[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW THE STATE OF THE PORK INDUSTRY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
LIVESTOCK, DAIRY, AND POULTRY
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MAY 4, 2011
__________
Serial No. 112-14
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
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
Wolf, Doug, Owner, Wolf L&G Farms, LLC; President, National Pork
Producers Council, Lancaster, WI............................... 3
Prepared statement........................................... 5
Maschhoff, Julie, Vice President, The Maschhoffs, Inc., Carlyle,
IL............................................................. 11
Prepared statement........................................... 13
Brenneman, Rod K., President and Chief Executive Officer,
Seaboard Foods LLC, Shawnee Mission, KS........................ 21
Prepared statement........................................... 22
HEARING TO REVIEW THE STATE OF THE PORK INDUSTRY
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WEDNESDAY, MAY 4, 2011
House of Representatives,
Subcommittee on Livestock, Dairy, and Poultry,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:05 p.m., in
Room 1300, Longworth House Office Building, Hon. Thomas J.
Rooney [Chairman of the Subcommittee] presiding.
Members present: Representatives Rooney, Goodlatte,
DesJarlais, Ribble, Cardoza, Scott, and Schrader.
Staff present: Patricia Barr, John Goldberg, Tamara Hinton,
John Konya, Debbie Smith, Pete Thompson, Michelle Weber,
Nathaniel B. Fretz, Mary Knigge, and Jamie Mitchell.
OPENING STATEMENT OF HON. THOMAS J. ROONEY, A REPRESENTATIVE IN
CONGRESS FROM FLORIDA
The Chairman. This hearing of the Subcommittee on
Livestock, Dairy, and Poultry to review the state of the pork
industry will come to order.
Good afternoon and welcome to today's hearing to review the
current state of the pork industry. I would like to begin by
thanking Ranking Member Cardoza for his help in preparing for
today's hearing. I would also like to welcome our witnesses and
extend our gratitude to them for being here today to share
their time and expertise with our Subcommittee.
This hearing is the third in a series to review the current
state of the various sectors of the livestock, dairy, and
poultry communities. In today's hearing we will be focusing on
the modern pork production sector.
Our witnesses today represent a small farrow-to-finish
producer, one of the largest family-owned pork farming networks
in the United States, and a packing company.
Pork is the most consumed meat in the world, and U.S. pork
producers are doing a tremendous job in meeting the growing
demand for this high-quality, safe, and nutritious source of
protein.
The trust that global consumers have in U.S. pork is based
upon the commitment that our producers have made to responsible
animal care, environmental stewardship, and advancements in
food safety. I look forward to hearing more about the work each
of our witnesses are doing to enhance the quality of pork
production in our nation.
Our witnesses have been asked to describe the pork
production system from their perspective, discuss current
economic conditions, and highlight some of their public policy
challenges. In this hearing, as with the other initial hearings
we have had, we hope to gain some perspective about the issues
we should be focusing on in greater detail later in this
Congress.
I appreciate my colleagues' attendance and interest in
these initial hearings. I 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
Good afternoon and welcome to today's hearing to review the current
state of the pork industry. I would like to begin by thanking Ranking
Member Cardoza for his help in preparing for today's hearing. I would
also like to welcome our witnesses and extend our gratitude to them for
being here today to share their time and expertise with our
Subcommittee.
This hearing is the third in a series to review the current state
of the various sectors of the livestock, dairy, and poultry
communities. In today's hearing, we will be focusing on the modern pork
production sector. Our witnesses today represent a small farrow-to-
finish producer, one of the largest family-owned pork farming networks
in the United States, and a packing company.
Pork is the most consumed meat in the world, and U.S. pork
producers are doing a tremendous job in meeting the growing demand for
this high-quality, safe, and nutritious source of protein. The trust
that global consumers have in U.S. pork is based upon the commitment
that our producers have made to responsible animal care, environmental
stewardship, and advancements in food safety. I look forward to hearing
more about the work each of our witnesses is doing to enhance the
quality of pork production in our nation.
Our witnesses have been asked to describe the pork production
system from their perspective, discuss current economic conditions, and
highlight some of their public policy challenges. In this hearing, as
with the other initial hearings we've had, we hope to gain some
perspective about the issues we should focus on in greater detail later
in this Congress.
I appreciate my colleagues' attendance and interest in these
initial hearings. I 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. It is a pleasure to
be here with you again. Thank you to our witnesses for
attending today and sharing with us your experience and
expertise on the current state of the pork industry.
The industry is vital to the health of our country, and it
is vital that we make sure that we keep you strong and healthy
and continuing to provide our country with a plentiful supply
of your product. Pork production provides nearly 35,000 direct
full-time equivalent jobs which helps generate an additional
515,000 indirect jobs. USDA projects that commercial pork
production will be at 22.6 billion pounds in 2011, an increase
of about half a percent from last year, but this depends
largely on the policies developed by this Committee and
implemented by USDA.
That is why I am very happy to be working with the Chairman
to have this hearing today to discuss pork production and the
trends in the industry and the problems this Committee should
focus on as we move forward. Our witnesses today will present
positive and negative trends faced by producers and packers.
These include feed price escalation, animal disease, antibiotic
questions, air quality and environmental issues, as well as
general Federal over-regulation. As a Committee we will work to
help promote policies that will help the pork industry grow and
thrive.
A strong pork industry provides affordable, healthy food
for our nation and supplies, as I said before, thousands of
jobs for our country.
As we continue to listen to agricultural producers, we need
to pay special attention to their feedback on which Federal
programs are most effective and economically efficient with the
industry, and which ones are not working. We are going to have
to make some really tough choices as we move forward toward the
next farm bill. This Committee must make sure that our
resources are focused on initiatives that best help our
producers and processors as a whole.
I look forward to your testimony, and I yield back my time.
The Chairman. I would like to thank the Ranking Member. The
chair would also request that other Members submit their
opening statements for the record so the witnesses may begin
their testimony and to ensure there is ample time for
questions.
I would like to now welcome our panel of witnesses to the
table: Mr. Doug Wolf, Owner of Wolf L&G Farms, from Lancaster,
Wisconsin; Ms. Julie Maschhoff, Vice President, The Maschhoffs,
Incorporated, Carlyle, Illinois; and Mr. Rob Brenneman,
President and CEO of Seaboard Foods, Shawnee Mission, Kansas.
Mr. Wolf, please begin when you are ready.
STATEMENT OF DOUG WOLF, OWNER, WOLF L&G FARMS, LLC; PRESIDENT,
NATIONAL PORK PRODUCERS COUNCIL,
LANCASTER, WI
Mr. Wolf. Good afternoon, Chairman Rooney, Ranking Member
Cardoza, and Members of the Subcommittee. I am Doug Wolf, a
pork producer from Lancaster, Wisconsin, and President of the
National Pork Producers Council. I appreciate the opportunity
to appear before you today to testify on behalf of NPPC.
The U.S. pork industry represents a significant value-added
activity in the U.S. economy. America's 67,000 pork producers
generate nearly $35 billion of gross national product and help
support more than 550,000 mostly rural jobs. The U.S. pork
industry can continue to be a leader in food production and
meet domestic and world demand for pork as long as exports
continue to grow, feed grains are available, and producers are
allowed to operate without undue legislative or regulatory
burden. I will address each of these factors.
There is no dispute that free trade agreements have been a
major reason for the rapid growth of U.S. pork exports over the
last 2 decades. The United States is now the lowest-cost pork
producer in the world and the U.S. pork industry is the number
one global exporter of pork. But the industry will not stay in
that position if competitor countries cut trade deals in key
markets and the United States does not.
U.S. pork producers urge Congress to approve free trade
agreements with Colombia, Panama, and South Korea. When fully
implemented, those FTAs will generate more than $770 million in
additional pork exports, increase hog prices by more than $11
per head, and create more than 10,000 U.S. pork industry jobs.
While exports have been, and with new FTAs will continue to
be, a boon for the U.S. pork industry, they will do little good
if domestic policies hamper producers' ability to operate. Hog
prices are high now because production is lower relative to
just 3 years ago, the results of producers' response to sharply
higher cost of production which now averages about $170 per
market hog. That is 20 percent higher than last year and 60
percent higher than the average from 1999 through 2006.
These costs are now being passed along to consumers in the
form of higher retail pork prices. The USDA estimates those
prices will rise between six and seven percent in 2011.
Certainly other factors are pushing up meat prices, but 65
to 75 percent of pork production costs are for feed, including
grain. Those prices also have been rising rapidly because of
global shortages and increased demand, particularly from
ethanol production. Additionally, feed grain supplies have been
getting higher. While producers can deal with higher prices we
are concerned about ability of feed for our animals. Despite
the third highest corn harvest on record last fall, USDA
estimates only about 2 weeks of corn carryover stocks.
Soybean stocks are low. If we have a weather event in the
Corn Belt, or if China, for example, makes a major corn
purchase, we could see spot feed shortages across the U.S.
While DDGs can provide some relief, they have limited use in
hog diets and they are not an equal replacement for the corn
and soybeans we use. We asked USDA to address these potential
feed grain crises, but so far it has taken no action.
Finally, pork producers have real concerns about looming
Federal regulations, including ones from EPA, FDA, and USDA
that seem to be promulgated without regard to the realities of
today's modern food animal production systems. Chief among them
is a proposed USDA regulation on buying and selling of
livestock and poultry, the GIPSA rule.
As you know, Congress in the 2008 Farm Bill, asked USDA to
address five specific issues related to livestock and poultry
contracts. Unfortunately, the agency's proposed GIPSA rule goes
well beyond those issues. According to a study by Informa
Economics, the rule would cost the pork industry alone nearly
$400 million annually. It would create legal uncertainty, raise
production cost, lead to more vertical integration in the U.S.
pork industry, and could force producers like me out of
business.
NPPC wants USDA to write a regulation that sticks to five
topics that Congress asked it to address and to do thorough
cost-benefit analysis that is available for public comment
before it issues an interim or final rule. Not doing so would
be reckless and lead to serious questions about the openness
and transparency of the rulemaking.
Thank you again for inviting me to testify. I would be
happy to answer any questions.
[The prepared statement of Mr. Wolf follows:]
Prepared Statement of Doug Wolf, Owner, Wolf L&G Farms, LLC; President,
National Pork Producers Council, Lancaster, WI
Introduction
The National Pork Producers Council (NPPC) is an association of 43
state pork producer organizations and serves as the voice in Washington
for the nation's pork producers. The U.S. pork industry represents a
significant value-added activity in the agriculture economy and the
overall U.S. economy. Nationwide, more than 67,000 pork producers
marketed more than 110 million hogs in 2010, and those animals provided
total gross receipts of $15 billion. Overall, an estimated $21 billion
of personal income and $34.5 billion of gross national product are
supported by the U.S. hog industry. Economists Dan Otto and John
Lawrence at Iowa State University estimate that the U.S. pork industry
is directly responsible for the creation of 34,720 full-time equivalent
pork producing jobs and generates 127,492 jobs in the rest of
agriculture. It is responsible for 110,665 jobs in the manufacturing
sector, mostly in the packing industry, and 65,224 jobs in professional
services such as veterinarians, real estate agents and bankers. All
told, the U.S. pork industry is responsible for more than 550,000
mostly rural jobs in the U.S.
Exports of pork continue to grow. New technologies have been
adopted and productivity has been increased to maintain the U.S. pork
industry's international competitiveness. As a result, pork exports
have hit new records for 17 of the past 19 years. In 2010, the U.S.
exported more than $4.8 billion of pork, which added $56 to the price
that producers received for each hog marketed. Net exports last year
represented about 20 percent of pork production. The U.S. pork industry
today provides 21 billion pounds of safe, wholesome and nutritious meat
protein to consumers worldwide.
Profile of Today's Pork Industry
Pork production has changed dramatically in this country since the
early 1980s. Technology advances and new business models changed
operation sizes, production systems, geographic distribution and
marketing practices.
U.S. pork farms have changed from single-site, farrow-to-finish
(i.e,. birth-to-market) production systems that were generally family-
owned and small by today's standards to multi-site, specialized farms
many of which are still family-owned. The changes were driven by the
biology of the pig, the business challenges of the modern marketplace
and the regulatory environment. Separate sites helped in controlling
troublesome and costly diseases and enhanced the effect of
specialization. Larger operations can spread overhead costs (such as
environmental protection investments and expertise) over more farms and
buy in large lots to garner lower input costs. The change in sizes has
been the natural result of economies of scale, plain and simple.
