like
everybody on the panel, that if there is money to be captured
out there by doing specific things, it certainly ties back to
the same concept. It is the very same concept that GIPSA gave
us: the opportunity to get those niche markets and so it may be
money well spent.
Mr. King. And I thank you for your response. I just want to
make my position clear is that if this happens, I don't want
the USDA to be driving it, I want the producers to be in
control, and that is where I have taken the initiative on this,
but I am sitting back waiting for the industry to make some
move. Then I will give you--take it back to you, Mr.
Strickland. The counsel I am interested in also is every time I
sit down and talk with anybody in agriculture, and they are all
my neighbors around me from where I can see on my deck and all
around, always the EPA comes up. We are a little bit
nonspecific about what to do, but we are in this environment
where we have at least a Republican Majority in the House of
Representatives and we control the purse strings. Do you have
any advice on where we might tighten those purse strings with
regard to the EPA?
Mr. Strickland. Well you asked the right person from
Florida with our numeric nutrient criteria that has fallen upon
our heads and rained amongst our shoulders with inaccurate
science. Financial numbers that they have given us that
initially came out with EPA to implement the numeric nutrient
criteria, and only in the State of Florida with $113 million.
We just finished with a study that was done by Florida
Department of Agriculture and their ag water policy in
conjunction with the University of Florida, and their
agriculture and economic group there. We wanted to see what it
was going to cost, and instead of the $113 million, we came up
with anywhere from $800 million to $3.3 billion. EPA suggested
that there would be 6 million acres in my state that would
have--that would be affected by this new criteria, which by the
way, is unobtainable. Our figures from that same group came up
with 13.5 million acres. If there is any way to say that until
you come up with an obtainable goal and sound science, that we
are not going to fund something that would affect the bottom
line of the United States of America and the State of Florida,
then that would certainly help, but it is not specific to
Florida. As they move, EPA controls, we have caught the brunt
but we have the rest of the United States that is going to be
involved in that fight if we don't stop them now.
Mr. King. Thank you, Mr. Strickland, I appreciate your
input on this. My clock ran out a little while ago and we will
examine your point. Thank you.
Mr. Chairman, I yield back.
Ms. Burkholder. Mr. Chairman, could I answer as well?
The Chairman. Absolutely.
Ms. Burkholder. Okay. I want to touch on something that the
EPA is doing right now that is a little bit back behind the
door. I want to talk about the Conservation Practice Standard
Code 590 regulations that are coming through the NRCS office. I
think that we all need to be cognizant of what the regulations
are and we need to do a good job defining those regulations
because those regulations are ruling the way that I do my
business. When the EPA goes through the NRCS office to do
things like this Conservation Practice Standard Code 590, it
makes it so that I don't know what I have to do to be in
compliance, because there is no regulatory backup for it, okay?
And so that makes it very difficult for me to know what to do
to run my business to be in compliance, because it is not out
in the open.
Now if you look at that document, you will see in there
that I am not going to be allowed to spread my natural
fertilizer on my farm ground when the ground is frozen. In
fact, for a while there was verbiage in there that I couldn't
spread it when the wind was blowing 10 miles an hours. I didn't
know if you all have ever been to Nebraska, but one thing that
is constant is that we always have wind. Part of our
agricultural operation, the sustainable cycle of my husband's
and my operation is being able to take our crops, feed them to
cattle, harvest a high quality human protein to sell to you,
and also harvest that natural fertilizer that is coming out of
the cattle to put our nutrients back into our soil. And so at
the NRCS office, and if EPA runs the NRCS office and makes it
so that it is very difficult for me to spread that natural
fertilizer back on my ground, again, that is going to have a
huge impact on the way that I run my business.
Mr. King. Thank you.
The Chairman. Thank you, Mr. King.
I will now move to the former Ranking Member of this
Subcommittee, Mr. Neugebauer.
Mr. Neugebauer. Thank you, Chairman Rooney, for having this
hearing. I apologize for being a little bit late here.
Ms. Burkholder, kind of tell me a little bit about the
cattle that are in your feedlot. In other words, are you
feeding some of your own cattle, are you feeding cattle on
behalf of others, and when you look at some of the potential
GIPSA rules on marketing those cattle, do you see some pitfalls
and some concerns that you have?
Ms. Burkholder. Certainly. As I stated earlier, I have
worked really hard in the last 10 years to get cow-calf
partners that want to trace their animals from birth to
harvest. When I go out in the country to buy calves, I am my
own cattle buyer. When I go out in the country to buy calves, I
look for cow-calf operators that want to at least retain a
little bit of interest, maybe not monetary, but interest in the
performance of that animal all the way through the life cycle.
