[Senate Hearing 112-282]
[From the U.S. Government Publishing Office]
S. Hrg. 112-282
THE STATE OF LIVESTOCK IN AMERICA
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
JUNE 28, 2011
__________
Printed for the use of the
Committee on Agriculture, Nutrition and Forestry
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COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY
DEBBIE STABENOW, Michigan, Chairwoman
PATRICK J. LEAHY, Vermont PAT ROBERTS, Kansas
TOM HARKIN, Iowa RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota THAD COCHRAN, Mississippi
MAX BAUCUS, Montana MITCH McCONNELL, Kentucky
E. BENJAMIN NELSON, Nebraska SAXBY CHAMBLISS, Georgia
SHERROD BROWN, Ohio MIKE JOHANNS, Nebraska
ROBERT P. CASEY, Jr., Pennsylvania JOHN BOOZMAN, Arkansas
AMY KLOBUCHAR, Minnesota CHARLES E. GRASSLEY, Iowa
MICHAEL BENNET, Colorado JOHN THUNE, South Dakota
KIRSTEN GILLIBRAND, New York JOHN HOEVEN, North Dakota
Christopher J. Adamo, Majority Staff Director
Jonathan W. Coppess, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Michael J. Seyfert, Minority Staff Director
Anne C. Hazlett, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
The State of Livestock in America................................ 1
----------
Tuesday, June 28, 2011
STATEMENTS PRESENTED BY SENATORS
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan,
Chairwoman, Committee on Agriculture, Nutrition and Forestry... 1
Roberts, Hon. Pat, U.S. Senator from the State of Kansas......... 2
Panel I
Almanza, Alfred V., Administrator, Food Safety and Inspection
Service, U.S. Department of Agriculture, Washington, DC........ 7
Glauber, Joe, Ph.D., Chief Economist, U.S. Department of
Agriculture, Washington, DC.................................... 4
Parham, Greg, Ph.D., Administrator, Animal and Plant Health
Inspection Service, U.S. Department of Agriculture, Washington,
DC............................................................. 6
White, Dave, Chief, Natural Resources Conservation Service, U.S.
Department of Agriculture, Washington, DC...................... 9
Panel II
Harper, Frank, President-Elect, Kansas Livestock Association,
Sedgwick, KS................................................... 35
Hunt, Steven D., CEO, U.S. Premium Beef, LLC, Kansas City, MO.... 33
Jones, Dennis O., Pork Producer, South Dakota Farmers Union,
Bath, SD....................................................... 32
McPherson, Hans, Rancher and Member, Montana Farm Bureau,
Stevensville, MT............................................... 38
Sietsema, Rick, Farmer, Sietsema Farms, Allendale, MI............ 30
Welch, Michael, President and CEO, Harrison Poultry, Inc.,
Bethlehem, GA.................................................. 36
----------
APPENDIX
Prepared Statements:
Boozeman, Hon. John.......................................... 50
Chambliss, Hon. Saxby........................................ 52
Harper, Frank................................................ 54
Hunt, Steven D............................................... 63
Jones, Dennis O.............................................. 70
Mcpherson, Hans.............................................. 85
Sietsema, Rick............................................... 90
Welch, Michael............................................... 101
Testimony was Submitted Collectively from USDA for the Following
Witnessess:
Alfred V. Almanza, Joe Glauber, Joe, Greg Parham, Dave White. 120
Question and Answer:
Hon. Debbie Stabenow:
Written questions to Alfred V. Almanza....................... 136
Written questions to Joe Glauber............................. 141
Written questions to Frank Harper:........................... 157
Written questions to Steven D. Hunt:......................... 160
Written questions to Dennis O. Jones:........................ 162
Written questions to Hans Mcpherson:......................... 166
Written questions to Greg Parham............................. 168
Written questions to Rick Sietsema:.......................... 176
Written questions to Michael Welch:.......................... 181
Written questions to David White............................. 184
Baucus, Hon. Max:
Written questions to Alfred V. Almanza....................... 138
Written questions to Greg Parham............................. 172
Chambliss, Hon. Saxby:
Written questions to Alfred V. Almanza....................... 139
Written questions to Joe Glauber............................. 151
Conrad, Hon. Kent:
Written questions to David White............................. 190
Gillibrand, Hon. Kirsten:
Written questions to Alfred V. Almanza....................... 138
Harkin, Hon. Tom:
Written questions to Joe Glauber............................. 150
Lugar, Hon. Richard G.:
Written questions to Joe Glauber............................. 153
Written questions to Greg Parham............................. 174
Almanza, Alfred V.:
Written response to questions from Hon. Debbie Stabenow...... 136
Written response to questions from Hon. Max Baucus........... 138
Written response to questions from Hon. Kirsten Gillibrand... 138
Written response to questions from Hon. Saxby Chambliss...... 139
Glauber, Joe:
Written response to questions from Hon. Debbie Stabenow...... 141
Written response to questions from Hon. Tom Harkin........... 150
Written response to questions from Hon. Saxby Chambliss...... 151
Written response to questions from Hon. Richard G. Lugar..... 153
Harper, Frank:
Written response to questions from Hon. Debbie Stabenow...... 157
Hunt, Steven D.:
Written response to questions from Hon. Debbie Stabenow...... 160
Jones, Dennis O.:
Written response to questions from Hon. Debbie Stabenow...... 162
Mcpherson, Hans:
Written response to questions from Hon. Debbie Stabenow...... 166
Parham, Greg:
Written response to questions from Hon. Debbie Stabenow...... 168
Written response to questions from Hon. Max Baucus........... 172
Written response to questions from Hon. Richard G. Lugar..... 174
Sietsema, Rick:
Written response to questions from Hon. Debbie Stabenow...... 176
Welch, Michael:
Written response to questions from Hon. Debbie Stabenow...... 181
White, Dave:
Written response to questions from Hon. Debbie Stabenow...... 184
Written response to questions from Hon. Kent Conrad.......... 190
USDA:
Written response to questions from Hon. Debbie Stabenow...... 193
THE STATE OF LIVESTOCK IN AMERICA
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Tuesday, June 28, 2011
United States Senate,
Committee on Agriculture, Nutrition and Forestry,
Washington, DC
The Committee met, pursuant to notice, at 2:48 p.m., in
Room 106, Dirksen Senate Office Building, Hon. Debbie Stabenow,
Chairwoman of the Committee, presiding.
Present: Senators Stabenow, Baucus, Klobuchar, Roberts,
Cochran, Johanns, Boozman, Grassley and Thune.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION
AND FORESTRY
Chairwoman Stabenow. Good afternoon and welcome to the
Committee on Agriculture, Nutrition and Forestry. We very
much appreciate all of our witnesses. We have two excellent
panels today, and we very much look forward to your testimony,
and we thank you for being here.
Today, we will hear about some of the exciting and
innovative things happening in the livestock industry, many of
which I have seen for myself back in Michigan. The livestock
industry represents a $250 billion industry which supports
nearly 2 million jobs nationwide and 40,000 jobs in my State of
Michigan. I continue to talk about the Farm Bill as a jobs bill
because that is exactly what it is, and today we are talking
about a very important part of our industry.
We have two great panels of witnesses today to talk about
the state of the livestock industry. On the first panel, we
have senior officials from the Department of Agriculture who
will cover the overall economic outlook for the industry,
animal health and food safety issues, as well as conservation
efforts. On our second panel, we will hear from producers and a
packer about a number of issues including export opportunities,
the proposed GIPSA rule, ethanol and the permanent disaster
programs for livestock that we have added in the 2008 Farm
Bill.
One of those producers we will hear from is Rick Sietsema.
He has an excellent story to tell. I am very proud to have him
here, representing the State of Michigan.
And in fact, producers all across Michigan are taking an
innovative and responsible approach, thanks in part to a
voluntary certification process we have in Michigan called the
Michigan Agricultural Environmental Assurance Program, or
MAEAP, which helps livestock producers adopt practices that
manage animal waste and nutrient runoff. A central piece of
this program is assessing Farm Bill conservation programs like
the Environmental Quality Incentives Program, EQIP, and the
Conservation Stewardship Program.
And because of the work we have done in Michigan, MAEAP and
conservation programs are helping farmers find regulatory
certain for the larger livestock operations. I think MAEAP is a
great illustration of how we can work together with producers
to find creative solutions to challenges that they are facing.
Throughout the hearing today we will hear more examples of
how we can work with producers to find effective solutions to
the challenges we face. For example, the Department of
Agriculture has worked hard to develop a great new working
relationship with the industry to ensure a safe supply of food
for consumers. The Department has also worked closely with the
industry to develop a plan to trace disease outbreaks and
provide assurance to the countries who buy our meat products.
And I know there are many people who have concerns with the
proposed GIPSA rule. I am looking forward to hearing from our
witnesses about that today. I appreciate and understand the
complexity of this issue, especially as it relates to different
geographical regions, market structures and species. That said,
I will be watching and working closely with the USDA, with my
friend and Ranking Member, Senator Roberts, and will continue
to work with stakeholders to find a workable solution that does
not hinder economic development and innovation.
So again, welcome to the hearing. I would now like to turn
to my friend and Ranking Member, Senator Roberts, for his
opening remarks.
STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
KANSAS
Senator Roberts. Madam Chairwoman, I appreciate your
calling this hearing today which focuses on the center of
America's dinner plate and the 860,000 folks that make up this
nation's 100-plus billion livestock industry.
The livestock sector is a driver of the agriculture
economy, also a major reason agriculture has had a substantial
success in the export market. Unfortunately, despite this
unmatched success, the livestock industry has been under
regulatory attack--those are harsh words; I intend them to be--
from both the EPA and the Department of Agriculture. This is
especially true of the USDA as it applies to the proposed GIPSA
rule.
During the last Farm Bill, we had a very strong, spirited
debate on many of the exact proposals that are included in the
proposed rule, and we rejected them all during that Farm Bill
debate, in some cases by a very substantial vote margin.
Let me repeat that: The exact proposals that are included
in the proposed rule, and we rejected them all, in some cases
by a substantial vote margin. So much for congressional intent.
Despite the strong, clear bipartisan congressional
statements and intent on this topic, the Administration went
forward in direct opposition to these congressional actions.
I do not want to call into question anyone's motives. Let
me make that clear. But I must say that the actions of the USDA
on this rule and the past activities of GIPSA Administrator J.
Dudley Butler as a lawyer in the private sector call into
question the Department's impartiality on this issue.
Frankly, Secretary Vilsack was not here for the last Farm
Bill debate. He did not know all of the history behind the
congressional intent on this topic, and I do not think he got
the full story from Mr. Butler or others who developed this
rule.