Marketing methods have changed as well. As recently as the early
1980s, a significant number of hogs were traded through terminal
auction markets. Many producers, though, began to bypass terminal
markets and even country buying stations to deliver hogs directly to
packing plants to minimize transportation and other transaction costs.
Today, hardly any hogs are sold through terminal markets and auctions,
and the vast majority of hogs are delivered directly to plants.
Pricing systems have changed dramatically, too, from live-weight
auction prices to today's carcass-weight, negotiated or contracted
prices, with lean premiums and discounts paid according to the
predicted value of individual carcasses. The shift to lean premiums and
discounts was largely responsible for the dramatic increase in leanness
in pork seen in the 1990s.
Today, the prices of about five percent of all hogs purchased are
negotiated on the day of the agreement. All of the other hogs are sold/
priced through marketing contracts or packer produced in which prices
were not negotiated one lot or load at a time but determined by the
price of other hogs sold on a given day, the price of feed ingredients
that week or the price of lean hog futures on the Chicago Mercantile
Exchange. These newer risk-management mechanisms are entered into
freely and often aggressively by producers and packers alike to ensure
a market for and a supply of hogs, respectively, and to reduce the
risks faced by one or both parties.
Robust pork demand in both the domestic and export markets likely
will make 2011 a successful year for U.S. hog producers. Pork cutout
values and farm-level hog prices are near record highs, and prices of
lean hog futures contracts for summer months exceeded $100 per hundred
pounds carcass-weight until recently. The recovering U.S. economy, the
weak U.S. dollar, successful marketing efforts by producer groups,
packers and processors and an expanded opportunity for pork sales to
South Korea have all contributed to these strong prices.
U.S. Pork Industry Concerns
The demand for meat protein is on the rise in much of the world.
Global competitiveness is a function of production economics,
regulations, labor costs and productivity. The U.S. pork industry can
continue to be a leader in food production and meet the needs of
increased consumer demands as long as exports continue to grow, feed
grains are available and producers are allowed to operate without undue
legislative and regulatory burdens.
Trade
There is considerable global demand for pork and pork products.
Pork represents 44 percent of global meat protein intake, far more than
beef and poultry. And there is no disputing that free trade agreements
have been a major factor in the rapid growth in U.S. pork exports over
the last 2 decades. Since the year before the North American Free Trade
Agreement was implemented in 1994, for example, U.S. pork exports to
Mexico have increased 780 percent to $986 million last year; since the
year before the Australia FTA was implemented, U.S. pork exports to
that country have grown by 1,300 percent to $148 million; since the
year before the Central America FTA was implemented, U.S. pork exports
to the CAFTA countries have increased by 313 percent to $119 million;
and in the 2 years since the Peru FTA took effect, U.S. pork exports to
that South American country have almost doubled to $1.2 million. The
Center for Agriculture and Rural Development at Iowa State University
estimates that U.S. pork prices were $56 per hog higher in 2010 than
they would have been in the absence of exports. The U.S. pork industry
last year exported more than 1.9 million metric tons of pork valued at
$4.8 billion.
The United States is now the lowest-cost pork producer in the
world, and the U.S. pork industry has established itself as the No. 1
global exporter. But the industry will not stay in that position, even
as the lowest-cost producer, if competitor countries cut trade deals in
key markets and the United States does not.
U.S. pork producers have been and continue to be strong supporters
of trade agreements, including the deals with Colombia, Panama and
South Korea, which are pending Congressional approval. Iowa State
University economist Dermot Hayes estimates that, when fully
implemented, those FTAs will generate more than $770 million in
additional pork exports, causing live hog prices to increase by $11.35
per head and creating more than 10,200 direct pork industry jobs.
The downside of growing exports, of course, is a larger economic
impact should there be any disruption in trade. Pork producers
understand this dynamic and recognize that it would be devastating for
U.S. pork producers and the entire pork industry.
NPPC supports development of risk-management programs that would
support producers and packers should U.S. export markets ever be
interrupted by a serious animal disease outbreak. This is something
NPPC will be working to address in the next farm bill.
As it demands of other countries, the United States must live up to
its trade obligations. Bilateral and multilateral trade agreements lay
out specific commitments for the signatories, and failure to abide by
them can--and often does--lead to disputes that hurt one or more
countries.
Such was the case with the trucking provision of the North American
Free Trade Agreement among the United States, Canada and Mexico. The
United States refused to allow Mexican trucks to haul goods into the
country. Mexico took its case to a NAFTA dispute-settlement panel,
which ruled that it could retaliate against the United States. In March
2009, the Mexican Government placed tariffs of up to 20 percent on 89
U.S. products worth $2.4 billion; in August 2010--after no U.S. action
to resolve the dispute--it added more products, including pork, to its
retaliation list. The duties made U.S. goods going to Mexico less
competitive with products from other countries and placed more than
26,000 U.S. jobs in jeopardy.
NPPC is pleased that the U.S. and Mexican Governments finally have
resolved the trucking dispute, that the United States will live up to
its NAFTA obligation and that Mexico has agreed to suspend the tariffs
on U.S. goods. Congress must allow a U.S. pilot program that lets
Mexican trucks haul products into the United States to go forward. If
it does not, Mexico undoubtedly will reinstate, and possibly raise, the
tariffs on pork and other U.S. goods.
Feed Availability
A major reason for higher hog prices is lower production relative
to just 3 years ago, the result of producers' responses to sharply
higher costs of production. Costs for typical farrow-to-finish
producers will average about $85 per hundred pounds carcass-weight this
year based on corn and soybean meal futures on April 1. That figure is
20 percent higher than last year and 60 percent higher than the average
for 1999-2006, before the advent of Federal biofuels policies. These
costs are now being passed along to consumers in the form of higher
retail pork prices, which set six record monthly highs during 2010 and
are almost certain to set new highs this year. Indeed, the U.S.
Department of Agriculture in its April 25 food inflation forecast
projected that retail meat prices will rise six to seven percent this
year, the largest jump since 2004.
Certainly, other factors are pushing up meat prices, including
increased global demand and higher transportation costs--the result of
rising fuel prices. But 65 to 75 percent of pork production costs are
for feed, including grains, the prices of which also have been rising
rapidly. (Each market pig consumes approximately 10.5 bushels of corn
and 4 bushels of soybeans in the form of meal.) Additionally, feed
grain supplies, particular corn, have been getting tighter.
Even with the third largest corn crop on record, the projected
2010-2011 year-end stocks-to-use ratios for both corn and soybeans are
the lowest ever. USDA recently estimated 2010-2011 crop year corn
ending stocks of just 14 days, a historic low. Total corn usage, driven
by nearly 5 billion bushels of corn going to ethanol production, is now
routinely more than 13 billion bushels per year and still growing
because of constantly rising renewable fuels mandates and, at least at
present, soaring oil and gasoline prices, which make ethanol production
more profitable. The ethanol industry will use more than \1/3\ of this
year's corn crop. (As an aside, USDA has overestimated the amount of
dried distillers grains with solubles--DDGS, a byproduct of ethanol
production--that are returned to livestock producers as feed.)
U.S. pork producers are concerned about the impact on the industry
of the increased use of corn for ethanol production. The U.S. pork
industry strongly believes the country needs a strong renewable energy
sector. However, it cannot come at the expense of the U.S. livestock
industry. Reducing the use of imported oil--becoming energy
independent--and focusing on renewable fuels are laudable, but markets
must be neither distorted by subsidies and taxes nor constrained--or
compelled--by mandates to the point where they cannot send effective
price signals.
Where mandates and subsidies are allowed to exist and distort the
market, it is unconscionable that long-established laws would be
ignored to drive greater ethanol production. But this is the path the
Administration has taken in response to demands to allow an increase to
15 percent (E15) from the current ten percent in the amount of ethanol
that can be blended into gasoline. Despite the clear language in the
Clean Air Act that fuel additives be safe in--not harm--all vehicles,
the U.S. Environmental Protection Agency approved E15 for 2001 and
newer model year vehicles. NPPC and other stakeholders filed suit
against EPA over its decision. Pork producers obey the rule of law, and
they expect the U.S. Government to do the same.
The United States must invest in research and development for other
energy alternatives, such as using animal manure and fat and biomass,
including switchgrass and corn stover.
The U.S. pork industry wants to emphasize that the right balance is
needed to meet the needs of fuel and feed security.
The increasing demand for corn has resulted in cash corn prices of
more than $6.50 per bushel and corn futures prices around $7.50 per
bushel. For the most part producers will adjust to higher feed grain
prices, but there's not much they can do about a lack of available
supplies.
Currently, only about nine percent of corn has been planted this
year compared with 46 percent at the same time last year. While NPPC
has faith in the American farmers' ability to produce feed grains
sufficient to meet demand, it is concerned about factors beyond their
control, particularly the weather.
The last real drought in the major corn-growing states happened in
1988, 23 years ago. Of course, too much rain also could cause problems.
(Last week, Reuters reported that Texas is experiencing its worst
drought in 40 years and that there are widespread crop failures in the
state because of it.) Should the Corn Belt suffer a drought or other
weather event that reduces the harvest, there will be regional
shortages of feed.
Any difficulties with this year's or next year's U.S. corn and
soybean crops could be disastrous for U.S. pork producers. Ethical care
of animals requires producers to feed them even when feed prices are
high. But if there are feed shortages, livestock producers cannot
simply turn a light switch to stop production and cannot stop feeding
their animals. Taking animals to market before they reach market weight
really isn't an option. Such an action likely would severely depress
livestock prices, hurting producers' bottom line. Producers will do all
in their power to secure feed to care for their animals, but Congress
and the Obama Administration also should be contemplating how to
address physical feed shortages to avoid any potential welfare issues
if such a situation does occur.
Another factor that could affect U.S. feed grain supplies is a
major corn purchase by another country. According to the U.S. Grains
Council, China's corn reserves are 10 million to 12 million metric tons
lower than previously estimated, and it is expected to import an
additional 2 million to 3 million metric tons before the end of the
current crop year. Such a major purchase would make tight U.S. supplies
even tighter.
NPPC has asked USDA to address potential feed-grain shortages,
requesting that non-environmentally sensitive farm acres enrolled in
the Conservation Reserve Program (CRP) be released early and without
penalty so that they may be planted to crops. It also has asked that a
contingency plan be developed should corn demand exceed supply.
Unfortunately, USDA has declined to consider either option.
Legislation and Regulation
Federal legislation and regulations must not impose unnecessary
costs on the U.S. pork industry or restrict it from meeting consumer
demands in an economical manner; government intervention must not stand
in the way of market-based solutions. The structure of the production
and packing sectors should be allowed to change with the demands of the
growing global marketplace. This includes allowing producers and
packers to change to adopt new technologies and pricing and marketing
mechanisms that enable producers to reduce their risks in the current
highly volatile markets and allow packers to capture economies of
scale. The U.S. pork-packing sector is the envy of the world in terms
of efficiency and food safety, and legislation and regulations should
not take away or hamper that source of international advantage.
Allowing producers and packers the freedom to develop new ways of doing
business will only enhance the value of U.S. pork products, at home and
abroad, and reduce costs and risks.
Unfortunately, there are several pending Federal regulations that
will have the opposite effects.
Chief among them is the proposed USDA regulation on the buying and
selling of livestock and poultry--the GIPSA rule. Congress in the 2008
Farm Bill asked USDA to address five specific issues related to
production contracts:
Criteria for determining whether an undue or unreasonable
preference or advantage has been given to any producer.
Whether a poultry dealer or swine contractor has provided
sufficient time for a grower to remedy a breach of contract
that could result in contract termination.
Whether a poultry dealer has given reasonable notice of any
suspension of delivery of birds to a grower under a contract.
When a requirement of additional capital investment during
the life of a contract constitutes a violation of the Packers
and Stockyards Act as an unfair practice.
The factors that comprise a fair usage of arbitration,
including notification and the option for producers to opt out
of automatic arbitration to resolve disputes.
The U.S. pork industry was stunned in June 2010 when USDA proposed
a rule that not only went well beyond the five issues Congress asked it
to address but included provisions considered and clearly rejected by
Congress. If implemented as currently drafted, the GIPSA rule would
have a devastating impact on livestock producers. According to an
analysis of the rule conducted by Informa Economics, it would cost the
U.S. pork industry nearly $400 million annually. Industry analysis of
the regulation concluded that it likely will have a chilling effect on
innovation and flexibility, leading to a race toward mediocrity. It
will create legal uncertainty that will drive costs higher and cause an
increase in vertical integration in the livestock sector, driving
producers out of the business and possibly affecting meat supplies. All
of those effects will harm the U.S. pork industry's international
competitiveness, costing U.S. on-farm and pork processing jobs as well
as negatively affecting the U.S. balance of trade.