I do partner with some of them financially, although many times
I am going out in the country and I am purchasing that calf
because the cow-calf operator doesn't feel comfortable with the
volatility of the market retaining ownership of that calf.
Something that is very important to me is the ability to then
provide that cow-calf producer, regardless of whether or not he
has a financial stake in that calf anymore, with the carcass
and the feedyard performance of that animal.
As I said before, we are in the business of making beef,
and if we can't vertically collaborate to do a better job, that
is going to stagnate us in our ability to move forward and to
continue to add quality to our product.
So part of the reason that I am in the AMA that I am with
U.S. Premium Beef is because they will give me detailed carcass
data tied to an individual calf so that I can take that
information, combine that information with the calf's feedyard
performance, and then give all of that information back to my
cow-calf operator so that he can go back and look and see was
the calf efficient for me at the cow-calf level? Did he work in
the feedyard level? What did the beef that he produced look
like? And so that AMA is really important to completing that
cycle to be able to trace that calf.
Mr. Neugebauer. And so if you can receive a premium for
delivering that high quality, then are you going to also reward
that cow-calf operator when you--when he has calves to sell
or--obviously you may bid a little higher for that animal?
Ms. Burkholder. Absolutely. That is right. I want to forage
relationships with people. I want to buy the same calves every
year. I want to partner with the same people every year. So in
order to do that over time, you have to take care of each
other. We try to take care of each other and pass that premium
back and forth.
Mr. Neugebauer. So if the GIPSA rules begin to bring a
liability for--to making that differentiation or create some
flaws in the marketing system, that is disincentive for you to
do that, is it not?
Ms. Burkholder. Absolutely. It ruins my entire business
model. I have to go back and figure out how to feed cattle,
because the way that I am doing it now, it wouldn't work.
Mr. Neugebauer. Thank you.
Mr. Bull, a number of people have said that this--one of
the elements of the GIPSA rules is that it bans packer to
packer transactions. Some people think that will have some
unintended consequences. Can you kind of--a lot of people don't
understand what those are. Can you elaborate on those just a
little bit?
Mr. Bull. Certainly. From our standpoint, we do not buy fed
cattle from any of our competitors; however, some of our
competitors have feedlots that are not very well positioned to
their packing plants, and to save the freight and expense they
sell to a competitor of theirs. I think some of the best
examples to really get to the heart of the packer to packer ban
site, because there are some issues related there that are
pretty much a nuisance. But to the heart of it, there has been
some great branded beef operations that have been set up by
producers, Myers Natural Angus, Nolan Ryan Beef, and on and on
around this country, and because of the classification they are
packers, but they are not big enough to own a packing plant,
nor do they even want to own a packing plant. And so they make
arrangements with processors like myself who will process those
cattle for them, then they sell the meat out of that business.
So they are producers that have grown a brand, put a lot of
energy around it, and now have created a branded meat solution.
The packer to packer ban would actually either force them to
sell to me or go out of business or buy their own packing
plant, and to me, that is the heart of some of the unintended
consequences that we have seen from some of these rules.
Mr. Neugebauer. I think one of the concerns a lot of us
have is that business models that have worked very successfully
are jeopardized by these rulemaking processes, and particularly
when I think about it--and I go back to Ms. Burkholder, even
possibly Mr. Strickland, is these marketing arrangements
between--whether it is the cow-calf and the feedlot or the
feedlot and the packer, is people have established, as Ms.
Burkholder said, business models, which in some cases, the
livestock business is a leveraged business. It requires a
tremendous amount of capital, and many of the financing
arrangements for these operations are based on somewhat of the
certainty that these marketing agreements provide for basically
everybody up and down the chain.
Mr. Strickland, are you concerned about the--having those
kinds of impact?
Mr. Strickland. Yes, sir, without a doubt. Yes, sir,
because it all starts right here at this end of the table and
goes to the other end of the table. What we do on our ranch,
whenever I invest that money in better bulls, whenever I invest
that money in individual IDs, whenever I invest that money for
age and source verification, I want a premium and I want to be
paid for it. It is a competitive market and we live in the
United States. I understand competition, and I am going to try
to do my best to produce a very healthy product, but I still
need money to pay the bills on the ranch. I want to be paid for
them and I strongly feel like this GIPSA rule will prohibit me
from dealing with people like Ms. Burkholder next to me and on
down the road, whether it is Amarillo, Texas, or Oklahoma City.
Ms. Burkholder. Sir, if I could offer one more comment. I
think that we need to remember that the consumer has a right to
have a choice, and one of the things that these niche markets
or these AMAs have allowed is the production of a slightly
different type of product that the market, the consumer has
said that they desire. I think that a healthy business
continues to evolve to meet the needs of the consumer, of the
folks that are buying our beef. And so I want everybody to
remember the fact that these AMAs are helping to give the
consumer what they want, and I think that at the end of the day
that is very important.