Mr. Butler made a career out of suing many in the livestock
and processing sectors. To be perfectly blunt, the rule as
proposed looked like a trial lawyer's full employment act.
Better yet, I will read a quote from the Administrator,
Administrator Butler, regarding the core of the material in the
rule. His quote: ``That is a lawyer's dream, a plaintiff
lawyer's dream.'' He was a plaintiff lawyer.
I understand that part of government service is that folks
with diverse backgrounds and experience will fill these
political positions, and that is usually a good thing. We need
people with real-world experience, helping to run our
government. The problem is that when those serving seem to have
trouble checking their past agendas at the door.
In this instance, since we are talking about livestock, it
seems like the fox is guarding the henhouse and we are missing
a few hens. As a result, we are looking at a proposed rule that
is undoubtedly major in its economic impact and which threatens
to undo years of livestock marketing arrangements that have
benefitted both livestock producers and consumers.
At a time when many talk about how agriculture is going to
help lead the rebound for our economic recovery, it makes no
sense to me why we would try to hamstring this industry and
take away marketing tools that will have far-reaching
implications in both the domestic and international
marketplace.
I am disappointed that Mr. Butler is not here today. I do
know, however, that the USDA Chief Economist, Dr. Joe Glauber,
is a straight shooter. He is here, and he will give us honest
answers to our questions.
I think that probably Secretary Vilsack, my suggestion to
him would be to put Mr. Butler in the witness protection
program, under the circumstances.
I look forward to hearing from Dr. Glauber along with many
of our witnesses about the very real-world impact of this
proposed rule.
I thank the Chairwoman for holding this hearing.
Chairwoman Stabenow. Thank you very much, Senator Roberts.
And again, we welcome our first panel. And we realize that
we have your written testimony. It has been submitted for the
record. We will ask you to keep your remarks to five minutes.
Also, in the interest of time today, to make sure we have ample
opportunity for our second panel, I will ask colleagues to
stick to our five-minute rule as will I attempt to do my best
to do that as well this afternoon.
So I am pleased to introduce our panelists. First, we have
Dr. Joe Glauber. Dr. Glauber is the Chief Economist at the
USDA. Dr. Glauber served as Deputy Chief Economist at USDA from
1992 to 2007. In 2007, he was named the Special Doha
Agricultural Envoy and continues to serve as Chief Agricultural
Negotiator in the Doha talks.
Second, we have Dr. Greg Parham, and we welcome you. Dr.
Parham is the Administrator for USDA's Animal and Plant Health
Inspection Service. Dr. Parham began his career with APHIS in
2006 as the agency's Chief Information Officer and since then
has held appointments as Deputy Administrator for Marketing and
Regulatory Programs and Associate Administrator until becoming
Administrator of APHIS in April of this year.
Next, we have Mr. Al Almanza, who is the Administrator for
the Food Safety and Inspection Service. Mr. Almanza's career
began in 1978 as a food inspector in a small slaughter plant in
Dalhart, Texas. Since then, he has served through the agency as
Deputy District Manager, as a Labor-Management Relations
Specialist and Processing Inspector. We welcome you as well.
And Chief White is with us--Chief Dave White, Chief of
USDA's Natural Resources Conservation Service. Chief White
began his career with the Natural Resources Conservation
Service over 32 years ago, was named Chief in March of 2009.
Chief White has been active in the Farm Bill process, having
worked both the 2002 and 2008 Farm Bill, both time as detailees
with our Committee. And so, it is good to have you back.
We thank all of you for joining us, and we will ask Dr.
Glauber to proceed.
STATEMENT OF DR. JOE GLAUBER, CHIEF ECONOMIST, U.S. DEPARTMENT
OF AGRICULTURE
Mr. Glauber. Thanks very much, Chairwoman Stabenow, Ranking
Member Roberts and other members of the Committee. Thanks for
the invitation to discuss current issues and developments in
the livestock industry.
Let me begin with my presentation, at least to give you a
brief overview of the livestock economy and what has been going
on over the last six months and looking forward.
As we enter the second half of 2011, livestock prices are
generally higher, supported by strong U.S. agricultural exports
and very modest increases in production. However, livestock
margins remain under pressure as weather events and strong
demand have pushed prices for feed and other inputs to record
levels. Economic growth, especially in less developed
countries, and the reduced value of the dollar continue to
support global demand and U.S. prices for livestock and dairy
products.
Turning to the export picture, USDA's forecast for U.S.
agricultural exports for fiscal 2011, as you may know, is a
record high of a $137 billion, up from $108.7 billion last year
and the previous record almost $115 billion in fiscal 2008.
U.S. exports of livestock, poultry and dairy products are
forecast to reach a record $26.5 billion in fiscal 2011, up $5
billion from the previous year.
U.S. beef exports for 2011 are forecast at 2.59 billion
pounds. I note this is the first time that our exports for beef
have exceeded the level, pre-BSE levels. So after a long time,
we finally climbed back so that at least our exports for 2011
are forecast above the pre-BSE levels. We are expecting a
slight decline for 2012 although that still, I think, reflects
the fact we are anticipating stronger national demand, but
total beef supplies will likely be about 4 percent lower.
U.S. pork exports are forecast to increase to 4.9 billion
pounds in 2011. That is an increase of 15 percent from 2010.
U.S. exports to South Korea, up 195 percent during the first
quarter, are expected to abate later this year as domestic
production begins to rebound from recent foot and mouth disease
outbreaks there. U.S. pork exports in 2012 are expected to
decline slightly to 4.8 billion pounds as exports to South
Korea decline, as pork production recovers in that country.
For broilers, broiler exports are forecast to decline from
6.77 billion pounds in 2010 to 6.48 billion pounds due
primarily to lower exports from Russia and China. Broiler
exports in 2012 are expected to total 6.7 billion, again up 3.4
percent from the 2011 forecast.
One of the bigger issues facing livestock producers has
been the higher feed costs. For the 2011-2012 marketing year,
global demand is forecast to exceed global production, causing
global stocks of grains and oil seeds as a percent of use to
fall and crop prices to rise.
As many of you know, on Thursday, NASS will release its
acreage report. This has been much anticipated by the market
because of the interest in how planting delays and flooding
have affected corn, wheat and soybean plantings.
Our current estimates for total corn supplies are down 230
million bushels from last year. Lower beginning stocks more
than offset the projected increase in corn production. All this
contributes to lower corn ending stocks for 2011-2012,
projected at 695 million bushels, or 35 million bushels lower
than beginning stocks, and that has pushed the farm price for
corn to a record $6 to $7 per bushel, up from this year's
current record of $5.30.
And I might add the prices for other feed stuffs are
projected to remain high. Soybean prices, for example, we are
now forecasting those at $13 to $14 per bushel for 2011-2012
compared to this year's record of $11.40. And that means
soybean yield prices projected at $375 to $405 per ton, again
up from 2010 levels.
And lastly wheat prices, and we are seeing some feeding of
wheat now for livestock because of its competitiveness with
corn. But it too, of course, is looking at record prices. We
are forecasting those at $7 to about $8.40.
I will close here, but I think the takeaway from this is
that feed prices have kept margins quite tight. And this has in
fact meant for livestock, where we would normally see with the
high prices that we have seen in beef, pork and poultry, where
we might expect more expansion, we just have not seen the
expansion, and that is largely because of the pressures the
producers have been under, because of these tight margins. And
given the tightness in the markets and these low prices, or
these low stock levels, I think the tightness will continue for
some time.
And with that, let me conclude. Thanks.
[The prepared statement of the USDA can be found on page
120 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Dr. Parham, welcome.
STATEMENT OF DR. GREG PARHAM, ADMINISTRATOR, ANIMAL AND PLANT
HEALTH INSPECTION SERVICE, U.S. DEPARTMENT OF AGRICULTURE
Dr. Parham. Thank you, Madam Chairwoman and members of the
Committee.
My name is Dr. Gregory Parham, and I was recently appointed
the Administrator to USDA's Animal and Plant Health Inspection
Service. Although I am new to this role, I am not new to this
agency or to USDA. As you heard, I have been with APHIS since
2006 and with USDA since 1982.
My father, a veterinarian like me, spent his entire career
with APHIS and its predecessor agencies. From him, I learned
the value of public service and especially the importance of
safeguarding agriculture. It is with that spirit that I am so
proud to be here before you today.
I am also joined today by Dr. John Clifford, the U.S. Chief
Veterinary Officer and also the Deputy Administrator for
Veterinary Services within our agency, and he too shares a
strong commitment to agriculture and APHIS's critical mission
of safeguarding animal health.
While much of USDA's focus is on preventing disease, we
must also be prepared should a foreign animal disease be
detected in our country. We must be ready to minimize the
potentially devastating effects on livestock and livelihoods of
producers. Key to those efforts is an effective animal disease
traceability system. We want to be able to identify sick or
potentially exposed animals, see where they have been and
identify other animals with which they have been in contact. We
could then isolate and treat effectively affected animals,
securing animal health and helping ensure that markets for
healthy animals stay open domestically and around the world.
We are also developing a proposed rule which will provide
states and tribal nations with enough flexibility to use the
methods that work best for their producers. What works best in
Michigan might not be the best for Montana. The system we are
designing recognizes that fact. If two states in the West, for
example, want to recognize each other's brands, that is
acceptable under our system.
This flexible approach will help us hold down the costs of
the overall system. We plan to provide those who choose to use
them with low-cost ear tags which all States will recognize.
These tags have been an effective part of our successful
disease eradication programs over the years.
Aside from flexibility, the other hallmark of our approach
is transparency. We have made it a priority to listen to what
producers all around the country have to say, incorporating
their suggestions on what an effective animal disease
traceability approach should look like. At every step of the
way, we have and will continue to listen to producers and the
public. We want to ensure that we have as much stakeholder
support as possible because participation is central to an
effective and successful system.
Our commitment to listening to and responding to the needs
of our producers has been key to another APHIS initiative--
improving our brucellosis and tuberculosis programs. Together
with our producer and State partners, we have made great
strides in reducing the incidents of both diseases, but in
today's animal health landscape we can continue to strengthen
these programs while effectively addressing challenges like the
prevalence of disease in wildlife populations.
So we have reached out to our partners for their ideas. We
published concept papers on new directions for both programs
and reviewed the many public comments we received. We followed
up with State meetings, industry meetings, just to get their
input on our proposal and what is needed.