NPPC continues to urge USDA to scrap the current GIPSA rule and to
write a regulation that sticks to the five mandates it was given by
Congress in the 2008 Farm Bill. It also requests Congress to conduct
oversight hearings on the origins of the rule, the legal and economic
analyses used to develop it and the rule's impact on small businesses.
Today, the U.S. pork industry has developed a wide variety of
marketing and pricing methods, including contracts, to meet the
changing needs of a diverse marketplace. U.S. pork producers will not
be well served by having certain types of contracting mechanisms
eliminated, actions that only would force livestock markets to revert
to an inefficient system used more than half a century ago in which
animals were traded in small lots and at prices determined in an open-
market bid system. This system was inefficient and makes no economic
sense in today's economy.
The U.S. pork industry opposes any legislation or regulations that
restrict marketing opportunities or interventions into hog markets
unless such actions address a clear, unequivocal instance of market
failure or abuse of market power. To date, USDA has not presented any
evidence that either is taking place.
Another challenge faced by the U.S. pork industry is the attempt by
various activist groups to use the regulatory process to advance their
agendas. Currently, for example, Farm Sanctuary, an anti-livestock
group, is requesting USDA's Food Safety Inspection Service (FSIS) to
amend its ante mortem inspection regulations to prohibit the slaughter
of all non-ambulatory livestock, including swine.
Such a ban not only would eliminate approximately 66 million pounds
of safe and wholesome pork from the food chain--causing meat supply and
carcass disposal problems--but would be contrary to the available
scientific evidence on non-ambulatory hogs and provide no added benefit
to public health, food safety or animal well-being.
Most hogs that become non-ambulatory are fatigued and will recover
with adequate rest, and all animals destined for slaughter must be
presented for ante mortem inspection to FSIS inspectors as directed
under the Federal Meat Inspection Act as well as an FSIS directive.
Additionally, euthanizing non-ambulatory hogs would weaken the ability
to detect animal diseases and eliminate a method of comprehensive
disease surveillance.
A second issue involves packing plant disruptions that have taken
place over alleged animal welfare problems. Many of these incidents
involved FSIS animal welfare inspectors who were newly hired and had
minimal training in swine behavior and handling. The disruptions--plant
shutdowns--have created the potential for very serious animal welfare
issues.
An FSIS directive requires plants to remain closed until a
violation is resolved to prevent further inhumane acts. Consequently,
shutdowns may result in trucks waiting to offload animals, indirectly
causing further inhumane handling issues, including dangerous
temperatures for the animals, especially during the summer months.
NPPC wants to ensure that the use of regulatory control actions,
including plant shutdowns, for minor, non-egregious handling violations
do not lead to secondary animal welfare issues when trucks are not
diverted to other plants. It also would like FSIS animal welfare
inspectors to be better trained--FSIS has new training materials on
animal handling--and, when egregious violations do occur, for
inspectors to divert trucks to other plants.
Pork producers also have concerns about a proposed guidance issued
in June 2010 by the U.S. Food and Drug Administration. Draft Guidance
#209 (The Judicious Use of Medically Important Antimicrobial Drugs in
Food-Producing Animals) recommends that livestock producers eliminate
from food-animal production antibiotics used to promote feed
efficiency.
But the majority of the FDA-approved antibiotics that are labeled
only as growth promotants actually prevent disease or illness. So
eliminating them undoubtedly will lead to an increase in illness and
disease in pigs and a corresponding increase in the amount of
antibiotics needed to treat illness and disease. Banning antibiotics
that are known to prevent illness in livestock has serious animal well-
being implications.
While the draft guidance would allow such antibiotics to be used
after they are submitted to FDA for re-review and the agency determines
they prevent disease or illness, that process is prohibitively
expensive and time consuming, typically costing millions of dollars and
taking 7 to 10 years to complete.
Although the guidance does not have the force of law, producers are
concerned that it may be treated as such by FDA, which is being
pressured by opponents of modern animal agriculture and several public
health groups to address an increase in antibiotic-resistant illnesses
in humans, which they blame on the use of antibiotics in livestock and
poultry production. (There is no scientific evidence linking antibiotic
use in livestock with antibiotic resistance in people.)
It must be noted that FDA's animal drug approval process requires
that products not only be efficacious and safe for animals but also
that they do no harm to human health and the environment.
The pork industry's Take Care: Use Antibiotics Responsibly program
educates producers on proper uses of animal health products, which are
employed as part of an overall herd health plan developed in
consultation with veterinarians. Prohibiting the use of any of these
important tools will jeopardize animal health, increase production
costs and, potentially, lead to higher retail meat prices.
Pork producers take a broad view of what it means to be
environmentally responsible farmers and business people and have fully
embraced the fact that their operations must protect and conserve the
environment and the resources they use and effect. Producers take this
responsibility with the utmost seriousness and commitment, and it was
in that spirit that they have made major commitments to environmental
conservation.
Today, the pork industry is meeting EPA's stringent zero-discharge
standards for livestock operations under the Clean Water Act (CWA).
Yet, despite that success, EPA continues to pressure the industry.
As an example, in its 2008 CAFO Rule--which includes the zero-
discharge standard--EPA, at the urging of environmentalists, ignored
the 2005 decision of the U.S. Court of Appeals for the 2nd Circuit in
Waterkeeper that there was no duty for a producer who was not
discharging to apply for a CWA permit. It illegally expanded its
jurisdiction to include not just a requirement that operations that are
discharging obtain a permit but also that operations that might have
discharges in the future obtain them. To make matters worse, EPA also
reversed the burden of legal proof and the long-standing due process
notion of innocence until proved guilty by demanding that producers
prove to the agency that, even though they don't discharge today, they
won't discharge 20 years from now.
NPPC led the charge on behalf of all livestock producers against
this, and in March the Court of Appeals for the 5th Circuit ruled in
National Pork Producers Council v. EPA that EPA could only require
permits from livestock farms that are actively discharging and that it
was unlawful for the agency to speculate about future conditions.
While the National Pork Producers Council decision is a major
victory over EPA, it has not ended the pressure that producers feel
from the agency. Last May, as part of the litigation, EPA entered into
a sweetheart settlement agreement with several environmental groups.
That settlement resulted in a guidance document being released 2 days
later--with no industry input--that stated in clear terms that EPA had
decided to regulate dust that has blown out of hog barns through
ventilation fans, lands on the ground and mixes with rainwater as a
regulated discharge of a pollutant under the Clean Water Act.
Furthermore, the deal required EPA to propose by May 25, 2011, that all
large livestock operations, with or without a history of actually
discharging and without evidence that discharging is occurring, to
submit detailed information to EPA about their operations. EPA agreed
to post the information in a national database available online and
accessible to the general public, including environmental activists.
Producers would have to submit nearly all the business data and manure
management records that would be required under a CWA permit, including
their nutrient management plans.
On the air emission side of the equation, NPPC is proud of its
leadership in helping to organize and negotiate the groundbreaking
Livestock Air Consent Agreements and the National Air Emissions
Monitoring Study (NAEMS). The NAEMS was a multi-year study, funded by
livestock producers and carried out by university scientists under
protocols and controls developed and overseen by EPA. The purpose of
NAEMS was to develop a better scientific understanding of the emissions
associated with livestock production, and it included monitoring of a
number of species around the country. The data from that study was
transmitted to EPA last summer, and the agency is currently in the
process of reviewing it and developing species-specific air emissions
factors.
After spending a number of years developing and implementing the
data collection efforts, and at a cost of millions of producer-
contributed dollars, NPPC is deeply concerned that EPA will not commit
the resources and expertise needed to develop top quality and sound
emissions factors from this data. NPPC is urging EPA to take the time
it needs to bring the right personnel to bear on the task of fully
understanding the data that was collected and to make use of scientific
expertise at USDA as part of that effort. Unfortunately, this has not
yet taken place.
Conclusion
The U.S. pork industry is the lowest-cost producer and No. 1
exporter of pork in the world, and U.S. pork producers continue to
produce the most abundant, safest, most nutritious pork in the world.
They have proved very resilient, most recently weathering financial
crises in 1998-1999 and 2008-2009 as well as the vagaries of a free
market economy, all while investing in and adopting new technologies
that have promoted animal health, protected the environment and added
thousands of jobs and billions in national income to the American
economy.
To continue as leaders in the global and domestic economies, the
U.S. pork industry requests that Federal policies and regulations
support the American farmer and not hinder--as the proposed GIPSA rule
would--his or her ability to feed the world.
The Chairman. Thank you Mr. Wolf.
Ms. Maschhoff.
STATEMENT OF JULIE MASCHHOFF, VICE PRESIDENT, THE MASCHHOFFS,
INC., CARLYLE, IL
Ms. Maschhoff. Thank you for the opportunity. Good
afternoon. Ladies and gentlemen of the Subcommittee, my name is
Julie Maschhoff, and I along with my husband Ken Maschhoff, my
brother-in-law and sister-in-law Dave and Karen Maschhoff
operate The Maschhoffs.
And today I would like to tell you a little bit about our
family operation and how it has evolved in the pork industry
and our history with this industry. Ken's parents were pioneers
in the industry in many ways.
On your first page of my handout you will see a picture of
Ken's father, Wayne, and his grandfather, Ben. And behind them
you will see one of the very first consignment buildings that
were put up in the State of Illinois. They have consistently
challenged, with each generation, how to bring new technology
into this farming operation; and today, five generations later,
our family continues that value in bringing forth new
technology, and as a result we have become the largest family-
owned pork production network in North America.
Our focus has not changed through the years. Our focus is
still to raise pork in an efficient, humane, and
environmentally responsible manner. But with each generation
the definition of those terms change. Grandpa Ben's definition
of environmental responsibility was to allow the pigs to run
through the cornfield and salvage corn every fall. Today we
have a team of 30 people in our environmental department to
make sure that we have the correct nutrient management plans in
place, and that manure is always used as a valuable fertilizer,
that it needs to be used and recycled into our cropping
operations.
Our commitment to humane production is shown by the animal
welfare standards that have been developed by our animal care
team and that, subsequently, every person in our operation is
trained on. And we believe that our farms are still the perfect
example of large-scale, sustainable agriculture.
Today we operate in nine different states, primarily in
Illinois, Iowa, Missouri and Nebraska, but also with sow farms
that are the reproduction centers located in Oklahoma, Indiana,
Georgia, Alabama, and South Dakota. Along with 320 other family
farmers that we call our production partners, and with the help
of 950 employees, we now produce four million pigs a year,
which is enough pork to feed ten million consumers here in the
U.S. and around the world.
Our business philosophy was handed down through the
generations. We still believe it is people that make things
work, so we invest heavily in human resources. We have
maintained the strong work ethic and the pride in ownership
that has been passed down from generation to generation. But
today we make decisions based on science and information. We
embrace and develop new technology, often testing all of our
production methods in our own research farm, named after the
great State of Georgia--just an aside--and utilizing our farms,
before we ever ask our production partners to adopt a new
technology.
And finally, we emphasize communication. We know we have to
communicate clearly what we are doing among our employees and
our production partners, but we also have to clearly
communicate to our allied industry partners and to the
consuming public.
But what really makes The Maschhoffs unique is our pig. We
are pig geeks--we will admit it--and we think the Maschhoff pig
is a very unique animal. We have worked for over 10 years to
come up with our own genetically enhanced pig, for lack of a
better term, but we have evaluated genetic lines from
throughout the world. We have been to Denmark, we have been to
Norway, we have looked at England, we have looked at China, and
we have tried to take the best of the best to make sure that we
have a unique animal that is something that our customers, our
friends in the packing industry, will want to use as they
satisfy their end-customers.
And, of course, all of our improvements are based on
scientific techniques and carried out in cutting-edge
facilities under modern animal husbandry practices.
Our pigs' health is another unique aspect of our operation.
We locate our breeding herds in very isolated rural areas as
much as possible, because that helps us prevent exposure to
different diseases in the swine industry. Any use of
vaccinations and medications is limited to strict adherence to
both FDA guidelines as well as our customer guidelines, and all
caregivers are trained to focus on individual pig treatments.
Our pigs' living environment is very different from Grandpa
Ben's day. Today, pigs are raised in barns that are designed to
provide an optimum climate for pig comfort, so no longer will
pigs get sunburned as they did with Grandpa Ben. They will not
have to rely on a pond to keep cool, since they cannot sweat.
Instead, they are in climate-controlled buildings. And, of
course, thanks to our cold winters that we have in Illinois,
they are protected during those winter months. Automated feed
and watering systems are there to prevent any hunger or thirst
issues.