Mr. Neugebauer. Yes, one of the important things about some
of these niche products and marketing processes is what we have
demonstrated is the market is much more powerful and stronger
than a bunch of government regulations. My big fear here is
that the government comes in and causes either some market
distortion, or in many cases, elimination of some of the
choices as Ms. Burkholder said.
Mr. Chairman, this has been a great panel, outstanding
panel. Thanks for having this important hearing.
The Chairman. Thank you, sir. Being that there is no more
questions, I want to thank the witnesses for their testimony.
As I said in my opening statement, this is the first,
hopefully, of many topics that we will delve into on this
Committee, but I think that this was a great start. I didn't
know that we had two Floridians here. I don't know how you go,
Ms. Burkholder, from West Palm Beach to Nebraska, but you are
an excellent spokeswoman for your trade. I appreciate all the
testimony of the witnesses today.
With that, under the rules of the Committee, the record of
today's hearing will remain open for 10 calendar days to
receive additional material and supplemental written responses
from the witnesses to any question posed by a Member.
This hearing of the Subcommittee on Livestock, Dairy, and
Poultry is adjourned.
[Whereupon, at 10:42 a.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Resolution Submitted by Hon. Leonard L. Boswell, a Representative in
Congress from Iowa
National Farmers Union
Special Orders of Business 2011
Farmer and Rancher Bill of Rights--GIPSA Rule
Whereas, the Grain Inspection, Packers and Stockyards
Administration (GIPSA) was created in 1994 as a merger of the Packers
and Stockyards Program, established in 1921 under the Packers and
Stockyards Act to regulate livestock marketing activities at public
stockyards and the operations of meat packers and live poultry dealers,
and of the Federal Grain Inspection Service, founded in 1976; and
Whereas, the number of U.S. beef and hog operations has been
rapidly declining, from 660,000 hog farms in 1980 to only 67,000 today,
and, in the same period, 1.27 million beef cattle operations to only
742,000; and
Whereas, National Farmers Union commissioned an economic report in
2007 to gauge market concentration by the percentage of the marketplace
controlled by the top four participants (known as CR4) which found that
the CR4 for beef packing is 81 percent and 65 percent for pork
processing; it should be noted that economists consider a CR4 in the
range of 40 to 60 percent to be the level at which competition is lost;
and
Whereas, the Government Accountability Office found in 2000 GIPSA's
investigations were planned and conducted primarily by economists
without the formal involvement of attorneys from USDA's Office of
General Counsel, resulting in a lack of emphasis on assessing potential
violations when investigations were initiated and conducted; and
Whereas, in several lawsuits filed by producers against processors
in the recent past, a 12-person jury found unanimously in favor of the
producer due to unfair practices by integrators, but then later an
appellate court of three judges reversed the decisions by stripping
authority away from the Packers and Stockyards Act (PSA) despite
dissenting views from the USDA, the agency that has regulatory
authority over the law; and
Whereas, the authors of the 2008 Farm Bill recognized certain
aspects of the PSA needed clarification and directed USDA to write
regulations with respect to the PSA to establish criteria that the
secretary of agriculture will consider in determining if certain
actions taken by packers, processors or integrators constitute a
violation of the PSA; and
Whereas, NFU submitted comments to the USDA in response to the
GIPSA rule and asked for greater explanation of what business records
must be disclosed by packers and processors to justify differential
pricing schemes, more clarity with regard to the required submissions
of sample contracts, and to ameliorate the consequences a producer may
directly or indirectly experience from a full ban on packers selling to
other packers; and
Whereas, USDA and the Department of Justice held five joint
listening sessions throughout the country in 2010 to examine the issue
of concentration and competition in agriculture, which was an
unprecedented signal that the Federal Government intends to seriously
enforce the PSA;
Therefore, Be It Resolved that the Secretary of Agriculture should
push forward with full implementation of the GIPSA rule to return
protections to producers from the misuse of market power and
consolidation of the beef, pork and poultry industries, as the original
law intended; and
Be It Further Resolved that the Secretary of Agriculture and
Attorney General are requested to act posthaste on the findings from
the five workshops held on consolidation and lack of competition in the
agriculture industry in 2010; and
Be It Further Resolved that USDA should recognize that many
livestock buyers have multiple independent livestock operator clients
and should be treated differently than the buyers representing major
packers; and
Be It Further Resolved that USDA should calculate the CR4 for all
of the major meat sectors on an annual basis and publish the data in a
user-friendly format.