For tuberculosis, we have issued a Federal order in April
2010 that provides greater options for dealing with TB-affected
herds, and on brucellosis we issued an interim rule in December
of last year that allows us to focus the program on high-risk
areas. In both cases, we now have more flexibility to maintain
a State's status when an infected herd is not depopulated. This
saves producers time and money because they no longer have to
comply with additional testing requirements because of
downgraded State status, and as we move forward we will
continue to review these programs with our partners and
stakeholders.
Madam Chairwoman, I again thank you for the opportunity to
testify today, and I look forward to working with you and
members of this Committee as we protect America's agriculture
and natural resources. Thank you very much.
Chairwoman Stabenow. Thank you very much.
Mr. Almanza, welcome.
STATEMENT OF ALFRED V. ALMANZA, ADMINISTRATOR, FOOD SAFETY AND
INSPECTION SERVICE, U.S. DEPARTMENT OF AGRICULTURE
Mr. Almanza. Thank you, Madam Chairwoman, Ranking Member
Roberts and members of the Committee. I appreciate the
invitation to appear before you today to discuss FSIS and the
ways we are improving public health through food safety and
encouraging businesses to produce the safest products possible.
FSIS is the public health regulatory agency of the United
States Department of Agriculture responsible for ensuring that
our nation's domestic and imported commercial supply of meat,
poultry and processed egg products is safe, secure, wholesome,
accurately labeled and packaged. Our inspection program
personnel are the backbone of FSIS's public health
infrastructure, and domestic processing and slaughter
establishments, laboratories and import houses across the
country. In fiscal year 2010, we employed more than 9,800
personnel, including more than 8,000 in-plant and other front-
line personnel protecting public health in approximately 6,200
federally inspected establishments nationwide.
As someone who began working on the slaughter line in a
beef establishment more than 30 years ago, I know firsthand
that our employees are our greatest asset and our greatest
strength. We are united, one team with one purpose, to protect
consumers from food-bourne illness.
During fiscal year 2010, our inspection program personnel
ensured public health requirements were met in establishments
that slaughter and/or process 147 million head of livestock and
9 billion poultry carcasses. FSIS inspection personnel also
conducted 8 million food safety and food defense procedures to
verify that the systems at all Federal establishments met food
safety and wholesomeness requirements. In addition, during
fiscal year 2010, inspection program personnel condemned more
than 451 million pounds of poultry and more than 493,000 head
of livestock during antemortem and postmortem inspection.
Protecting public health and the consumer is our mission.
As a regulatory agency, we live this mission every day and in
every way, from our inspectors doing the fundamental work of
the agency and inspecting the products on the line to policy
staff working together to ensure that FSIS's policy is up to
date and meeting the demands of the present food safety system.
Even so, we understand the importance of working with
industry to ensure that establishments produce safe products.
Moreover, we make an extra effort through our outreach and
guidance to help small and very small slaughter processing
establishments to ensure that they comply with FSIS
regulations. Establishments with 500 or fewer employees
represent more than 90 percent of the FSIS regulated
establishments.
We understand the importance of working together and
providing them with the information and tools they need in
order to be successful. In fiscal year 2010, we launched our
small plant help desk which responded to 2,277 inquiries during
the fiscal year. FSIS also distributed 24,000 copies of our
Proposed Hazard Analysis and Critical Control Point Validation
Guidance and the FSIS General Food Defense Plan. We also
developed 12 new podcasts on food safety issues for small and
very small operators, and conducted exhibits at 23 industry
events to share outreach materials with small and very small
operators. Through our efforts, we reached about 55,225
industry operators in fiscal year 2010.
In addition, we provide information and offer mobile
slaughter facilities for small livestock and poultry producers
in rural areas as well as provide the opportunity for State-
inspected meat and poultry establishments with 25 or fewer
employees to join a new interstate shipment program.
As previously mentioned, I began working at FSIS on the
slaughter line at a beef facility. This experience in the field
has given me the insight and understanding of the importance of
small and very small businesses to America's rural economies.
Small and very small businesses are the foundation of our rural
economies and are tangible by providing jobs, direct and
indirect, to those in rural America that may otherwise not have
such opportunities.
Ensuring that our employees have the proper tools and
FSIS's updated policies to prevent food-bourne illness has been
a priority for me since being named Administrator. It is not
our intention to impose rules that hinder small and very small
businesses from realizing their potential. Rather, we work hard
to provide the necessary tools and policies to ensure that
businesses produce the safest products possible. FSIS can
protect consumers without placing unnecessary burdens on
businesses.
Madam Chairwoman, Ranking Member Roberts and members of
this Committee, thank you for your help in ensuring the safety
of meat, poultry and processed egg products and for the
opportunity to testify before you today.
Chairwoman Stabenow. Thank you very much.
Chief White, welcome.
STATEMENT OF DAVE WHITE, CHIEF, NATURAL RESOURCES CONSERVATION
SERVICE, U.S. DEPARTMENT OF AGRICULTURE
Mr. White. Greetings. It is grand to be here. It is much
more comfortable sitting back there though.
I would like to take just a few minutes to talk to you
about three areas where conservation is really making a
critical difference in the livestock sector.
First is in programs. You all, through the 2002 Farm Bill
and the 2008 Farm Bill, have really given us the tools to
assist livestock producers. The big boy on the block is the
Environmental Quality Incentives Program, which you mentioned.
If you look at just the last I think it is since fiscal year
2005, 150,000 contracts with livestock producers from 2005 to
2010, huge amounts of interest out there. It is the workhorse.
It is the bricks and mortar program.
But it has also been joined by another program which was
created in the 2008 Farm Bill--the Conservation Stewardship
Program. As you know, we can enroll 12.7 million acres a year
in that. We are in our third year of enrollment. It is going on
right now. As of yesterday, we had about 34 million acres in
that program. About 17 million, about half, was livestock
related. It is grass and pastures, mostly rangeland. So it has
gone over huge with the ranching community.
I will just mention two other programs briefly. They are
long-term easement programs--the Grassland Reserve and the Farm
and Ranchland Protection, for those producers who want to hand
it down to their kids. I was the State director in Montana. I
thought man, these guys are not going to like easement
programs, but I was stunned because they want--I am talking
ranchers who could have sold out and become instant
multimillionaires, but they really wanted to leave it to their
kids. And this provides a mechanism for them to do this, as
well as programs like the Wetland Reserve.
And I would be remiss and be kicked out of the club if I
did not mention good ole conservation operations technical
assistance, these two books right here. This is the technical
plans for a large confined animal feeding operation that meets
all of the requirements for the State of Montana's Department
of Environmental Quality.
This right here is a simple little solar panel for a
livestock watering facility that precludes the need to string
wires five miles back. This is a 5.3 mile stockwater system in
Utah. This is 2,900 dairy head. This is the plans where you
were going to line a pond, put another separator in there. This
meets all the Utah Department of Environmental Quality
requirements.
This is the kind of stuff that we do every day with
producers.
The second item is technology. We are doing some cool
things. In EQIP, we have this Conservation Innovation Grant. My
predecessors have used it. We are using it now, doing stuff
with Washington State University. Some of the most incredible
feed management stuff is coming out of there.
There is a company called Coaltec. They are working with a
producer in West Virginia, a poultry producer, gasifying the
chicken litter. He is burning it to heat his houses, and his
byproduct is biochar. He is selling it, and he is making more
money selling biochar than he is off his chickens now. In fact,
this guy was featured in USA Today a few months ago.
Wisconsin Department of Ag has done some incredible work on
advancing us in odor control, particularly around dairy
operations.
And then there is Great Lakes Energy Company that has-- we
are working with them on four constructed wetlands. They are
taking all the affluent off of a dairy, and by the time it is
coming out it is dang near drinkable. And they are using some
kind of algae to really help clean it up.
So the technology is coming along, especially as you look
at stuff like precision ag. It is just amazing.
Third area, risk reduction. And Mr. Roberts, I am just
going to tell you right now; NRCS is in the Department of
Agriculture, not EPA, not the Corps, not Fish and Wildlife
Service, and you all have given us the requirement.
In the Environmental Quality Incentives Program, one of our
missions is to help producers beat or avoid regulation. I kind
of look on NRCS as being kind of the shield arm between
producers and the regulating community. Now whether it is the
Clean Water Act, the Clean Air Act, the Endangered Species Act
or even new areas, Madam Chair, like the Bovine Tuberculosis
Project in Michigan, we are trying to keep farmers on the land.
The reason this is important: Nine billion people coming in
the next four decades are going to require huge increases in
production, and it is up to us to get up early, stay up late
and work like a dog in between to keep our producers on the
land because we are going to need them.
Thank you very much, ma'am.
Chairwoman Stabenow. Well, thank you very much to each of
you. We very much appreciate your service, and we appreciate
your being here.
Let me just start off, Chief White, by thanking you. You
mentioned the bovine TB situation in Michigan, which has gone
way too long and is serious, but I want to thank you for your
wonderful leadership in working with us on creative ways to
support our producers.
I was on a farm not long ago, near Alpena, Michigan and
watching what they have been able to do, partnering with USDA
and moving their feed operations and managing their animal
waste, and so on, in a different way that is going to allow
them to protect the herd and be able to keep the farm. And so,
I want to thank you very much for that.
And recently, because of the increased efforts in Michigan,
we have received 73 EQIP applications for the TB initiative, as
you know. Sixty percent of those are first-time NRCS customers,
folks that are involved in conservation for the first time. And
I was really pleased to see that 15 of the producers are new
and beginning farmers. So I thought that was also something
that was very, very positive.
So thank you very much for that.
And Dr. Parham as well, thank you for your focus on
prevention, when you mention prevention, as well as eradication
because we have got a lot of work to do in this area.
So I want to thank both of you.
Let me talk about more about conservation because as you
mentioned, Chief White, back in the 2002 Farm Bill, with
Senator Harkin as Chair and Senator Lugar as Ranking Member
working closely together, Congress made really an unprecedented
investment in conservation at the time. One of these was EQIP,
to help producers comply with increased regulations on the
farms. At the time, livestock producers were facing increased
Clean Water Act total maximum daily load requirements, CAFO
permitting requirements and Clean Water Act requirements, and
we listened to producers and created a 60 percent set-aside for
the livestock industry.
I wonder if you might speak a little bit more in terms of
how that is going. And do you see as you talk to livestock
producers, as you know, as I know you do every day, are their
conservation needs changing? Is it more of the same? Are
compliance-related issues still their primary concern?
What should we be looking at in terms of the next Farm
Bill?
Mr. White. Some things have not changed since 2002. There
is still a huge concern on the part of our farmers and ranchers
on regulatory issues.