Again, all of our housing practices are designed on
science-based standards to ensure that we are doing what is
best for the animal's welfare, and we are routinely auditing
these environments to ensure we are always in compliance.
Our future challenges are the very things that Mr. Wolf
mentioned. Will we be allowed to continue to use the tools in
our toolbox with antibiotics; will we be able to--allowed to
conduct business, or will GIPSA interfere with our business
models and our ability to negotiate and enter into contracts;
and how will EPA continue to regulate our business, or will we
be free to compete on the world market?
In closing, I would like to thank you for your time and
your attention, the opportunity to share with you today, and I
will be happy to answer any questions.
[The prepared statement of Ms. Maschhoff follows:]
Prepared Statement of Julie Maschhoff, Vice President, The Maschhoffs,
Inc., Carlyle, IL
Our History and Mission
Our ancestors arrived in the Carlyle, Illinois area and began
farming over 150 years ago. Five generations later, The Maschhoffs is
one of the largest family-owned pork production networks in North
America. Our Mission Statement is: ``Our focus every day is to raise
pork in an efficient, humane and environmentally responsible manner.''
We strive to instill this mission into every one of our employees and
production partners on a daily basis.
The Maschhoffs are industry leaders in adopting the latest
production technologies, building modern animal facilities, and
carrying out research in a specially-designed research facility. Our
family is committed to providing for the welfare of our employees and
animals, and we believe that pork production today exemplifies
sustainable agriculture on a large scale. We employ management
strategies and make significant capital investments to reduce odor,
protect water resources, and recycle manure to enrich the land and
supply needed soil nutrients for crop production.
Since 1979, when Dave and Ken Maschhoff entered into a pork
production partnership, the Maschhoffs have continuously adopted new
production technologies, expanded the company's reach by building feed
mills and adopting contract production, and grown the business from its
base in southern Illinois to operations in nine states. Today, The
Maschhoffs family business manages 192,000 sows, producing
approximately four million market hogs annually. We have more than 950
employees and have created a production network with 320 Production
Partners, family farmers who have built modern production facilities
and manage the wean-to-finish phase of the pig production cycle.
Our business philosophy centers around: investing in human
resources; maintaining a strong work ethic and pride in ownership;
making information-based decisions; embracing and developing new
technology; and emphasizing communication among employees/partners,
suppliers and customers, and the pork-consuming public.
Our Business Model
The Maschhoffs, like many other pork producers in the U.S., is a
model of a partially-integrated company. We own reproduction facilities
(sow farms) and the sows in the production system, and we utilize both
company-owned and Production Partner-owned (contract) facilities for
the wean-to-finish stage of production. Baby pigs around 21 days of age
are weaned and then placed in the wean-to-finish barn to be raised up
to market weights of around 280 pounds. The Maschhoffs do not own pork
processing facilities, so we contract with several major pork packing
plants to supply market hogs. We also utilize the spot hog market to
sell a portion of our pigs.
Production Partners are family farmers who have entered into
production contracts with The Maschhoffs to build wean-to-finish barns,
manage those facilities and care for the pigs during that phase of
production. The Maschhoffs maintain ownership of the pigs throughout
the life cycle, and also supply the feed and veterinary care for the
pigs, thereby removing the two main sources of market/price risk (hog
market and feed) for the farmers. We typically enter into 10-12 year
negotiated contracts with our Production Partners, a period of time
long enough for the farm family to get the production facility paid
for. The Production Partner is responsible for day-to-day care of the
pigs, maintenance of the buildings, utilities and insurance, and
management of the valuable manure resource. Typically, the manure is
used on the Production Partner's land as a source of soil nutrients for
corn production.
This model has worked extremely well in the Upper Midwest for hog
production and is greatly supported by the financing community. It is
very common for a family's son or daughter who wants to return to the
family farm to participate in contract pork production as a way to get
started in a career in agriculture. Given today's high land prices and
start-up capital costs, being a Production Partner with The Maschhoffs
has been a highly viable way for beginning/young farmers to get started
and to build equity. In fact, demand for production contracts today far
exceeds supply in the Midwest.
Feed Production and Environmental Stewardship
Feed for pigs consists mainly of corn (the energy source) and
soybean meal (the protein source), along with vitamins and minerals. In
recent years with the rapid growth of the ethanol industry and the
resulting competition for corn, we have also adapted the ethanol
byproduct distillers grains into pig diets. As such, The Maschhoffs is
a major buyer of corn, soybean meal and other feedstuffs in the areas
where we operate. Over the years we have constructed two large feed
mills and have entered into numerous feed toll milling arrangements
with local elevators and cooperatives. It takes about 650 lbs. of feed
to grow a weaned pig from 15 lbs. to a market hog weighing 280 lbs. Of
that feed, at least 60 percent is corn with the balance being a
combination of soybean meal and distillers grains. This year we are
going to need 35 million bushels of corn, 165 thousand of tons of
soybean meal, and 293 thousand tons of distillers grains to produce
enough feed for our production system.
Distillers grains from the ethanol industry represents both a
challenge and an opportunity for us in the way we feed pigs. With corn
becoming increasingly expensive, we are constantly searching for ways
to re-formulate our least-cost feed rations using any and all
feedstuffs available. We do utilize a wide array of food industry
byproducts as a substitute for corn when the pricing makes sense. And,
we feed distillers grains as an energy and protein source, substituting
partially for both corn and soybean meal, again when the pricing makes
sense. Currently we utilize distillers at an inclusion rate of up to 30
percent in wean-to-finish diets, a rate that changes with different
feed rations. The biggest constraints to utilizing distillers grains
are: (1) the variability in quality from plant-to-plant and even within
a plant from hour-to-hour; and (2) pigs being monogastric (one-stomach)
animals, they deposit fat in a such a way that the fatty acids included
in distillers grains are directly deposited in the pig; when too much
distillers are fed, the pork belly becomes soft due to the type of fat
laid down, and the carcass risks rejection from pork processors and
their customers. Contrary to what many in the ethanol industry claim,
distillers grains is far from an ideal feed for the pork industry--we
feed what we can when it makes sense, but there are definite
limitations to its use.
Producing feed and raising pigs is one of the oldest, most
successful and sustainable ways to add value to the corn and soybean
commodities produced in the Midwest. In addition, the manure produced
in pork production is entirely recycled into the soil to increase its
fertility and to provide much-needed nutrients (nitrogen, phosphorous,
potassium and micro-nutrients) for crop production. At The Maschhoffs,
we have invested significant resources in personnel, machinery,
training and technology to manage the manure resource. In fact, we have
more than 30 full-time equivalent employees dedicated to environmental
management throughout our production system.
To reduce nutrient excretion by the pig, thereby reducing emissions
and odor, we tailor the pig's diet to its nutritional needs at a
particular stage of growth, a process called phase feeding. We also use
feed additives such as the enzyme phytase to increase the absorption of
feed phosphorous by the pig, reducing the amount of phosphorous
excreted in the manure by 20 to 30 percent.
Food Safety
Food safety is always at the forefront of our thinking at The
Maschhoffs. We work closely with our pork processing customers to
ensure that food safety at the consumer level is maintained. Food
safety at The Maschhoffs begins at the farm level by focusing on
maintaining pig health and welfare. Our entire production system is
actively involved in the National Pork Board's ``Pork Quality
Assurance'' (PQA-Plus) program, and we work with our trucking partners
via the ``Transport Quality Assurance'' (TQA) program to ensure pigs
are handled safely and humanely. We strive to protect consumers by
following the strictest feed and medicine traceability protocols to
ensure that the pork they eat is safe and nutritious.
Community Outreach
Through our Community Partnership Program, The Maschhoffs makes
matching contributions to qualified charities and events in which our
employees and Production Partners are involved. Local 4-H clubs, FFA
clubs, rural fire departments, churches and schools are just some of
the beneficiaries of The Maschhoffs' support.
Government Regulation and Our Business
As a substantial family business involved in agricultural
production, The Maschhoffs face a large number of regulations at the
local, state and Federal Government levels. I will comment on just a
few of the more significant issues here. Let me start on the positive
with several highly-beneficial government activities that directly
impact our pork production business. I mentioned how important food
safety is for us at The Maschhoffs--we have great confidence in the
USDA's meat inspection system under the Food Safety Inspection Service
(FSIS). In fact, FSIS has been highly successful in driving down cases
of meat-borne pathogens, as reported by the Centers for Disease Control
(CDC). We supported the passage last year of the FDA Food Safety
Modernization Act (FSMA), as amended, because we feel the FDA needs
more tools to help the agency maintain consumer confidence in the
nation's food supply. Anything that jeopardizes consumer confidence in
food is very bad for our business. We are hopeful that the many rules
under development now by the FDA under the FSMA will truly help it
maintain food safety and not lead to increased bureaucratic
interference in our feed and pork production systems. Finally, we at
The Maschhoffs have long supported mandatory price reporting for pork,
including wholesale cuts. The regulations under development at USDA's
Agricultural Marketing Service will hopefully bring even more
transparency into the pork meat price discovery system and benefit
producers such as ourselves who rely on many USDA price reports to make
day-to-day decisions in marketing our animals.
As you are aware, the U.S. pork industry has been wildly successful
over the past 15 years in increasing pork exports--we are now the
leading pork exporting country in the world, and year in and year out
export around 20 percent of the pork we produce. I would urge you to
ratify as soon as possible the three pending free trade agreements
(South Korea, Colombia, and Panama) which would be highly beneficial to
all of us in the pork industry.
On the other side of the ledger, I need to mention several sets of
regulations in place or under development that are of great concern to
us. Let me start with the GIPSA rule currently under review at USDA. As
presented for comment, the proposed rule would be a great threat to our
pork production business model in two main areas: (1) we feel the
proposed rule would force us to do away with our system of contracting
with production partners, thereby taking away an important economic
tool for hundreds of family farm pork producers in the Midwest; and (2)
we would be hamstrung in our supply contract negotiations with our pork
processor partners. In general terms, the GIPSA rule would, as a
colleague recently put it, ``put us in a race to mediocrity in pork
production''. We hope the USDA will keep in mind that our production
contracts and supply contracts are negotiated, business transactions
that contain proprietary business information. We have no problem with
the several livestock contracting provisions that the Congress called
for in the 2008 Farm Bill, but the proposed GIPSA rule goes far beyond
Congressional intent and would do great damage to the livestock
industry in the U.S.
The EPA, as some on the Agriculture Committee have previously
noted, seems to be an agency with a whole lot of solutions to problems
that just don't exist in agriculture. We are most concerned about CAFO
regulations, the December 2010 ``Clean Water Protection Guidance'' that
would greatly expand the set of waters subject to jurisdiction under
the Clean Water Act, EPA's misguided attempts to regulate dust in
agriculture, and repeated attempts to regulate air emissions from
livestock facilities. It is disheartening to those of us who have
committed to producing livestock in a sustainable fashion for 150 years
to hear government officials talk about manure (or milk) as toxic
waste. Perhaps it is our own fault for not educating those same
officials as to how we operate, for example, that we store manure below
ground in steel-reinforced concrete tanks that do not discharge; that
we know the nutrient value and field placement of every single gallon
of the millions of gallons of nutrients that we field-apply each year;
or that manure is so valuable to corn producers that it is bought and
sold as a commodity and that demand far outstrips supply in the areas
where we operate.
A rule under development at USDA/FSIS that deals with non-
ambulatory animals at processing facilities gives us great concern. As
a result of a petitioned rulemaking process, two anti-livestock
interest groups, the HSUS and Farm Sanctuary, are asking FSIS to
condemn all non-ambulatory animals, including pigs that are temporarily
unable to walk due to stress and/or heat exhaustion. Such a rule could
cause the pork processing industry to condemn over 60 million pounds of
perfectly good meat in a year. We have addressed this issue many times
in the past in the Congress, and to date our ``downer pig'' champion
Congressman Boswell has always had the good sense to explain to his
colleagues the difference in physiology between pigs and cattle, and
that given a little time to rest, almost all non-ambulatory pigs will
get up and walk and be perfectly fine for the food supply.
