[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

                              ----------                              


                         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.]

                                  
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