You mentioned the Clean Water Act. Since the 2002 bill, we
have written something like 50,000 comprehensive nutrient
management plans. About 81 percent of them are implemented. In
2008, EPA bought off on accepting these comprehensive nutrient
plans as meeting the requirements for their non-point discharge
system, with a couple modifications. So there has been huge
work there.
Of course, Chesapeake Bay, that is really a canary in the
coal mine that we are looking at on regulation.
I think the emerging issue, particularly out West, is the
Endangered Species Act. Some of you up here remember the
spotted owl. That was parts of Washington and Oregon, two
States. The sage grouse is a candidate species. It has the same
potential as the spotted owl, but it covers 10 times the
geographic area, and it could disrupt ranching throughout the
West because of the checkerboarded ownership pattern, the
Federal-private.
So we are putting tremendous resources into trying to keep
that bird from being listed and working. It is a partnership
effort with the governors out there. I just got a really great
memo from the Governor of Wyoming. He loves it. The ranchers
love it. The conservation groups love it. We have good support
from Fish and Wildlife Service.
So I think the concern of regulation is still there, but
you all have given us such a gift through these programs that
we are able to--I just wonder if we would have had these same
programs in Bush I, before the spotted owl got listed, could
things have been different.
And our commitment you is try and use these programs,
strategically array those forces, to make sure that our owners
and operators can continue to produce the food and fiber we
need.
Chairwoman Stabenow. Great. Well, thank you very much.
I am looking here at my time. Thank you very much.
Mr. White. Sorry.
Chairwoman Stabenow. Senator Roberts.
Senator Roberts. Dr. Glauber, I have eight questions, five
minutes. You ready?
Mr. Glauber. Let's go.
Senator Roberts. I was especially pleased to hear the
Secretary has put you in charge of the economic analysis of the
proposed GIPSA rule. The entire livestock industry was
especially glad to hear that.
Where is the Office of Chief Economist in terms of an in-
depth cost-benefit analysis of this proposed rule?
Have you identified economic benefit to producers, the
livestock industry or to consumers?
Mr. Glauber. Thanks very much, Senator. Yes, as you are
aware, the Secretary did put my office of doing cost-benefit
analysis for this rule.
I might add it is a difficult analysis. It is not like the
typical sort of analysis that my office would do, looking at,
say, an increase of a loan rate or something like that. The
direct costs of any rule, they are typically pretty easy to
calculate. I mean all things considered-- things like putting
on regulations to say we will gather more data or more
supporting evidence. Those things, one can make some
calculations on.
I think much more difficult and particularly in the case of
this rule are the effects of the regulation itself on behavior
by packers and integrators, et cetera. That is how they might--
the regulations could--potentially affect the way they do
business. A lot of----
Senator Roberts. Let me interrupt you on that point----
Mr. Glauber. Yes, please.
Senator Roberts. --because I have a question that pertains
to that.
The GIPSA Administrator, who is not here, argues that the
rule will not prevent customized marketing agreements because
the rule does not call for an across-the-board ban, but what he
fails to acknowledge is that the legal risks associated with
this rule's competitive injury provisions will, without
question, have a chilling effect on the use of marketing
agreements. Will your cost-benefit analysis study the effect on
the industry, the chilling effect of the use of marketing
arrangements due to expected litigation?
And I have another one that follows up on that if the
answer is yes.
Mr. Glauber. Okay. The answer will be yes, we are reviewing
the cost, a lot of the comments that were received. This was a
very big issue that figured in a lot of the comments that were
raised by reviewers. So we are looking at that.
Senator Roberts. The Administrator said that the new rule
will be a plaintiff lawyer's dream. That is his quote. If the
rule really only expands opportunities for trial lawyers to
sue, why in the heck are we doing this?
You do not have to answer that. But will your economic
analysis attempt to calculate the cost of significant
additional litigation on the industry?
Mr. Glauber. Again, Senator, I think the one thing I can
assure you is that our office is spending a lot of time with
the comments that have been raised. We have been looking at lot
at the Informa study, the study, the RTI study that was done
two or three years ago. We also are looking at a lot of the
comments by those who favor this rule.
Senator Roberts. Those will be counted. I am talking about
the private sector studies--you just mentioned Informa--that
say this proposed rule is going to be a disaster. Are these
studies accurate? What role do they play in your analysis?
And I am sorry I interrupted you again.
Mr. Glauber. No. We are looking at how these--we are
looking at these analyses very carefully. I think a lot of it
does hinge on what the perceived risk of litigation is and if
that in fact affects behavior. We know from the RTI study the
large benefits that come from alternative marketing
arrangements, et cetera. And I think that is what my office now
is, in a very real sense, trying to gauge and looking at.
Senator Roberts. Well, let me give you an example. Are you
aware the State of Missouri, the Show Me State, has enacted a
law similar to the proposed GIPSA rule. I also understand the
governor called a special session to repeal that law. Will you
study the Missouri precedent in your cost-benefit analysis?
Mr. Glauber. I have not looked at the Missouri law in
particular. I am aware of it. I should not say that it has not
figured in on the comments. We are aware of it, and I have
looked at articles that have discussed that law, yes.
Senator Roberts. But you will.
Will your economic analysis be published for public
comment?
Mr. Glauber. I believe all I have been asked by the
Secretary is to perform the economic analysis and to present it
with the rule. So I will do that.
Senator Roberts. We can talk to the Secretary about that.
Has the Department finally changed its mind and declared
this rule economically significant in terms of the
Administrative Procedures Act?
Mr. Glauber. I can yes to that. I think there is no doubt,
particularly with the comments that have been raised, would
suggest that the rule has a larger impact than $100 million.
Thank you.
Senator Roberts. Reports in the media have leaked that the
United States has not been successful in defending Canada's and
Mexico's WTO case against our mandatory country of origin
labeling law. If this is indeed accurate, what does this mean
for the section of the Farm Bill as we prepare for the upcoming
Farm Bill discussion?
Mr. Glauber. I would----
Chairwoman Stabenow. I would just ask you to be brief.
Mr. Glauber. Okay. I would love to comment on that. We have
seen a preliminary analysis of that, but the actual decision
comes out, I believe, tomorrow. And I would be greatly
chastised by USTR and others if I were to discuss the contents.
Senator Roberts. Well, you can respond to that in writing.
Mr. Glauber. Okay. Thank you.
Senator Roberts. Okay. Thank you.
Chairwoman Stabenow. Thank you very much.
Senator Cochran.
Senator Cochran. Madam Chairman, thank you very much for
convening the hearing. It comes at a time when producers in my
State are very concerned about marketing prospects and the
failure of the Administration to make early decisions about
what they are going to do to respond to a possible breakdown in
marketing.
I am told that in 2010 alone, in my State, poultry totaled
$22.47 billion in the value of our production, more than double
the value of the second largest agriculture industry, but that
economic prospects in our State are terribly disturbing. Feed
costs have reached record highs. Exports to countries like
Russia and China have seen huge declines in purchasing. Poultry
growers face a great deal of challenge in just maintaining
their operations and continuing to try to make a living in this
important industry. And that is just one example though of why
it is necessary for Congress to take action.
We are hoping that we can cooperate with the
Administration. We have to figure out a way to expand into new
markets if the old markets are drying up and to stimulate
demand for U.S. livestock products. This may be a broader
problem than many of us had realized. So the convening of this
hearing is really important, and I hope something specific can
come from the Administration in terms of a commitment to join
with the producers and find a way to restore profitability and
predictability to the production and marketing of U.S.
agriculture products.
I guess that is the end of my statement. I did not want to
delay the panelists, but we wanted to hear what you are
proposing, what you are recommending. Is there a recommendation
or an initiative from the Administration to deal with the
serious challenge that our producers are facing?
Mr. Glauber. Well, let me just say a couple of things. One,
you are absolutely right about the poultry industry. It has
been suffering from very weak margins because of the high feed
costs. And I think this is true across species, but I think in
particular for poultry recently.
And some of this, poultry also has suffered from a loss of
some critical export markets. Russia has been one, as you
mentioned; China, because of the countervailing and antidumping
case against China. Those two have fallen.
And to give you some idea, and I know you know these
numbers, but exports now over this last decade have been
between 15 and 20 percent of production--so very, very
important for the industry. I think opening up those markets
and improving there is a very critical activity.
I think we have been working hard. I know Jim Miller, when
he was Under Secretary, spent a lot of frequent flyer miles
going to Russia to try to open that, get chicken flowing back
to Russia. But I think, unfortunately, the economics of high
feed costs, I think, are going to be around for a little while.
What we really need is for some stock rebuilding through
higher production. I think one good news is I think a lot of
the big increase in demand for corn use for ethanol will slow
now as we start approaching the 15 billion gallon mark under
the RFS. So I think that we should, with productivity gains,
see some increases there.
But I cannot promise anything on the economic side, at
least on the feed costs side, that could give you something to
take home over the next few months for sure.
Senator Cochran. One of the suggestions from livestock
producers in my State is the need for a warranty program to be
implemented, but they say that their efforts to communicate
with and establish a dialogue with USDA has not been
productive. There does not seem to be an interest. We have got
to move away from herd destruction orders and rely more on some
preventive measures, early detection procedures, and they are
not getting any help from Washington.
Dr. Parham. Senator Cochran, if I could respond to that,
thank you for the question. And I am aware that Dr. Clifford's
team is aware of this particular proposal, and it is my
understanding that they have now had some contact, and there is
an expectation of a meeting within the next several weeks.
Okay?
Please be assured that we are interested in any innovative
ideas that will allow us to continue to manage the risk
associated with these programs and looking at ways other than
just depopulation every time we have an issue. So yes, we are
aware of it, and we will be meeting with the company in the
coming weeks.
Senator Cochran. Is there any other witness who can tell us
something encouraging?
Mr. White. Do you want to hear about conservation?
Chairwoman Stabenow. And I will ask you to be brief. Thank
you.
Mr. White. I do not know if it directly addresses this, but
we are trying to work with agriculture in a way where we can
get dual value. Like in your part of the world last year, when
the oil spill was going on, we did that migratory bird habitat
with rice producers, cotton farmers, where they agreed to flood
their land. This was working land that produced rice and corn
and cotton in the summer, and it produced environmental
benefits for these animals in the winter. And if we can figure
out a way to do that more in a working land program, I think it
would be economically beneficial to agriculture.
Senator Cochran. Well, I hope you will work with our staff
and see if we can put something together that really provides
some meaningful benefits and provides relief to farmers who
really do need it.
Thank you, Madam Chairman.
Chairwoman Stabenow. Thank you very much.
Senator Grassley.
Senator Grassley. Thank you, Madam Chairman.
I have three questions, one for each of three of you. I
will start with Dr. Glauber.