I mentioned earlier in my remarks regarding food safety that we
supported the FDA Food Safety Modernization Act. In general, we feel
the FDA does a fair job in another of its duties, the review and
approval of animal drugs. In fact, FDA's animal drug approval process
requires that the product not only be efficacious and safe for animals,
but also that they do not harm human health or the environment. The
FDA's June 2010 draft guidance #209 (The Judicious Use of Medically
Important Antimicrobial Drugs in Food-Producing Animals), however,
concerns us greatly. The draft guidance, by doing away with the use of
animal health protection products for animal health maintenance or
production, would take away an important tool pork producers have in
using FDA-approved products to keep pigs healthy. We fear a situation
such as what has occurred in Danish pork production where similar
restrictions resulted in more sick pigs and ultimately an increase in
the amount of antibiotics needed to treat those pigs. In addition,
keeping pigs healthy results in better feed efficiency of the pigs
(less feed needed to produce more pork) which is especially important
during this time of high corn prices.
Finally, let me comment the impact of ethanol policy on our pork
production business. I already pointed out the challenges pork
producers face with using distillers grains in pig feed. As significant
users of energy and petroleum products, we pork producers are as
interested as anyone in finding new, renewable sources of energy to
reduce our imports of oil from unstable parts of the world. However,
some thought needs to be given to the unintended consequences of the
development of those alternatives. In our specific case, an analysis is
called for of the impacts that the triple threat of ethanol support in
the U.S. (consumption mandates, ethanol import tariffs, and price
subsidies) has had on corn prices and in turn costs for livestock
producers. We know that there are many world-wide demand and supply
factors that have influenced corn prices over the past 5 years--what we
need is a recognition that ethanol has played a part in the contraction
of the country's livestock industry, that there are and will continue
to be implications for meat consumers in the form of higher prices, and
ultimately, we need an honest discussion about what our country's
strategy is for getting beyond corn-based ethanol.
Our Future
Pork production is a major source of job creation in this country.
Iowa State University has estimated that a 100 million gallon ethanol
plant in Iowa uses 37 million bushels of corn per year and directly
employs 80 people. The same 37 million bushels of corn made into feed
and fed to pigs in a farrow-to-finish operation directly employs 800
people! Add to that the hundreds of additional jobs created in the meat
packing, processing, food wholesale and retail sectors, and exports,
and one realizes the importance of livestock production in producing
economic value and creating good jobs in this country.
At The Maschhoffs, we are planning for the sixth generation of
family members to carry on the tradition of pork production in the
Midwest to support (and grow) the thousands of jobs dependent on
livestock and meat production in Illinois and beyond. We are concerned
with the many regulations at all levels of government that continue to
pose threats to our business. Those include business, income and estate
taxes; environmental permitting; legal and regulatory intrusions into
business contracting; food safety regulations; compliance with nine
state sets of workers' compensation laws; and in some locations, a
failing transportation infrastructure. There are other issues as well
that we have to deal with on a daily basis: access to affordable
capital to finance our business; threats from anti-livestock and
strident animal welfare groups; restrictions to free trade; the costs
of energy and health care; not to mention the availability and cost of
our main input, corn. I joke with my four children that in order to
keep this business going, we are going to need them to study law,
medicine, business and psychiatry! In spite of the numerous threats to
our business, we remain optimistic because we are engaged in
agriculture in a part of the country that is best suited to a
combination of crops and livestock production. We benefit from a rare
combination of soils and climate that are the envy of farmers around
the world and that have given us a tremendous comparative advantage in
animal agriculture.
We love what we do and we are proud to be involved, along with
hundreds of Midwestern farm families, in the noble endeavor of feeding
people throughout the United States and around the world. We ask that
the Congress and the Administration work to maintain a business climate
and regulatory environment that allows us to focus on what we do best--
producing pork.
Attachment
Thank you very much.Mr. Brenneman.
STATEMENT OF ROD K. BRENNEMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
SEABOARD FOODS LLC, SHAWNEE MISSION, KS
Mr. Brenneman. Mr. Chairman, Ranking Member, and Members of the
Subcommittee, thank you for the opportunity to appear before you today.
My name is Rod Brenneman, and I am the President and CEO of Seaboard
Foods.
I have provided the Subcommittee with a more detailed testimony for
the record. Seaboard Foods is a vertically integrated pork producer and
processor, currently ranking as one of the top five pork processors and
producers in the United States.
Mr. Chairman, Seaboard Foods has experienced both the up-and-down
cycles and the corresponding challenging economic conditions facing the
pork sector firsthand at every level: hog production; processing;
marketing; and international trade. Many issues threaten the economic
viability of the pork sector, among them escalating input cost for
feed, artificial and unwarranted barriers that hinder international
trade, and increased regulation such as the rule proposed by the Grain
Inspection, Packers and Stockyards Administration.
In mid-2008, corn prices were nearly 150 percent above 2007 prices.
Some said that 2008 was an anomaly. Unfortunately, today the U.S. pork
industry again faces rising input costs, most notably historically high
corn prices that are double April 2010 levels and surpassing even 2008
levels. Corn prices have been above $7 all of April, with no signs of
relief. Although there are several reasons for the increase in feed
prices, paramount among them is the determined government policies to
promote the use of corn for ethanol.
These policies need to be reevaluated and, in my opinion,
completely changed. When roughly 40 percent of the corn crop is used to
produce fuel instead of animal feed or food production, it is difficult
for anyone to argue that the policies have had no impact on food
prices, and there are many studies that support this view.
The United States is the world's largest pork exporter and the
third largest pork producer, trailing China and the European Union. As
one of the most efficient in the world, the U.S. pork industry can be
competitive in world markets, but our producers and processors can only
do so with a level playing field and the elimination of unjustified
barriers to trade. We must resist protectionist sentiment in managing
our own trade issues and encourage our trading partners to act in kind.
We do best when markets are allowed to function without market-
distorting subsidies, high tariffs and quotas, and non-scientific
barriers that inhibit the free flow of products.
In addition to addressing trade barriers, we must take advantage of
all prospective trade opportunities. The three pending free trade
agreements with Korea, Colombia, and Panama represent significant long-
term growth markets for the U.S. meat industry.
Finally I would like to discuss the GIPSA proposed rule, which is
the most troubling and problematic government action I have witnessed
during my career in the pork industry. Simply put, the rule, if
implemented as proposed, would unravel the substantial progress and
innovation achieved by hog producers and the processing industry during
the last several decades. In my opinion, this proposed rule goes well
beyond the scope of the mandate in the farm bill that was passed by
Congress. Much of the proposed progress in the pork sector during this
time has come about because of close working relationships that have
evolved between hog producers and processors.
At Seaboard, although we are largely vertically integrated, we
still have close relationships with producers. Those relationships are
the force that drives the innovation that enables the industry to
deliver to consumers the products they demand.
It is both ironic and disconcerting that GIPSA would propose a rule
that threatens the use of marketing agreements, tools that RTI
International, in a study commissioned by GIPSA and completed in 2007,
identified as providing substantial benefits for producers, packers,
and consumers. The GIPSA rule, however, threatens the use of those
agreements because of the legal liability it could impose not only on
processors, but also swine contractors who use such agreements.
In conclusion, I have three recommendations for the Subcommittee to
consider:
First, encourage the Secretary of Agriculture to provide an
opportunity for review and comment on the economic impact analysis
currently being done by the Chief Economist regarding the GIPSA rule.
Second, encourage and work with the U.S. Trade Representative to
finalize and pass the three pending free trade agreements with Korea,
Colombia, and Panama, and work to open export markets to U.S. pork,
particularly China, which continues to impose non-science-based
restrictions on U.S. pork.
And finally, look critically at eliminating the current Federal
support for corn ethanol to ensure the pork industry and consumers are
not negatively affected to the benefit of the mature corn ethanol
industry.
Thank you for the opportunity to appear before the Subcommittee,
and I am happy to answer any questions that you might have.
[The prepared statement of Mr. Brenneman follows:]
Prepared Statement of Rod K. Brenneman, President and Chief Executive
Officer, Seaboard Foods LLC, Shawnee Mission, KS
Mr. Chairman, Ranking Member, and Members of the Subcommittee,
thank you for the opportunity to appear before you today. My name is
Rod Brenneman and I am the President and CEO of Seaboard Foods.
Seaboard Foods would like to express our appreciation to the
Subcommittee for holding this hearing on the state of the U.S. pork
industry.
Seaboard Foods is a vertically integrated pork producer and
processor, producing and selling fresh, frozen and processed pork
products to further processors, food service operators, grocery stores,
retail outlets and other distributors in the United States.
Internationally, Seaboard sells to those same types of customers in
Japan, China, Mexico, Russia, Korea and many other foreign markets. In
2010, the U.S. pork industry exported over 20 percent of the total pork
produced and Seaboard's amounts were in excess of this overall average
at approximately 27 percent.
The pork processing business is highly competitive and capital
intensive. In 1995 Seaboard Foods invested over $150 million to open a
state-of-the-art packing and processing facility in Guymon, OK. To
operate that plant at full capacity requires approximately $75 million
in working capital.
Our processing facility in Oklahoma employs approximately 2,300
people, and we also market all of the product for a similar sized
facility that is located in Missouri. These two facilities have a
combined processing capacity of over 10 million head per year--
representing about nine percent of the U.S. slaughter volume.
Seaboard Foods' live production facilities are located in Oklahoma,
Kansas, Texas and Colorado, and are supported by our six centrally
located feed mills. These facilities consist of genetic and commercial
breeding, farrowing, nursery and finishing buildings. Seaboard Foods
raises approximately four million hogs each year, making Seaboard the
second largest hog producer in the United States. Our facilities
consume more than 40 million bushels of corn and milo and over 350,000
tons of soybean meal per year.
Mr. Chairman, Seaboard Foods has experienced both the up and down
cycles and the corresponding challenging economic conditions facing the
pork sector first-hand at every level--hog production, processing,
marketing, and international trade. Many issues threaten the economic
viability of the pork sector, among them escalating input costs for
feed and energy, artificial and unwarranted barriers that hinder
international trade, and a rule proposed by the Grain Inspection,
Packers and Stockyards Administration that would reverse more than 30
years of progress and innovation driven by consumer demand.
Input Costs
The U.S. hog and pork production industry in 2011 is faced with
rising input costs, with corn prices at levels that are more than
double the price that they were in April 2010, and higher fuel expenses
at the pump as you are fully aware.
Corn is estimated to account for upwards of 70 percent of feed
grains in pork production and soybean meal accounts for another 20
percent of the feed. In mid-2008, corn prices were nearly 150 percent
above 2007 prices. In addition, soybean meal prices reached record
levels during that same time period. Some said 2008 was an anomaly.
Unfortunately, we find ourselves once again dealing with historic corn
prices that have already surpassed 2008 levels. Corn prices remained
above $7.00 for the entire month of April and there are no signs of
relief. We estimate our corn feed costs this year will be at least $85
million dollars above what we paid for corn in 2010.
Last year's corn crop was considered within the top five most
productive years, however our supplies are at the lowest levels in 15
years and as I mentioned before corn prices are once again at
historical high levels. Although there are several reasons for the
increase in feed prices, paramount among them is the determined
government policies to promote the use of corn for ethanol. This same
phenomena is taking place around the world and is causing concerns to
governments in both the developed and developing world and also the
World Bank. This effort, while seeking a desirable goal which is to
lower the U.S. reliance on fossil fuels, has had an unfortunate
unintended consequence to the U.S. meat industry and ultimately to
consumers. In fact, there are many people around the world that are
being put in a position of not being able to afford to feed themselves
and their families as a result of these high prices. These policies
need to be reevaluated and in my opinion, completely changed. When
roughly 40 percent of the corn crop is used to produce fuel (ethanol)
instead of animal feed or food production, it is difficult for anyone
to argue that the policies have had no impact on food prices, and there
are many studies that support this view.
Trade Overview
The United States is the world's largest pork exporter, and the
third largest pork producer, trailing China and the European Union.
Export markets have become increasingly important to the viability and
economic health of U.S. pork industry as per capita U.S. red meat
consumption has declined in recent years. Foreign demand for U.S. pork
is growing because economic growth and rising middle class disposable
incomes, especially in north Asian markets, are expanding at the same
time the U.S. market faces rising food prices amid the recent
recession. In this difficult economic environment, U.S. pork exports
are increasingly important to maintaining the economic viability of our
industry.
In 2010, U.S. pork exports exceeded 1.92 million metric tons, worth
$4.78 billion, only two percent below the 2008 record of 2.05 million
metric tons and more than $4.88 billion. Last year, the U.S. set new
export records to Mexico, Australia, Central America, the Philippines,
Taiwan, Dominican Republic and New Zealand.
The positive trend for U.S. pork exports continued in February
2011, with an increasingly large portion of total U.S. production going
to international customers while returning more revenue to America's
red meat industry. For the month of February, 27 percent of U.S. pork
production was sold outside of the United States with the incremental
value of exports reaching $51.48 per head versus 25.2 percent and
$43.81 last year. Total pork exports jumped 15 percent in value and
eight percent in volume versus February 2010 totals. Mexico, Japan, the
Hong Kong/China region, South Korea and Canada remain the top five
export markets.
The growth leader for U.S. pork exports in February was South
Korea, which purchased a record 19,532 metric tons valued at $49.2
million as that nation continues to deal with product shortages driven
by a major outbreak of foot and mouth disease (FMD).
Trade Barriers
The U.S. pork industry can be competitive in world markets but our
producers and processors can only do so with a level playing field and
the elimination of unjustified barriers to trade. We must resist
protectionist sentiment in managing our own trade rules and encourage
our trading partners to act in kind. We do best when markets are
allowed to function without market distorting subsidies, high tariffs
and quotas, and non-scientific barriers that inhibit the free flow of
products.
Despite the rebound in U.S. pork exports in 2010 which helped the
U.S. meat industry weather the economic downturn at home, significant
tariff and non-tariff barriers exist to expansion of U.S. pork exports
in key foreign growth markets. For example, some major trading partners
threaten to reject USDA export certificates, and demand certification
of prescriptive and unscientific standards such as zero tolerance on
the FDA approved antibiotic tetracycline. Additionally, these countries
often delist U.S. meat plants because of minor clerical errors in
export documentation or for alleged residue violations. U.S. pork sales
to Russia have plummeted from 203,000 MT in 2008 to 83,000 MT in 2010,
largely due to Russia's unfair sanitary and phytosanitary restrictions.
Many promising long-term markets, such as mainland China, Taiwan
and the European Union continue to restrict U.S. pork shipments based
on unjustified, non-scientific import regulations which ban pork meat
containing residues of Ractopamine hydrochloride (a safe feed additive
to increase efficiency of pork production approved for use in the
United States and 26 other countries) and zero tolerance for pathogens
common on raw products. As of June 1, 2011, China will implement a new
restrictive labeling law which will significantly increase production
costs and in some cases prevent some producers from supplying this
growing market. USDA is actively negotiating with Chinese officials to
guarantee product traceability and minimize the additional labeling
requirements.
There are numerous smaller markets which continue to maintain bans
on U.S. pork from several U.S. states because of the A/H1N1 virus
despite the clear scientific evidence to indicate that the virus cannot
be conveyed to humans through the consumption of U.S. pork. Many other
markets require procedures and testing to minimize risks associated
with trichinae. In the United States there is a negligible risk of
trichinae as a result of high biosecurity protocols and modern
production practices.
In addition to addressing trade barriers, we must take advantage of
all prospective trade opportunities. The three pending free trade
agreements (FTAs) with Korea, Colombia and Panama represent
significant, long term growth markets for the U.S. meat industry.
Passage and implementation of the three FTAs would represent an
additional $2.3 billion in meat and poultry exports and the potential
creation of 29,524 new jobs, according to a white paper prepared by the
American Meat Institute (AMI). To benefit from this potential, the
Administration and the Congress must act now to pass and implement
these agreements. Our competitors are actively working in these
markets--if we don't act fast to set the stage for long term export
growth and job creation, other countries will.
GIPSA Proposed Rule
The GIPSA proposed rule is the most troubling and problematic
government action I have witnessed during my career in the pork
industry. Simply put, the rule, if implemented as proposed, would
unravel the substantial progress and innovation achieved by hog
producers and the packing industry during the last several decades.
Much of the progress in the pork sector during this time has come
about because of close working relationships that have evolved between
hog producers and the packers. At Seaboard, although we are largely
vertically integrated, we still have close relationships with
producers. Those relationships, partnerships really, are the force that
drives the innovation that enables the industry to deliver to consumers
the products they demand. It is both ironic and disconcerting that
GIPSA would propose a rule that threatens the use of marketing
agreements, tools that RTI International in a study done for GIPSA and
completed in 2007 identified as providing substantial benefits for
producers, packers and consumers. The GIPSA rule, however, threatens
the use of those agreements because of the legal liability it could
impose not only on packers but also swine contractors who use such
agreements.
The GIPSA rule is also troubling for another, more basic reason.
I'm not a lawyer. I'm a businessman who runs a pork company. But I am a
citizen and basic civics teaches us that there are three branches of
government for a reason. I think it is troubling when the Executive
Branch blatantly ignores the Judiciary, the branch of government that
interprets the laws. And, it is also troubling when the Executive
Branch ignores the intent of Congress, indeed, this Committee--when it
enacts laws. Simply put, the disdain found in the GIPSA rule for the
courts and the Congress is just not good government.
Conclusion
Many factors influence the pork sector and I am confident that we
can address these problems and make the industry stronger than ever. If
I may, I have three recommendations for the Subcommittee:
First, encourage the Secretary of Agriculture to provide an
opportunity for review and comment on the economic impact
analysis currently being done by the Chief Economist regarding
the GIPSA rule;
Second, encourage and work with the U.S. Trade
Representative to finalize and pass the three pending free
trade agreements with Korea, Colombia and Panama and work to
open export markets to U.S. pork, particularly China, which
continue to impose non-science-based restrictions on U.S. pork;
and
Finally, look critically at eliminating the current Federal
support for corn ethanol to ensure the pork industry and
consumers are not negatively affected to the benefit of a
mature corn ethanol industry.
Thank you for the opportunity to appear before the Subcommittee. I
am happy to answer any questions you may have.
The Chairman. Thank you, Mr. Brenneman.
We will now move into questions. The chair would like to
remind Members that they will be recognized for questions in
order of seniority for Members who were here at the start of
the hearing. After that, Members will be recognized in order of
arrival. I appreciate the Members' understanding of this. I
would like to ask the first question, and then we will move on
to the Ranking Member and on down the line.
I will direct my question to Mr. Wolf, but if the other two
witnesses would like to answer as well, after Mr. Wolf, feel
free to chime in.
Mr. Wolf, if we were to reach a critical situation prior to
the next harvest where some hog producers could not have enough
access to corn to feed their animals, what options would
producers have and what kind of chaos would physical feed
shortages create?
Mr. Wolf. Thank you, Mr. Chairman, for that question. It is
a concern that the industry has been looking at for quite some
time, and we feel it is a valid concern. A scenario that has
been put to us, or an analogy, is that it is like the bottom of
a lake, it isn't smooth and we are going to have pockets. Parts
will probably run out of physical availability of feed, not the
whole industry.
If we don't know that this is coming, it could be a
catastrophe. We could always look at other commodity feeds that
we can try to blend in, maybe some wheats or some other
products. But the problem is this year we have the perfect
storm where we are short on all commodities. So what we are
trying to do is ask the Congress and USDA to look ahead as far
as they can and anticipate to what degree they can, with the
help of the pork industry, to make sure that we don't end up
there; because the only availability that we would have to us
if we run out of feed is to go ahead and harvest early at a
lighter weight, just to make sure that the animal welfare is
good.
The Chairman. Anybody else?
Mr. Brenneman. I would just comment from a processing
standpoint, if pigs were required to come in early, there is a
limitation to how small they can be processed. The plants are
capable of accommodating some variation in size, but they can't
accommodate complete variation in size. So there would also be
some limits on the processing side.
The Chairman. As a follow-up, if you have to harvest early,
what does that do to, like, the normal annual cycle of
production and then, I guess, the cost or the price?
Mr. Brenneman. Well, I will talk about it from a product
standpoint. And if they come in at a much lower weight than
what is traditional or expected, it causes a number of
concerns. One would be from the consumer standpoint and our
customer standpoint. Their expectations are for certain size of
products in the marketplace. If the pigs come in early, they
are obviously not as heavy and the product sizing would change,
so that could have some impact. But, you know, overall, it will
have a significant cost impact as well, because when you look
at the capital investment required in a processing and a
production industry, quite frankly, when you shrink the amount
of pounds that go through facilities that were designed for
much more poundage, the net cost, the fixed-cost component of
that is quite significant.
The Chairman. Anybody else?
Ms. Maschhoff. I was just going to comment on the
throughput factor which Mr. Brenneman just stated. When you
have a system of our size, and any size it is designed to run,
it normally takes 5\1/2\ months to bring that pig to the
correct market weight. Under a supply contract agreement, which
we have, we promise to deliver a certain number of animals at
certain weights. We have maybe a 10 pound window. We strive
very hard to make sure that we meet that targeted weight for
our customers. And all of a sudden, everything gets thrown out
of whack and the entire system has to--the ripple effect goes
on for a long time.
The Chairman. Thank you. Mr. Cardoza.
Mr. Cardoza. Thank you, Mr. Chairman.
I just want to state for the record that I support your
views on the GIPSA rule. I think it is of grave concern to the
industry, and we are working on it.
With regard to antibiotics, in the last session of Congress
I was on the Rules Committee, and the Rules Committee, in my
opinion, conducted a hearing outside of its jurisdiction on the
question of animal antibiotics. I was opposed to it then, and I
remain opposed to it.
I think we came to--or the Committee erred in its judgment
in moving in that direction. But I would like to here, in the
appropriate committee, explore your views on the dissemination
of antibiotics and your views how it affects your product and
consumers, and let you all have an opportunity to make a
comment on that question. And, as well, you might want to
comment on how you feel it impacts your competitiveness with
regard to other countries that have banned antibiotics. So
whoever would like to start. Mr. Wolf.
Mr. Wolf. Thank you. I appreciate that question, too. It is
another issue that seems very timely today. We have had a lot
of discussion looking at it. Antibiotics provide a special
place in our toolbox for animal production, livestock
production. They are a necessary product to have available from
an animal welfare standpoint to assure that these animals are
cared for to their maximum potential. We need to have them
available, because it also provides a means of increasing
efficiency to the animals to protect them so that they don't
get unhealthy or get sick, and that will help out as far as our
carbon footprint or our cost production, whatever; it is just
going to be a good issue there.
So it is important that we have these available,
understanding that today the producers are certified through
our PQA program that assures that proper use of the antibiotics
are done, they are used very judiciously and through a
veterinary directive.
So I will stop with that and allow Julie to go from there.
Thank you.
Mr. Cardoza. Are you aware of any knowledge that the
antibiotic use in animals is contributing to human resistance
to the antibiotic production?
Mr. Wolf. At this time I haven't seen, or our industry
hasn't found, any study that can actually attribute that to
that--to an animal.
Mr. Cardoza. Thank you.
Ms. Maschhoff. I guess I would agree with Mr. Wolf's
comments. Antibiotics are so critical for us. But remember,
they are always used under a veterinarian's care. We employ two
full-time vets and work with an additional dozen vets in
different states, in different areas, to make sure that we are
always using antibiotics as a tool to its best advantage and to
our animals' advantage.
We participate in a program called Safe Feed/Safe Food, and
the bottom line and the whole goal of this program is that the
healthier the animal is when it comes to market, the healthier
food product is going to be going to our consumers. And
ultimately that is our goal. We want to make sure that
everything we do produces a safe product in a humane manner for
today's consumers, and antibiotics are critical to allow us to
do that.
Mr. Brenneman. I would just echo what they have said, but
all of our antibiotics are administered under the direction of
licensed veterinarians. I am not aware of any studies that
connect, as Mr. Wolf said, that connect the use of that with
immunity or whatever from humans.
But the other thing, it is a very delicate issue because
you get into definitions of therapeutic versus subtherapeutic
versus antibiotics used for growth hormones.
And, the other issue that Mr. Wolf mentioned is the animal
welfare issue. We want to make sure we have the tools available
to us to be the very best that we can from an animal welfare
standpoint, too. I think we need to be careful about drawing
too many lines in the sand with tools that are available to us
to treat the animals the very best that we can.
Mr. Cardoza. Thank you. Very briefly, are there alternative
feeds that you can employ? In my area, when I was growing up,
for our hogs we fed them sweet potatoes, because that is what
we had. My grandparents were sweet potato growers. Are there
alternatives that you can use in light of this corn shortage as
a temporary stop-gap?
Ms. Maschhoff. Well, there is a reason you don't see grass-
fed pork on anyone's menu. So there are only certain things,
because a pig has a single stomach and is a monogastric animal.
So there are certain limitations to what we can do with ethanol
byproducts. They can only be used to substitute to a very small
degree what corn would normally provide. But we are limited.
And we don't mind that, because through our extensive research
with nutrition, we have found that the carcass requirements do
change as you change the feed. And obviously if we want to
continue to supply what consumers are looking for, we have to
be very cognizant that there are certain feed stuffs that we
must continue to use in the pork industry, and corn still
remains the feed of choice.