While there are certain provisions of the GIPSA rules that
I support, there are other issues that cause me some concern.
One of those areas is a restriction on livestock dealers,
requiring them to only buy livestock for one packer. There is
real concern that this could have a very negative impact on
small packers who cannot afford to have their own buyer, and
some packers may elect to not go to certain sale barns if it
proves too costly to send a dealer only on their behalf rather
than sharing a dealer.
So, a question. I guess really two questions for you, but I
am going to ask both of them at the same time. Has GIPSA
considered what may be the unintended consequences to this part
of the proposed rule?
This part of the rule may actually decrease competition at
some sale barns. Has GIPSA considered that, and what does GIPSA
plan to do to respond to these concerns in the proposed rules?
Mr. Glauber. Well, let me--certainly, with the first, in
regards to the unintended consequences, I think this has been
pointed out by many of the comments that were submitted to
GIPSA. Certainly in my review of the comments, that comes up
quite frequently. And you are absolutely right; that is one
thing that is mentioned is the adverse effect potential on
small firms.
They are certainly aware of the rule as they are going
through the rule and reviewing these comments. I know from my
standpoint on the economic side that is something that we
certainly are taking into account.
Senator Grassley. Well, what about the decreased
competition? Do you think there would be decreased competition
maybe if this rule goes into effect where I know your motive is
to increase competition?
Mr. Glauber. Yes.
Senator Grassley. And I applaud that motive.
Mr. Glauber. That was what I was alluding to.
Senator Grassley. Okay.
Mr. Glauber. I think is the fact that a lot of the comments
have brought that point to bear. That is that this could
potentially decrease competition rather than increase
competition.
Senator Grassley. Mr. Almanza, last year there was a
petition for rulemaking filed with the Department of
Agriculture regarding the treatment of nonambulatory hogs at
packing plants. Under current law, nonambulatory hogs are still
slaughtered, but they are separated from the hogs that are able
to walk. The petition filed with the USDA asks that
nonambulatory hogs be euthanized. USDA has not responded to the
petition.
I am not aware of any data or study that show euthanized
downed pigs and not allowing them, that meat, to enter the food
chain will increase food safety. In fact, it is my
understanding that most fatigued hogs are able to walk again
after they are able to rest for short periods.
And I suppose there are plenty of reasons that you can have
downed hogs. But I remember when I worked at the Rath Packing
Company back in the 1950s for 6 or 7 years they would be
overheated from the hot weather coming in, and you know, they
would be like down and out, but you let them rest for a while
and get their breath back and their heat, temperature down,
they would get up and be okay.
So what is the status of USDA's position on this matter,
and can you shed any light on what health concerns USDA would
be addressing if it changes the current law and treatment of
downed pigs at packing plants?
Mr. Almanza. Yes, sir, and thank you for the question.
We are still reviewing that proposal. But you are
absolutely right; the concerns with swine are totally different
than with downed beef animals. And so there are some different
concerns that we are looking at, and we certainly will be
addressing that in the near future.
Senator Grassley. Do you have any science at this point
that tells you that the meat may not be as safe as for a hog
that is not downed?
Mr. Almanza. No, sir, not that I am aware of.
Senator Grassley. Okay. I would like to ask Dr. Parham.
Market research suggests that overseas markets are more
important than ever for American meat producers. U.S. producers
need access to foreign markets, but we are hearing rumblings
that the U.S.'s lack of a comprehensive BSE rule is being used
by some countries as a barrier for U.S. beef.
It is my understanding that USDA has indicated it is
working on a comprehensive rule. So Dr. Parham, would you agree
that the U.S. needs a comprehensive BSE rule, and if so, when
could we expect it to be issued?
Dr. Parham. Thank you, Senator Grassley, and yes, indeed we
do believe that we do need a comprehensive rule. One of the
things that we have done is actually combined two previous
rules into one that would be comprehensive, that would also
give us then compliance on the world markets, and we are
working on that. It is in the process of clearance right now.
While I do not want to give a specific date, certainly we have
that as one of our top priorities, and we do expect to get a
rule out certainly I would say within fiscal year 2012.
Senator Grassley. Okay.
Chairwoman Stabenow. Thank you very much.
Senator Grassley. Thank you.
Chairwoman Stabenow. Thank you.
Senator Klobuchar.
Senator Klobuchar. Thank you very much, Madam Chairman.
Thank you for holding this hearing.
Livestock producers are really the original value-added
agricultural product. They are key in my State. We are first in
turkeys, third in pork and sixth in dairy production, and our
livestock industry produces over $6 billion worth of products
and also accounts for nearly 40 percent of the value of our
State's agricultural production. The producers also support
prices for our grain farmers and create thousands of jobs at
processing plants like Hormel, Gold'n Plump and Jennie-O.
My first question really is one of the things that I have
seen some improvement with some of our plants and our producers
is just because of some of the markets opening up. And we
continue to see, however, frivolous barriers to trade, like
when China decided to ban American pork products because of the
H1N1 virus or because of numerous Russian trade barriers to our
poultry products.
Mr. Glauber, I guess I would ask this of you. How do you
think we should proactively address this issue to better
protect our producers from unfair and unscientific agriculture
trade barriers?
Mr. Glauber. Well, again, I would just stress how important
these markets are for U.S. livestock and poultry producers
because as opposed to, say, 30 years ago where we were
exporting very little, now these are very big, big markets.
And you are right; I think if we look at two of our larger
markets--China and Russia--we have had some fairly major issues
that we are trying to resolve, poultry being a big one in
Russia.
But as you mentioned, in China of course we have had
problems with beef, getting any beef in there, because of-- we
have had a number of discussions with USTR and USDA, have gone
and met with counterparts in China.
On the H1N1, thankfully, there, it looks that we are seeing
some reopening of the market for pork, but for poultry we still
have problems because of the antidumping and countervailing
duties on U.S. chicken products, which were of course grossly--
we had a very strong market for poultry in China, but that
dropped by 75 percent last year.
I think what we need is again strong bilateral engagement.
You know. To the degree that there may be improper imposition
of duties, et cetera, then there is always recourse through the
WTO. But again, at least for China. Of course, not for Russia.
But in the meantime, I think bilateral work.
And we are sending teams, preparing to send teams.
Senator Klobuchar. Okay. Thank you. I have more questions.
Mr. Glauber. Thanks.
Senator Klobuchar. Conservation programs, permanent
livestock disaster programs--the House bill passed by the Ryan
budget would actually cut commodity programs by $30 billion and
conservation programs by $18 billion over 10 years.
Dr. Glauber, how would these drastic cuts affect the health
of rural communities and the abilities of producers to rebound
after natural disasters like those we just saw over the weekend
in North Dakota, as well as what we have seen with tornados and
historic droughts?
Mr. Glauber. Well, I may let Chief White chime in here on
the conservation programs.
Certainly, just the magnitude of those programs in terms of
dollars are income to producers and to rural communities. And
to the extent that those may hit some regions
disproportionately, we have not yet done an analysis of how
those impacts might be felt, but they are considerable sums.
Senator Klobuchar. Okay.
Mr. White. Thanks, Senator. I hope I do not see what the
underside of the bus looks like here in answering this.
With less money, we are going to reach fewer farmers; there
will be less conservation applied to the land. So our task will
be to manage whatever you all allocate, and we will do that in
the most effective way we can, to hopefully do a better job of
spending the money so it does the best use for conservation.
Senator Klobuchar. Okay. Thank you.
Dr. Parham, on food safety, does the USDA believe that the
program to track and minimize livestock diseases will improve
our ability to keep our markets open and protect producers with
healthy animals from financial ruin?
Dr. Parham. Yes, Senator Klobuchar. I believe you are
speaking about animal disease traceability and our ability then
to be able to trace these animals, yes?
Senator Klobuchar. Yes.
Dr. Parham. What we have done with that particular program
is really go back to the drawing board, so to speak, and build
on the strengths of what was done before, to look at where some
gaps were and to really hear from States, from partners, from
tribal nations as to what would work best.
As I stated in my testimony, we believe that transparency
and flexibility are the keystones of our approach now, and our
intent is indeed to make sure that we are able to protect
healthy animals as well as to be able to trace those that are
diseased because, again, we believe it is not only a matter of
prevention, but in the event of an outbreak we want to be able
to trace those animals as quickly as possible and to take the
appropriate measures when we do.
Senator Klobuchar. Thank you.
Chairwoman Stabenow. Thank you.
Senator Klobuchar. One last, just I can ask it later. Dr.
White, I just want to give you a heads-up from some dairy
producers in the southern part of my State that are concerned
about some of the compliance measures. This is energy from
livestock issues, the livestock waste, and they really want to
get it going, but there are some red-tape issues with
technologies. And I will simply put it in writing, and you can
answer it.
Thank you.
Chairwoman Stabenow. And we will be happy--we are actually
going to give everybody one second round on a question, and so
you can wait and hold it then if you would like to do it as
well.
Senator Boozman.
Senator Boozman. Thank you, Madam Chair. I have a statement
that I would ask unanimous consent that we put in the record.
Chairwoman Stabenow. Without objection.
[The the following information can be found on page 50 in
the appendix.]
Senator Boozman. Thank you very much for having the
hearing, and I appreciate all of you all being here and really
do appreciate the hard work that you do on behalf of our
Agriculture Committee.
Dr. Glauber, you mentioned that there were a number of
factors--the flooding. This has been such an unusual year. You
have got flooding. You have got drought--that have affected the
corn production.
And you also mentioned the ethanol. How much does ethanol
affect the price of corn?
Mr. Glauber. Well, I think there is no question that it has
an impact on corn prices. You know, I think if we were talking
about corn exports increasing by 2 billion bushels, I do not
think anybody would have--there would not be a debate. We would
say, yes, it definitely has an impact.
Certainly, if you look over the last few years where most
of that demand has been met has been through increased supply.
We have increased corn area planted, and we have increased--and
yields have increased. Also, remember that from--there is also
significant increase in distillers dried grains and the
byproducts of ethanol that go into feed production.
The impact on food prices, on the other hand, I think is
much smaller, and that is for a number of reasons. The impact,
of course, is carried through by higher feed costs which cause
smaller production than would normally occur. And because of
that, the farm value of retail food in general is pretty small,
but we know that that is how it passes through. And so, the
overall impact on food prices, I think, has probably been
fairly small.
Over time, I think the impact--the good news is I think the
impact will be lessened. One is that corn used for ethanol
begins to flatten out certainly in our projections because of
the fact the cap on the amount of corn-based ethanol that can
be applied towards the renewable fuel standard is capped at 15
billion gallons. And then I think that over time, if we look at
yield increases, which we anticipate to be about 1 percent per
year, fairly conservative, but that we should see some stock
rebuilding, and I think some alleviation of this tight stock
situation we see right now.