Mr. Cardoza. Thank you, Mr. Chairman.
The Chairman. Thank you Mr. Cardoza. We will now move to
Mr. DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman, and thank you to
all of our witnesses today for your testimony.
Mr. Wolf, we all hear frequently from our constituents
about the burdensome environmental regulations created by
local, state and Federal authorities. Could you take a moment
and expand on your testimony about how your particular sector
is affected?
Mr. Wolf. Thank you. I appreciate that; the question, too.
The regulations that are being forwarded out by EPA are getting
stronger all the time, the Clean Water Act and the Clean Air
Act that are now coming forward. There are certain limitations
to agriculture that just can't be taken care of, and a good
example would be the dust rule, the proposed dust rule. Anybody
who has been in rural country this time of year, during
planting, realizes that you just have no control; that is just
part of the factors that are going on. So we feel that there is
getting to be some over-burdensome regulation being proposed by
EPA, and we are working with the EPA to prevent that from
affecting the industry today.
Mr. DesJarlais. Would anyone else like to add anything to
that?
Mr. Brenneman. No. I guess, just generally speaking, we
would be--we want to make sure that any new regulations, of
course they all add costs, are based on sound science and not
emotional issues or other issues that might be out there.
Ms. Maschhoff. I would go so far as to say that regulation
should be based on sound science and the courts, because we
know that the recent Fifth Circuit Court has ruled that we do
not need permits as confined animal feeding operations that do
not intend to discharge. And yet in Illinois, we are fighting a
battle to not have to pay for very, very expensive permits
which the courts have ruled we do not need. And Region 5 seems
to feel that they have the right to mandate permits, and we are
under a court system that says we do not need the permits.
So as producers we see this type of tug of war going on,
and it leaves us with a lot of uncertainty and a lot of
frustration in what EPA is trying to accomplish and what good
they are trying to do for American farmers.
Mr. DesJarlais. Okay. Thank you. Ms. Maschhoff, you
mentioned the Maschhoff super-pig, basically. I will direct
this question to you.
Ms. Maschhoff. I like that term. I will have to write that
down.
Mr. DesJarlais. Some groups are advocating a legislative
ban on the use of antimicrobials for growth promotion and feed
efficiency. What impact would this legislative ban have on
development of antimicrobial resistance and what impact would
this legislative ban have on animal health?
Ms. Maschhoff. Well, let me give you the blond version,
because when we talk about antimicrobial resistance, what we
are doing when we feed antimicrobials, we are really just
trying to regulate the floor in the pig's gut. There is a very
nice way to put it, but that is what it does. And what we are
doing is, we are allowing that animal to take up feed more
efficiently. It is allowing that pig to take all that energy
and put it right towards growing. It means they don't have to
use it to fight off different diseases, it doesn't sidetrack
what that animal is doing as it grows every day. So those
antimicrobials are very important in making sure our animals
are eating and growing efficiently.
What that means is they need less corn. We have a corn
shortage. It reduces our carbon footprint. It just seems to be
a win-win situation all around, because there is no negative
effect when that animal is harvested.
Mr. DesJarlais. Mr. Wolf, you made the statement that the
rising costs are due to the competition for grain in the
production. The availability and price of feed obviously has a
huge impact on the business plan. Do you have a plan to address
what many are expecting to be very short supplies on feed later
this year?
Mr. Wolf. Thank you. Personally, in my personal situation,
we are diversified, so we grow our own grain; so we are
fortunate from there. But from an industry standpoint, let me
tell you, most of our industry has tried to forward price
product, which it works out pretty good until actual physical
availability becomes limited. So our concern is today that,
although our producers have contracted and protected againist a
price rise, whether or not the companies can fulfill on the
physical delivery of these grains. So there is a real concern
there.
And what can you do? There isn't a lot that the industry
can do. I mean, if you can't take physical delivery, which most
of the industries can't take that kind of quantity, it is just
going to be difficult.
Mr. DesJarlais. Thank you. Thank you, Mr. Chairman.
The Chairman. Mr. Scott.
Mr. Scott. Thank you, Mr. Chairman.
Last Congress, when I had the privilege of being the
Chairman of this Subcommittee, there were three issues that
seemed to dominate the debate. One, of course, was the dairy
economy. And I won't get into that today, though, because the
last time we did that, we had a bunch of protesters dressed in
cow uniforms running through the halls of Congress.
But the other two issues on which we spend a majority of
our time have great relevance today. One is the issue of
antibiotics and the use of antibiotics; and the other, of
course, is the GIPSA rule.
I will begin with the antibiotics issue with you, Mr. Wolf,
if you could please explain to the Committee in what ways you
use antibiotics in your operation.
Mr. Wolf. Thank you, Mr. Scott. We talked a little bit
earlier about the antibiotics being in our toolbox as a tool to
use. And the tools that are available, with the whole idea
behind our toolbox, is to provide the safe, nutritious product
that the pork producers do, so the consumer can be assured that
when they buy a pork product, that it is the best in the world.
And so the antibiotics that we use in my particular operation
are to assure the safety.
Now, whether that is to use it on a preventative basis or
to use it to medicate animals that are actually sick, but it is
very judicious. The thing to remember is that these antibiotics
are expensive.
Mr. Scott. Let me ask you, in your estimation, would it
cost more to treat an animal after it becomes ill than it would
to engage in preventive care?
Mr. Wolf. Yes, sir; yes, sir. An animal, once it becomes
sick, not only does it take more antibiotics to bring it around
and make it more healthy, but that animal will never recover
100 percent and become as efficient as an animal that never has
been sick before. So there is more cost.
Mr. Scott. I went over to Europe and looked at the Danish
system over there. What effects would you anticipate, either
positive or negative, from a move to a system like the Danish
implemented several years ago?
Mr. Wolf. Well, the Danish program points out exactly what
we have been talking about, the entire group here today, is
that they have implemented the non-antibiotics except for under
a treatment situation. And what we have seen is that they have
actually increased their use of antibiotics. It has taken more
antibiotics to treat these animals than if they use them on a
proper preventative basis. And from what our studies have
shown, too, is they haven't seen any human change after the
antibiotics as far as bacterial resistance, so we see that it
hasn't done anything.
Mr. Scott. So just to make sure we are clear, would you say
the Danish system is more positive or more negative?
Mr. Wolf. Negative, sir.
Mr. Scott. All right. Very good.
Ms. Maschhoff, I would like to ask you a few questions
about GIPSA. I have been rather outspoken on that, and I
certainly feel very concerned about that. I stated many times
last year, in my opinion it far exceeds the scope of what we
mandated in the last farm bill. And we were clear in the House
and we were--so, but anyway, I spoke very strongly on that.
It is my understanding that your business model requires
you to rely heavily upon contractors; is that correct.
Ms. Maschhoff. That is correct, sir.
Mr. Scott. And that the rules proposed by GIPSA would have
a negative effect on your business; is that correct?
Ms. Maschhoff. We believe they would be.
Mr. Scott. Can you explain to the Committee how and why
that is the case?
Ms. Maschhoff. Certainly. Thank you for that opportunity.
Under the Maschhoff system, we have worked out a business model
where a contract on a production side is entered into,
negotiated, and agreed to between another independent family
farmer and ourselves. That family farmer constructs a building
to our specifications and then raises the animals under our
protocols until it is ready for market weight. They have a
guaranteed return every month because of their production
contract with The Maschhoffs. Because of the strength of that
contract, they are allowed to go to their banker, receive the
funding necessary to put up a barn, which could cost anywhere
from $800,000 to $1 million based on the strength of that
contract. So that becomes a very important part of their
balance sheet and their negotiations with the bank.
In turn, now that we have those animals on feed, so to
speak, we have to ensure that we have a home for that Maschhoff
super-pig. So we turn around and negotiate with our end-
customers in the packing industry. And depending on what each
packer needs for their particular customers, our pig is worth a
different amount to them, and we enter into a supply contract
to ensure that we have a home for that pig. That contract is
what allows us to receive financing from the banking community.
If the GIPSA proposed rule goes into effect, all of a
sudden the mere fact that you have a contract raises suspicion
and you have to defend that contract. And, oh, I don't know,
but I bet there is a lawyer out there just somewhere, waiting
to create a lawsuit to see if they are really fair or not.
But remember, every contract is negotiated on the strength
of what each party brings to the table. We have spent 10 years
and over $10 million to create the genetic material that makes
up the Maschhoff pig today. We have invested millions more in
making sure that we have barns that allow for the best, most
efficient growth environment for those animals. How do we
capture that type of investment if we can't negotiate a
contract that lets our pig stand alone and become worth perhaps
just a bit more to someone in the supply chain?
Mr. Scott. Thank you very much. That was a very good answer
and very important to get those points out relative to the
GIPSA rule and the impact it has in our business. And I concur
with you 100 percent.
Mr. Chairman, if I may, I know my time is over, but I just
have one more point. And especially I want to ask this point,
since Ms. Maschhoff's operations are in my State of Georgia.
And I would like to ask you about the corn and the cost of
feed, particularly in Georgia, where we don't happen to grow
much corn. Can you explain to the Committee the price pressures
that you are feeling at present and where you expect that to go
in the future?
Ms. Maschhoff. Well, as you probably know, Georgia only
produces about 35 million bushels of corn, \1/2\ of 1 percent
of the entire U.S. corn crop. Because of the competing interest
of ethanol in the poultry industry, it is very difficult to
find corn; and as a result, we typically have to bring it in
from other corn states, because Georgia is basically corn-
deficit. As the price continues to raise, it does force us to
balance that ration and change it as best we can, while still
providing for maximum nutrition and animal welfare. But it is
continually a concern, and it does keep us awake at night, as
to where the actual commodity will be coming from in the
future.
Mr. Scott. Thank you. And, Mr. Chairman, thank you for your
kindness in giving me that extra time.
The Chairman. My pleasure, Mr. Scott. We will now move to
Mr. Ribble.
Mr. Ribble. Thank you, Mr. Chairman. Thank you to the
panel.
As a former business owner myself, it is always good to
talk to some other business owners. So thanks for being here,
thanks for taking time away from your companies to come and
talk to us today. It is really important that you are here, and
I wanted you to know how much I appreciate it.
Mr. Wolf, since you are from the grand State of Wisconsin,
as I am, I would just like to address my first question to you.
Hog production in Wisconsin has dropped by over 1 million head.
Can you talk to us a little bit about what has caused that
drop-off and what the economic impact has been?
Mr. Wolf. Well, thank you, Mr. Ribble. I appreciate you
being here from Wisconsin, too, and taking time away from your
business to run and represent us here. It is a great honor. In
Wisconsin, there was a time when I started 35 years ago, that
we were a large pork production state. A number of things have
happened over the years. Number one, of course, we lost our
packing industry. It has become more efficient, and of course
we understand that.
But the second part of it is the competitive disadvantage
that regulation has put Wisconsin in as far as pork producers,
coming down from the EPA and DNR as far as costs that other
states around us don't have to compete with; and therefore, it
has just been unfavorable for producers to locate in Wisconsin.
Mr. Ribble. Okay. When you talk about the EPA, can you
maybe cite some specific examples?
Mr. Wolf. Well, the only couple that come right to the top
of my head is that as far as our nutrient content is
established at a little different rate than other ones are. As
far as determining CAFO numbers, they count them at a different
rate. So there are a number of issues like that that just makes
it--on a competitive nature, if you had your choice and you are
going to run a business, which you have, you are going to go to
the one place that has less regulation.
Mr. Ribble. Very good. Thank you.
Ms. Maschhoff, six generations, that is impressive. Not a
lot of family businesses stay around for that long, so
congratulations to your family.
You mentioned in your testimony that there have been--one
of the threats to your business have come from anti-livestock
and strident animal rights groups. Can you talk to us a little
bit about--you mentioned it briefly in your testimony, but I
would like you to go a little bit further--on the difference
today on how you are treating animals than maybe three
generations ago, and what the improvements have been in the
quality and safety of your pigs?
Ms. Maschhoff. Well, every aspect of animal care has
changed. This is not your grandpa's farm anymore. Just like
every other industry in this country, we have moved forward,
thanks to technology and science-based decision-making. So our
housing has changed based on science, our nutrition
requirements have changed.
One example, which I think is very unique, is as we study
how the genetic lines that we use grow, we actually ultrasound
that animal every week of its life. So we actually have a model
of how it grows every single week; how much weight it gains;
where the back fat is deposited; how much muscle is being
maintained, et cetera. Based on that type of technology, we
create 27 different rations to feed that animal over the course
of the 5\1/2\ months that it is growing. And one ration may
last 3 days, one ration may last 2 weeks, depending on what
that animal needs at every stage of its growth curve.
That is the way science has guided and changed the way we
raise animals in this day and age. And that is one of the
things that we think makes The Maschhoff system unique, the
fact that we are not afraid to invest in technology, because we
believe those changes will allow us to be more competitive in
the marketplace.
Mr. Ribble. Well, why do you suppose the animal welfare
groups are so concerned, then? Is there a communication
problem, is there a lack of understanding?
Ms. Maschhoff. There is a lack of people eating meat, from
their perspective probably. But in terms of a--there probably
is a communication issue. We need to continue to have
opportunities to explain that everything we do is guided by
science. Sometimes those technical answers aren't the most
entertaining and so they get lost in the shuffle of everyday
news. But we obviously do need to do a better job
communicating. But there are a great many people who try to use
the banner of animal welfare when, really, they are just
actually people who believe in animal rights and believe in
taking away the consumer's choice to have meat in their diet.
Mr. Ribble. Okay. Thank you very much.
Mr. Brenneman, thanks for being here. In your testimony you
said, ``I am not a lawyer, I am a businessman. But I am a
citizen, and basic civics teaches us that there are three
branches of government for a reason. I think it is troubling
when the Executive Branch blatantly ignores the Judiciary, the
branch of government that interprets the laws. And it is also
troubling when the Executive Branch ignores the intent of
Congress, indeed this Committee, when it enacts laws. Simply
put, the disdain found in the GIPSA rule for the courts and the
Congress is not good government.'' Congratulations for writing
that paragraph. I wish I had said it so accurately and so
correctly. Welcome to my world.
My question, though, really relates--I just wanted to
congratulate you on that statement. My question relates to
trade. What is the cost of waiting? What is the big deal if
some of these agreements take a little bit longer so that
their--as the Administration would tell us, more thoroughly
conceived?
Mr. Brenneman. Well, it is hard to put a number on the
cost, and I apologize that I can't do that. Each one of them
would be looked at slightly different. But the export markets
are increasingly important to the pork business today, more so
than any other time. We rely on the export markets. When we see
one or more export markets close, such as we did back in 2009
when H1N1 hit, it had a significant impact on the U.S. pork
industry. So while I can't give you an exact number I know
there are a lot of statistics out there, and each one of the
agreements would be different. It is--there is no doubt it is
extremely significant to our industry.
Mr. Ribble. Well, thank you very much for your testimony.
And, Mr. Chairman, I apologize for going over a little bit.
The Chairman. That is okay. Mr. Schrader.
Mr. Schrader. Thank you, Mr. Chairman. A pleasure to be at
the hearing.
As a veterinarian, it is nice to hear the livestock
industry is alive and doing fairly well, albeit with some
challenges. And I associate myself with the remarks of most of
the Members of the Committee on many of the issues you face,
whether it is trade or GIPSA rule and antibiotic issues. I
guess as a veterinarian, just a quick line of questioning. And
maybe, Ms. Maschhoff, you could respond if that is all right.
You already talked about the life cycle of the pig from birth
to the packer is what?
Ms. Maschhoff. I am sorry, what is the question?
Mr. Schrader. The life cycle of your pig is?
Ms. Maschhoff. Five and a half months to 6 months.
Mr. Schrader. And you also testified that that animal is in
pretty good shape. You even get that ration fine-tuned to
maximize that individual's well-being, I assume.
Ms. Maschhoff. They definitely get more vitamins than I do,
probably.
Mr. Schrader. I suspect they eat better than I do.
Ms. Maschhoff. They probably do, unless you have a personal
chef like our pigs have.
Mr. Schrader. Exactly. I think that is a very good point.
If we ate as well as our animal friends, we all would be less
obese and in better shape, quite frankly, at the end of the
day.
The antibiotics are misconstrued, oftentimes, by people as
they talk about it as a growth promoter, and people immediately
jump to steroids, people immediately anthropomorphize about
what you are doing. I think you testified pretty well, but the
antibiotics are to decrease the stress and improve the life
quality of that animal while it is here on this planet; isn't
that correct?
Ms. Maschhoff. That is absolutely correct.
Mr. Schrader. An animal that is stressed and upset, do they
gain weight, do they feel good?
Ms. Maschhoff. No. They basically go off feed and water.
And by walking those pens every day, you can immediately tell
which animals need attention.
Mr. Schrader. And so your goal in your operation is to
minimize that stress, not just from a financial standpoint, but
for the well-being of that animal, I assume?
Ms. Maschhoff. Yes.
Mr. Schrader. What antibiotics do you use on your farm,
what type of range in the course of your operation, if I may
ask?
Ms. Maschhoff. It is a very broad spectrum, and I rely on
our veterinarians to prescribe everything for the herd health.
Mr. Schrader. What is the withdrawal--is there withdrawal
times in your industry?
Ms. Maschhoff. Yes. Virtually every substance that is
prescribed by a veterinarian would have a withdrawal period
which we adhere to.
Mr. Schrader. And what is the range in that withdrawal
time?
Ms. Maschhoff. It could be anywhere from 10 days to 21 to
28 days. It varies, depending on the pharmaceutical we are
using.
Mr. Schrader. So that seems like a pretty reasonable amount
of time. I think the public needs to understand that the reason
we have those withdrawal times is to ensure the safety of that
product when it hits their dinner table. The idea that we are
going to induce antibiotic resistance borders on the absurd
when we look at the facts and how these antibiotics are
actually fairly judiciously used.
In your own herd or your operation, I know there is a huge
turnover given the life cycle we are talking about here. What
sort of antibiotic resistance have you seen, if you will? You
are using a line of antibiotics. Are you having problems in
that regard?
Ms. Maschhoff. We are not having a problem with
antibiotics.
Mr. Schrader. So the fact that we are not having any
problems in the immediate population with antibiotic resistance
would tell this country boy that maybe if you are not having it
with the immediate population, it is kind of unlikely we are
going to have it in the human population. The consumer is not
even exposed to the actual antibiotic which is broken down and
withdrawn from the animal system or from the operation long
before it hits that person's dinner table?
Ms. Maschhoff. That would be logical.
Mr. Schrader. Shifting real quick to the farm bill--I mean,
it is coming up--we do have some issues and we are in a tough
budget environment. I think the Ranking Member and the Chairman
of our full Committee are committed to trying to have
agriculture do its part. I am sure the direct payments will
come under siege again, and that is a topic for another
discussion, I guess. But what areas is the pork industry most
concerned about that we need to be making sure stay in the farm
bill to help this industry grow and thrive? Anybody.
Mr. Wolf. Thank you. And I appreciate that question because
I am Chairman of our Farm Bill Task Force for the National Pork
Producer Council, and we are looking forward to that one.
Probably the issues that come up with the pork producers are
going to be the ones we discussed today; is the fairness and
equal regulation so that we don't get over-regulated. That, if
anything, we go back to 2008 and get the five things that were
requested out of GIPSA and get those done right; and let's move
on, and enough is enough on that.
But from a forward standpoint as something that we may be
looking at in the future is feed availability to assure that
the livestock has feed availability, physical availability. And
that is something that the grain industry has done a fantastic
job of creating demand. I envy them. They have done a great
job. But they have done a job beyond the support of supplies
that we can do.
We have limited, limited land and areas that we can produce
these grains, but we just over-created demand for grain. So now
we are going to ask the government to help and assure that we
don't have the welfare concerns of the livestock industry.
Mr. Schrader. Good. Thank you. I yield back.
The Chairman. I now recognize the former Chairman of the
Committee on Agriculture, Mr. Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman. I appreciate your
holding this hearing.
Ms. Maschhoff, your written testimony mentions regulatory
efforts to impose requirements for the treatment of non-
ambulatory livestock at processing facilities. Can you take a
few moments and expand on that subject and describe how the
pork sector would be affected?
Ms. Maschhoff. Yes, thank you. In the pork industry when a
pig moves off of a truck, if it gets winded, if it gets tired,
it needs to lay down and rest. It doesn't have any--there
really is no correlation between that animal resting and that
animal's health; it just gets tired. And studies have shown
over and over and over that when that animal is allowed to rest
that 30 minutes, or whatever the case may be, it is fine.
The current regulation that Representative Goodlatte is
referring to would mandate that if that animal lays down to
rest, it is non-ambulatory permanently and therefore should be
removed from the food supply. This would erase 6 million pounds
of pork out of the food supply, just like that, with no
compensation to the farmers. That is not exactly based on sound
science. So that is a proposed area that has us greatly
concerned.
Mr. Goodlatte. And no risk whatsoever to consumers because
the meat is in no way tainted or affected by any kind of
illness. So you would advocate, as would I, that there would
have to be some kind of diagnosis of an illness before the
animal would be----
Ms. Maschhoff. That is correct. If there was presence of a
fever, an elevated temperature, for example, that shows that
that animal--a physical symptom that a veterinarian can say,
yes, this animal is sick. But simply resting is not an
indication of being sick.
Mr. Goodlatte. Do you utilize any government programs to
help you manage the environmental challenges that you face? As
we reprioritize our budget allocations, can you tell us more
about those programs, including the application process and the
usefulness or value of the programs?
Ms. Maschhoff. Currently we do not use any government
programs. However about 12 years ago when the EQIP,
Environmental Quality Incentive Program, was allowed, we did
participate in that program. That was a cost-share program that
allowed us to install various equipment and improve our
processes for handling the environmental aspects of our
operation.
Today our production partners have become more reliant on
that program as our operations are fully in place now. So it
has become more important to our production partners than to
our immediate concerns at The Maschhoff headquarters.
Mr. Goodlatte. I understand that some groups--this is
directed at Mr. Brenneman--I understand that some groups that
may be perceived as anti-agriculture have requested the Food
Safety Inspection Service to amend its regulations to prohibit
the slaughter of all non-ambulatory swine, especially pigs that
aren't walking, no matter the reason, no matter how briefly.
So I wonder if you could expand on what Ms. Maschhoff has
said and explain what the practical and economic consequences
to such a rule would be from your standpoint.
Mr. Brenneman. Certainly. As Mrs. Maschhoff said, it is
many times just an animal that needs a rest. These are not sick
animals and, quite frankly, they don't threaten the safety of
the food. And that is the one piece that I would add on to
everything that she said before; that this is not really--we
need to be careful not to confuse this with food safety issues
and create a food safety issue out of this, because it has no
impact on the safety of the food unless there is clearly an
illness or something there.
From a cost standpoint, it would be a significant cost to
producers and, quite frankly, to processors to have to deal
with that as well, because you have animals that come in that
need the rest. You potentially then have an open shackle that
goes--because you don't--you wouldn't be planning for those
animals to go down.
Mr. Goodlatte. Mr. Wolf, another issue that concerns--I
don't have a lot of pork production in my district, very little
if any, but I have a lot of poultry and beef cattle and dairy.
And I hear a lot from those producers concerned about the
impact that government-subsidized ethanol programs have on
them. And one of the byproducts, as you probably know, of
ethanol is dry distillers grains, which those promoting ethanol
promote as a byproduct that helps to offset the loss of some of
the corn from the market that my constituents argue drives up
the price of animal feed.
How do you respond to those who assert that DDGs are a
viable feed source in place of corn? Does it work in your
business? Does it work with pork in general, with hogs in
general?
Mr. Wolf. Thank you. It brings up an important factor that,
yes, we have been able to bring the DDGs back to the swine
market, although it is a limited basis on where, how much you
can use it. It affects carcass quality, which, here again, our
whole thing is on food safety and food nutrition integrity, so
we want to be careful that we don't do that. Some livestock
species can incorporate it better. Beef can incorporate it
better.
The thing to remember is that out of that 56 pound bushel
of corn, we are going to get back 17 pounds of DDGs. So the
difference in numbers there is just gone. And today, even with
modern ethanol production, they are telling me that they are
even able to get more of it than that, so we are down under 17
pounds of return. So even though that part of it can be
utilized, and it does work out okay to a limited source, it is
not going to replace what is being used.
Mr. Goodlatte. Mr. Chairman, thank you very much.
The Chairman. Thank you. And Mr. Schrader do you have any
other questions?
Mr. Schrader. I am good. Thank you, sir.
The Chairman. I would like to thank the witnesses for their
participation in this process today and for coming out and
helping us understand the pork industry a little bit better. I
hope all of you will consider coming back as we delve more into
some of the specific issues that we touched on today. And
again, on behalf of the Committee, I appreciate your testimony
and your answering of our questions.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional material and supplementary 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 3:10 p.m., the Subcommittee was adjourned.]