Senator Boozman. Thank you.
The other thing I would just comment; we really do not have
an energy policy right now. We are not using the resources that
we have been given. And as a result, with these very increased
energy costs, certainly that is going to have a major impact.
And I guess you can comment on that in a second, and again,
that truly is going to be a major factor.
I am an optometrist, an eye doctor, and we used to measure
a lot of things just like you are measuring. And your
statistics are very good. I guess if I came home at the end of
the year and told my wife that I had seen 4,500 patients this
year and only seen 4,000 last year, she would say: Great, but
how are we doing? You know. What is our income?
So your numbers are good.
I guess the question I have got; you know, this is the
state of the community. Are farmers, is their income going up?
Is it staying the same or are they losing money?
And then in light of the absence of trade deals, in light
of the high corn prices for whatever reason, and in light of
the high energy prices, and the list goes on and on, what is
your forecast for the future, dollar-wise, percentage-wise?
Mr. Glauber. Yes. Certainly for net cash income, which is
an aggregate measure for the sector, we are forecasting that at
a nominal record. Now if you adjust for inflation, you can go
back a few years and find higher things. That is for the
sector, and I think there is probably a good optometrist
analogy here.
But as one goes into the details and you see that the crop
side of the ledger is doing very, very well, the livestock side
of the ledger is doing better than it was doing certainly in
2009 when we saw very negative margins for hogs and dairy in
particular, but it still is a very tight situation in terms of
profit margins.
Senator Boozman. So, not so great. The trade deals that we
are trying to work would help that?
Mr. Glauber. Absolutely. If you look at the benefits for
Korea, I think something, are estimated at something like $1.9
billion. Beef is about half of that. And even Colombia, which
is of course much smaller, still we are looking at 30 to 40
percent increases, projected increases for livestock products.
So I think these are very important particularly for the future
as we look out over the next 10 years.
Senator Boozman. And then having an energy policy where we
lower the price, long-term, would be helpful, I guess?
Certainly?
Mr. Glauber. As you said, certainly energy prices play a
number of roles here. One is I think that for all the talk
about energy, a number of things on the ethanol side, do not
forget that high energy prices have made ethanol production
very, very profitable. So I think that is a very important
component.
And if you look at food inflation, energy plays a very
major role there as well.
Senator Boozman. Thank you, Madam Chair.
Chairwoman Stabenow. Thank you very much.
Senator Johanns.
Senator Johanns. Thank you, Madam Chairman.
Let me start out and use my perch on the Senate Ag
Committee and express my appreciation to all the folks at USDA.
I look out. I see familiar faces. That is always reassuring. I
cannot tell you how much respect I have for the career people
that are there, including you, Dr. Glauber. My temptation is to
call you Joe, after traveling the world, but I will show you
the respect that I think you have richly earned and refer to
you as Doctor.
I want to focus, if I could, on the GIPSA rule to start out
with at least. The proposed rule, as you know, in its inception
was not deemed economically significant. Knowing the arduous
process that a rule typically goes through at USDA and knowing
the many discussions that we have had about the need for
economic analysis in rulemaking, I cannot imagine, Dr. Glauber,
that you would have agreed with that assessment. Am I right
about that?
Mr. Glauber. Senator, as you do remember I am sure, what
happens in this process is an agency, when it is doing its work
plan for OMB in terms of here is the regulatory stream that we
foresee for the year, they will give--they will list the rules
that they intend to promulgate and then give a designation of
what that rule should be.
This rule was deemed by the agency as significant, and it
went to OMB as such, and OMB agreed that it was a significant
rule. It was not deemed economically significant.
I think from my standpoint, in looking at certainly the
costs, that you certainly you see this in the comments in
particular that have been raised by a number of the people who
have written, show significant costs on the order of billions
of dollars. So I think there is no question, and I think the
designation on this rule will be changed to economically
significant.
Senator Johanns. Yes, that is the kind of answer I would
expect from you, and I appreciate your candor about that.
Now I want to take even a further step backwards. I cannot
even remember or count the number of times where somebody from
the legal department would be in my office and we would be
talking about a course of action for the USDA and the advice I
would get was: Look, as much as you might want to do this, Mr.
Secretary, you cannot because you do not have a grant of
authority from Congress.
And that pretty well stopped the debate. Why? Because I had
a lot of respect for these folks.
I happen to be on this side of the dais now and I know the
process by which you get here, and it is not easy. And I am
very mindful of the fact that policy gets made here.
So I look down through the grant of authority given to the
USDA by the 2008 Farm Bill, and in item after item it says
establish criteria, establish criteria, establish criteria, and
I do not see a grant of authority, to be very blunt, for a fair
amount of what is in that proposed rule. And again, I think I
know USDA well enough to know that there has to be a raging
debate going on about whether USDA is exceeding its authority.
Let me just ask you, Doctor, where do you fall on that
debate? Do you feel this proposed rule has exceed the authority
we have granted to the USDA, number one?
And then number two, and equally as important, would it be
possible as this rule progresses to pull out those areas where
you have exceeded the grant from Congress and stay within the
limitations of our grant of authority?
Mr. Glauber. Senator, the only thing I can say is that I am
pretty good when it comes to the economic questions. I think
asking me about the law, and asking me about how extensive this
is and whether or not it exceeded it, frankly, I am less good
there, and I would defer to legal counsel. I am not trying to
duck this. I would just--that is not something I answer or can
answer as well as I can an economic question.
Senator Johanns. I can see your uneasiness, and I think I
understand it. USDA has gone beyond its authority here, has it
not?
Mr. Glauber. Well again, Senator, I think that again the
agency certainly in putting forward the rules did not feel so,
and that is what I can tell you. I have not been involved in
legal discussions on this bill.
Senator Johanns. I see everybody behind you very
uncomfortable by this line of questioning.
Thank you, Madam Chair.
Chairwoman Stabenow. You are welcome. Thank you very much.
Senator Thune.
Senator Thune. Thank you, Madam Chairwoman, and I
appreciate our panel being with us today and thank you for
convening this hearing along with the Senator from Kansas.
It is an important subject as we get into the next Farm
Bill. And like every segment of agricultural production, the
livestock industry is facing multiple challenges, including
this year, natural disasters resulting in record-setting
flooding in some areas of the country and record-setting
drought in others.
And I would suggest, Madam Chair, as we begin the debate,
the upcoming Farm Bill, that along with drafting a bill that
provides assistance for each sector of the agriculture
community we need to look at the overall landscape of crop,
livestock, energy and conservation programs to make certain
that Federal farm program policies do not result in inequitable
treatment within agriculture or distort commodity and livestock
prices and markets.
And I appreciate the discussion on the GIPSA rule. That is
something, of course, that has generated a lot of discussion in
the livestock industry in my state and something that as USDA
moves forward I hope that they will seriously consider the
unique comments received on this rule, perform its own economic
analysis of the impacts of the rule and work with those on both
sides of the issue surrounding it, the rule, to come up with a
final rule, and obviously one that it is not going to please
everybody, but hopefully is workable and does not create
administrative burdens or result in a lot of unnecessary
litigation and the loss of livestock industry jobs.
Mr. Glauber, if I could, I wanted to ask you a question to
come back to biofuels. I appreciate that in your testimony you
mentioned the dried distillers grains, which is byproduct of
ethanol, can be substituted for corn and other feed grain
ingredients in livestock rations.
In my opening statement for today's hearing, I mentioned
just previously here that all sectors of the ag community need
to be treated equitably by Federal farm policy. Would you agree
that in this whole food versus fuel debate that goes on around
the country, that USDA could and should be taking a stronger
stand and publicizing the fact that 17 pounds of DDGs derived
from each bushel of corn made into ethanol significantly offset
the corn usage dedicated to ethanol production?
Mr. Glauber. Senator, there is no question that the
distillers dried grains and other byproducts have been very,
very important additions to the feed market, and this has
evolved. Certainly, we have seen this rapid increase in corn
use for ethanol and as a consequence a rapid increase in
distillers dried grains.
I think the market has taken a little bit of time to
adjust. You might remember initially most of this was being
exported just because it just was not showing up in feeds. Now
certainly, it does better with beef and hogs, but we are seeing
it now where we are seeing it show up in feeds pretty much
everywhere in the country now and is a very, very important
component.
And we do--you know. I think it was mentioned in my
testimony about the importance of the DDGs. I know the Economic
Research Service puts out a table every year on feed, various
feed stuffs as well.
Senator Thune. I raise that point simply because critics of
corn ethanol claim that 38 percent of corn usage is dedicated
to ethanol production, which is not necessary accurate due to
the amount of DDGs that are consumed as livestock feed.
Most would agree that the so-called ethanol push began back
in 2002. Since 2002, according to the USDA, corn harvested
acres increased from 76.5 million acres in 2002 to 87 million
acres in 2010, which is an increase of 10.5 million acres, a
production increase from 9 billion bushels in 2002 to 12.4
billion bushels in 2010, which is an increase of 3.4 billion
bushels of corn. How much of this increased corn acreage would
you attribute to the growth in the use of ethanol.
Mr. Glauber. Well, I think the question that I just
answered a little earlier; I think that most of that increase
has certainly been due to ethanol production. We have seen
again the increase from ethanol use from about 1 billion
bushels for corn use for ethanol, from 1 billion to the current
5. If you look at that, most of that increase has come through
both increased area and increased yields.
Senator Thune. What is the average according to your
estimations, bushels per acre, today?
Mr. Glauber. In terms of yields?
Senator Thune. Yes.
Mr. Glauber. If we are looking at trend yields, somewhere,
162 or so.
Senator Thune. Where do you think that number is 10 years
from now?
Mr. Glauber. Well, again, if we are looking at--I should
look behind me to see my friend who has the baseline here. But
we are looking at roughly a 20 bushel per acre increase.
Essentially, our baseline has an increase, again a most
increase, of around 1 percent or so, 2 percent. We are looking
at about a 2 bushel increase per year.
Senator Thune. But you think that yields are going to
continue to increase and technology is going to continue to
improve?
Mr. Glauber. Right.
Senator Thune. And production in this country.
Mr. Glauber. Right.
Senator Thune. Yes, I do not disagree with that. I think
that much of the success that we have seen in the last 30 or 40
years in agriculture. We have been able to become much more
efficient and get a lot more production for what we invest in
it. So I suspect that that is going to continue, and I think
that the issues that we have today, this food versus fuel
debate, probably 20 years from now are going to look a lot
different because of that.
But I see my time has expired. Madam Chairman, I thank you.
Chairwoman Stabenow. Thank you very much.
Because of the interest on the Committee and the members,
we are going to do a second round of just two minutes if anyone
wants to ask an additional question.
And let me just ask one question, Mr. Glauber, and that
relates to trade, and trade barriers more specifically, because
I am very concerned that we continue to have many countries
that have unscientific trade restrictions on livestock
exports--Taiwan and beef, as we know; China and beef; Russia
and pork. And the USTR's 2011 report on SPS measures facing
U.S. producers and products is over 100 pages long.
So in your view, what countries with unscientific SPS
restrictions present the greatest potential for U.S. livestock
exports in the future, and what is the USDA doing to help our
livestock producers gain access to those markets?
Mr. Glauber. I think in general, and I will try to be brief
here, certainly the growth markets have been Asia, and I think
that in particular markets like China, Korea, Taiwan, Japan. I
mean that is where we have seen the growth. Japan, less so now,
of course, because it is a developed country.
But also, I think people in a long run look at countries
like India as potential, certainly for poultry, and let me
bring in another livestock product--dairy.
But I think that what is needed is engagement, bilateral,
as it takes a lot of work, and then through multilateral. I
think trade agreements are very important things here. Now
again, it is one thing to work on a tariff and lower a tariff.
That is helpful, but it does not help you if you still have
some SPS barrier or something like that or a technical barrier
to trade. And that best can be done I think bilaterally, and
that just takes a lot of work.
Chairwoman Stabenow. I agree with that. I also would just
say we need to keep pushing on those trade barriers as we are
moving forward and looking more broadly at trade.
Senator Roberts.
Senator Roberts. Dr. Glauber, I know that you are an
economist, and thank you for your contribution.
Thanks to all of you, and your dedication and your hard
work.
I want to follow up on the commentary by Senator Johanns.
It troubles me. In April, there was a meeting, and Joe, you
were there and the Office of General Counsel, others, and the
question was raised in regards to the GIPSA rule as reflecting
just precisely what the Congress did not want in regards to
congressional intent. And I think we were told at that
particular that the face of the statute was such that
congressional intent did not matter. Now that is the case.
I guess my question to all of you, and I am not going to
have you answer this because it is not within your purview and
not your pasture. But if that is the case, do conferences
matter between the House and Senate? Do amendments matter? Do
these hearings matter? Do we matter? Do votes matter in regards
to what was passed, what was defeated?
For the life of me, I do not understand the Office of
General Counsel or whoever spoke at that particular meeting, or
whatever group of lawyers spoke at that particular time,
telling us that we do not matter in regards to congressional
intent because the face of the statute was such that we did not
matter. I tell you the face of the statute is an ugly statute.
Now I do not know if any one of you want to try that one.
That is just a speech by me with about 23 seconds left to go,
but that makes me hot. And we got enough lawyers down there
that we can at least have some maybe come up and visit with us
personally, but perhaps in a hearing, to explain to me why
GIPSA rules are passed that are not in terms of congressional
intent, and the congressional intent, we are told and staff is
told that we do not matter. That is not right.
I think I will leave it at that.
Chairwoman Stabenow. Thank you very much.
We will turn to Senator Grassley.
Senator Grassley. I do not want to ask a question, but I
think more take advantage of an opportunity to comment on
something that Senator Thune just brought up, and not to find
any fault with any of the answers that were given, but to
follow on and say that 38 percent that Senator Thune talked
about really becomes about 20 or 23 percent of the corn crop
that is actually used for ethanol.
And that brings me to some comments that the next panel is
going to give. I read here about people that still think corn
prices in 2006 ought to be $2.50 because by 2008 it costs the
industry $1 billion more to feed them. But I just wonder if the
people coming up on the next panel realize you cannot raise
corn for $2.50 a bushel. You know. Do you want corn or do you
not want corn? It costs about $4 or a little bit more to raise
corn.
Then I wonder if they realize only about 3 percent of the
coarse grain worldwide is used for ethanol, just 3 percent. And
we are in a worldwide market of grain, I hope everybody
understands. There has got to be some realism brought to this.
And then finally, there is a statement made that finally we
have to realize that ethanol is dividing rural America. You
know, dividing farmers. Well, it is people like this that do
not know the facts about ethanol that are really dividing rural
America.
So I want the record to show that I take great exception to
the testimony that badmouths ethanol when, quite frankly, you
have got a choice between having ethanol and having higher
grain prices because the more market for corn, or maybe you
want to pay out billions and billions of dollars for farmers in
the safety net for the farm program.
Thank you.
Chairwoman Stabenow. Thank you very much, Senator Grassley.
Senator Baucus, welcome and you are welcome to--we are
doing a two-minute round, but you are certainly welcome to take
five minutes if you would like to do that.
Senator Baucus. Thank you, Madam Chairman.
Basically, I am most concerned about the availability of
brands. Can States, if they want to use brands as a system to
identify the cattle, use brands? Will that be recognized by
USDA and by other States?
We have a very steep history of brands in our State, in
Montana. I come from a family ranch. Our ranch brand is Bar O
Wine Glass. That is Bar Over Wine Glass. And we also have
Flying V.
We are a state that pretty much utilizes brands.
Agriculture is our number one industry still, and the livestock
side drives much more revenue even than the grain side. So can
somebody answer my question as to the degree to which Montana
will be able to use brands as an international ID system?
Dr. Parham. Thank you, Senator Baucus. And indeed, Montana
will, and you specifically will be able to, continue to use
your brand.
What we have done with the new traceability rule is look at
what some States were doing traditionally. With the flexibility
and the transparency we have going forward there are, I
believe, 14 States that currently use the brand that will still
be able to use that brand going forward, particularly if those
States can agree for any animals that are moving in interstate
commerce, they will be permitted to use that brand.
Senator Baucus. Is there going to be any concern about
that? Is that going to be clear? Is there any ambiguity?
Dr. Parham. We do not believe there is any ambiguity, and
we have taken great strides to educate through the various
meetings that we have had with producers, with States, with
tribes, to make it very clear because they are giving us much
of the input that we are using to go forward with the
traceability rule. And we believe that it will be very, very
clear, abundantly clear, that brands will be permitted as we
move forward.
Senator Baucus. Good.
Thank you, Madam Chairman. I have lots of questions, but
frankly, I am more interested in the next panel. So, thank you
very much.
Chairwoman Stabenow. Thank you very much.
Senator Boozman?
Senator Johanns?
You are passing to Senator Johanns?
Senator Johanns. I will go next?
Senator Boozman. No. Well, I will go and then----
Chairwoman Stabenow. Okay. Terrific.
Senator Johanns. Is that all right, Madam Chair?
Chairwoman Stabenow. That is absolutely fine.
Senator Johanns. Dr. Glauber, as you know, the issues that
are being analyzed in the GIPSA rule, in the proposed GIPSA
rule, have been studied on many occasions by the USDA. In fact,
at least in one area, there was a very a very extensive study
that came out right about the time that I went back home to run
for the Senate. Are those studies being factored into your
analysis, your economic analysis on the GIPSA rule?
Mr. Glauber. Yes, absolutely. The study in particular that
you are mentioning was often called the RTI study. It was a
multimillion dollar study. As you remember, it was contracted
out to 30-some odd researchers, extensive work done on beef,
pork and lamb, if I am not mistaken. We have looked at--we have
been spending a lot of time with that study to look at the
economic value of alternative marketing arrangements, which was
one of the focal points of that study.
Senator Johanns. Let me ask you again just a really direct
question. My preference always is to be direct. At the end of
all of this, let's say you do your economic analysis and it is
contrary to the position that you have heard from the cage, do
you feel you will have the ability to lay that down and
articulate your position on that rule?
Mr. Glauber. Senator, the Secretary said to me he wanted me
to have--he was having a hands-off policy, that he was going to
allow me to do the analysis, and that is what I intend to do.
Senator Johanns. Good for you.
Thank you, Madam Chair.
Chairwoman Stabenow. Thank you very much.
And now we will return to Senator Boozman.
Senator Boozman. Thank you, Madam Chair.
I think the lesson that we have learned today is if you
want to not have to answer a lot of questions and be safe with
your testimony you need to be up here with Dr. Glauber in the
future.
[Laughter.]
Senator Boozman. I would just like to add, and you can
comment, Dr. Glauber. But as an economist, the GIPSA rule, you
know we are seeing so much uncertainty in the economy right
now. People really do not know what the rules are going to be,
regardless of the profession that you are in. I am in health
care. You know, it is just up in the air.
I guess I would say that with this rule, the proposed rule,
potentially being so far-reaching. We have established that our
producers, our processors, they are not doing great. They are
trying to hold, to tread water. With the high costs that are
going to come up in feed stock--you name it--the energy costs,
all of these things that are pounding away on them besides the
flooding, the drought, and this and that. It just seems like
that the idea of putting such a far-reaching thing, creating
more uncertainty for the producers, the processors, that that
is going to be bad for them down the line, as far as the
uncertainty.
Can you comment as to what that will do, short-term, to the
economy of that group because of that? I mean is that a
reasonable----
Mr. Glauber. What I would say, and it addresses your point,
is I think that certainly you look for regulations to provide
clarity so that the environment in which you are going to do
your economic dealings, et cetera, are very clear, how to work
through this. And I think that is the challenge of a regulation
like this is to provide that.
A lot of the comments, in particular for those who oppose
the rule, opposed it because of the regulatory uncertainty.
That is the risk of litigation, et cetera, that they thought
the rule might impose. Certainly, we are looking at those
comments as we do these analyses.
Senator Boozman. Thank you, Madam Chair.
Chairwoman Stabenow. You are welcome.
And thank you very much to each of you. We appreciate your
service.
Senator Baucus. Madam Chair, if I might just be brief.
Chairwoman Stabenow. Yes, Senator Baucus.
Senator Baucus. I want to recognize Chief White with NRCS,
from Montana. He spent several years in Montana, where he was a
State conservationist and did a great job.
I think, Chief, are you involved in our efforts in Montana
to protect the sage grouse so it is not listed?
Mr. White. Yes, sir, deeply.
Senator Baucus. Okay. Thank you very much.
I might say that we have a lot of sage grouse in Montana,
but like a lot of the Endangered Species Act, it is quite
controversial. But thank you for your efforts. I think we have
got it managed up to this point, but I want to thank you.
Thank you.
Chairwoman Stabenow. Thank you very much. And again, thank
you to each. We will follow up with any questions that members
have in writing, and we would ask our second panel to join us
at this time. Thank you.
Welcome. We appreciate all of your joining us today for
this very important topic. We have your written testimony. We
will ask you to keep your testimony to five minutes as an
opening statement so we have enough time to ask questions.
And I want to start by introducing our first panelist, Rick
Sietsema. We are so pleased to have you here, Rick, of Sietsema
Farms in Allendale, Michigan. Rick and his brother, Harley,
operate a turkey and swine farm, along with a feeding/
manufacturing facility. The Sietsema Farm family raises 1.2
million turkeys and over 700,000 hogs annually. The farm was
also instrumental in creating the Michigan Turkey Producers
which is a local co-op in Michigan.
So, welcome. Glad to have you here.
And then secondly, our second panelist is Mr. Dennis Jones.
Mr. Dennis Jones is a fourth generation farmer who operates
Jones Farms in Bath, South Dakota. Mr. Jones is part of the
James Valley Pork Cooperative as well as a member of the South
Dakota Farmers Union. He has also been on the Board of
Directors of the National Corn Growers Association, CoBank and
the South Dakota Wheat Cooperative.
And I am going to turn to Senator Roberts for our next two
introductions.
Senator Roberts. Well, thank you, Madam Chairwoman.
It is a pleasure to welcome Steve Hunt, the CEO of U.S.
Premium Beef back to the Committee. He was one of the founders
of U.S. Premium Beef way back in 1996, which today is one of
the great success stories of the beef industry. The USPB
producer membership is the majority owner of National Beef
Packing Company, the nation's fourth largest beef processor,
headquartered in Kansas City with operations in Dodge City.
So, welcome back, Steve. Thank you for your partnership in
agriculture, all of your suggestions and your counsel.
I would also like to welcome Frank Harper. Frank is a
farmer and beef producer from Sedgwick, Kansas. He is one of
our what we call up-and-coming leaders in Kansas. He will be
the President of the all-powerful Kansas Livestock Association
next year.
Welcome, Frank. When you are riding point on that outfit,
always make sure you check over your shoulder just to make sure
they are still there.
Chairwoman Stabenow. Okay. And we would also like to
welcome Mr. Michael Welch. Mr. Welch is the President and CEO
of Harrison Poultry. Mr. Welch has served on the National
Chicken Council's Board of Directors since 2002, was elected
Chairman of the National Chicken Council in October, 2007,
serves as Chairman and Director of the Georgia Poultry
Improvement Association and was Director of the U.S. Poultry
and Ag Export Council International Poultry Development
Program.
So we welcome you as well.
And I will turn to Senator Baucus for the last introduction
Senator Baucus. Thank you, Madam Chairwoman.
Last, but not least, Hans McPherson is from Stevensville,
Montana. For those of you who do not know, Stevensville is in
the beautiful Ravalli County. A lot of people move to
Stevensville and throughout Ravalli County. In fact, a lot of
Californians move to Ravalli County, matter of fact.
It is diversified farm that Hans has operated since 1953,
and a long list of accomplishments, and I will just name a
few--many years, Vice Chairman of the Ravalli County Service
Agency, over the years 2006 to 2009, Chairman of the Board of
Directors of the Supply Ditch Association in his home town, and
Hans is currently serving on the Board of Directors with the
Montana Farm Bureau and Montana's Farm Service Agency State
Committee.
We bumped into each other at the airport. What is today?
Tuesday. Yesterday morning, and had a little chat in Bozeman,
Montana.
It is good to see you, Hans, and thank you very much for
taking the time.
Chairwoman Stabenow. Well, thank you very much to each of
you, and we will start with Mr. Sietsema. Welcome again.
STATEMENT OF RICK SIETSEMA, FARMER, SIETSEMA FARMS, ALLENDALE,
MI
Mr. Sietsema. Thank you. Good afternoon, Chairwoman
Stabenow, Ranking Member Roberts and the members of the
Committee. I am Rick Sietsema, Partner and CFO of Sietsema
Farms and our related businesses of Allendale, Michigan. I want
to thank the Committee for inviting me to discuss the state of
the U.S. livestock industry, and today I will be speaking on
behalf of Sietsema Farms and the National Turkey Federation.
The National Swine Producers are also in support of my
testimony.
Sietsema Farms production facilities are located in West
and Central Michigan. We are a multigenerational family-owned
business that has its roots deeply embedded in agriculture. As
a member of the Michigan Turkey Producers Co-Op, we raise
nearly a quarter of 4.6 million turkeys produced and marketed
both domestically and internationally. As a whole, Michigan
Turkey Producers has an economic impact in Michigan of over
$120 million.
Sietsema Farms and partners are also involved in the swine
industry as a genetic producer of Newsham Genetics and supplier
of Newsham Genetics across the Midwest. The economic impact of
Michigan and neighboring States and Ontario exceeds $135
million, plus that of many, upwards of 100 family-owned and
operated farms which we contractually grow and finish swine
with.
With our agricultural focus at Sietsema Farms, we have been
proactively working with NRCS and environmental programs. We
have enrolled our 1,500 acres and additional conservation
practices in the Conservation Security Program, and an
additional 13 acres in field buffer strips in the Conservation
Reserve Program, and in the EQIP program we have utilized funds
to construct several manure storage facilities.
In the near future, our turkey litter will be delivered to
our new state-of-the-art biomass gasification facility. With
this facility, the turkey production will be a closed
environmental loop, generating our electric and gas needs for
our feed production and our feed mill, and greatly reducing our
carbon footprint.
USDA Rural Development has been a significant resource
contributing to our ability to invest into agriculture. When
our market for turkeys closed in the late 1990s, USDA Rural
Development loan guarantees made it possible for us to get
access to capital to facilitated the construction of both a
turkey processing plant and a further processing and cook
plant. USDA Rural Development was also significant in our
ability to fund the gasifier facility mentioned earlier, which
will be the first of its kind in the world.
One challenge currently facing our livestock industry is
production costs, as mentioned earlier by USDA. Feed is the
most important of these. With the current runup in grains due
to the short supply caused by both production and by the
ethanol mandate, that has put us in uncertain terms for the
livestock industry.
Our biggest reason for the industry not being more
optimistic, facing some of the stronger prices that we are
currently seeing with the increase in turkey and pork supply,
is to these uncertain input costs. Corn and other feed
ingredients have risen to new levels, corn going from $4,
$4.50, $5 to $7 in barely a year, and in this past month
surpassing the $7 mark. What the livestock industry is looking
for is reform in the existing ethanol policy, a safety net that
ensures proper corn prices and availability, with less
volatility in the future.
Another challenge today is the marketing rule proposed last
summer by USDA's GIPSA. First is the competitive injury
position, which will make it easier to sue for regulatory
action against livestock and poultry processors. Second is the
provision that requires processors to virtually guarantee
growers can recoup an 80 percent of any capital investments.
The third is a series of provisions that would discourage
competitive contracts in which growers can receive premiums or
deductions based upon the performance of the livestock in their
care.
Studies have shown the negative impacts of this GIPSA rule
in excess of $360 million annually in the turkey industry and
more than $400 million in the pork industry. A study conducted
by John Dunham and Associates showed job losses of 104,000 and
a reduction in national gross domestic product by $14 billion
annually.
How can government help? Though most people in the
livestock industry prefer minimal government involvement, there
are ways that you have been helping and there are ways that you
can continue to ensure the economic viability of our industry.
Continued funding of EQIP is imperative for our industry's
ability to implement many conservation practices. We are
pleased that the 2008 Farm Bill kept 60 percent of these funds
for animal agriculture and would hope that these funds would
continue in the next Farm Bill.
Flexibility to the existing EQIP program for innovative
environmental stewardship programs and projects would be a
positive development, making it easier for livestock and
poultry farmers to access these funds. Farms should not be
restricted to the access of these resources based upon size,
financial benchmarks or animal units.
As a farmer and as American farmers trying to supply food
stuffs for the world population as we move forward, we need to
have these tools available to us.
In Michigan, we have a MAEAP program of which more than
1,000 farms have been MAEAP-verified and another 10,000 are in
the process. Through that process, in the seven years Sietsema
Farms has been involved in the MAEAP program, we have
implemented many projects with NRCS and MAEAP, including field
buffer strips, filter strips, grass waterways, conservation
tillage and residue management, shallow water wildlife
projects, nutrient management, irrigation management, manure
storage facilities and fuel security.
Thank you for the opportunity to discuss this with you as a
Committee, and I will look forward to your further questions.
[The prepared statement of Mr. Sietsema can be found on
page 90 in the appendix.]
Chairwoman Stabenow. Thank you very much for coming.
Mr. Jones.
STATEMENT OF DENNIS O. JONES, PORK PRODUCER, SOUTH DAKOTA
FARMERS UNION, BATH, SD
Mr. Jones. Chairwoman Stabenow, Ranking Member Roberts and
members of the Senate Committee on Agriculture, thank you for
inviting me to testify today.
I am a fourth generation cattle and hog operation in South
Dakota. Our farm is also part of James Valley Pork, a
cooperative. Our cooperative finishes 40,000 hogs annually. By
being part of a larger group of producers, we had hoped to find
power in numbers to get better prices for our hogs. We found
that the collective marketing power of 40,000 hogs was not
enough to get a fair price.
Rural America has lost more than 1.1 million livestock
farms in the last 30 years. In 1980, there were approximately
1.3 million beef cattle operations across the country, but in
2010 there were only 742,000. This is a decline of
approximately 42 percent.
In swine, the reduction has been even more dramatic. In
1980, there were 660,000 hog farms, but in 2010 there were only
about 67,000 left. That is a 90 percent drop.
As more and more farms and ranches have closed,
concentration among livestock producers has become a huge
issue, not just for prices but for food safety as well as
security. Today, there are few large buyers of livestock. The
top 4 packers have control of 81 percent of the cattle for
slaughter in the U.S. The top 4 swine producers control about
65 percent of the hog sales. These statistics make it clear
that concentration is on the rise in the livestock marketplace
and competition is declining.
A year ago, USDA proposed rules to address related anti-
competitive practice in the livestock industry. GIPSA has
received approximately 60,000 comments on the proposed rule.
The USDA is still reviewing these comments and conducting an
economic study before issuing the final rule.
The GIPSA rule will help ensure farmers transparency,
protection and bargaining rights for producers. This will help
restore at least a degree of competition in agricultural
markets. A lack of market power is just one of the reasons
there are fewer livestock farmers and ranchers.
The reforms in the GIPSA rule are long overdue. They
respond to the criticism that has come from the farm groups,
the Government Accountability Office, the USDA Inspector
General, about the lack of enforcement of the PSA. The rule is
more important today than 80 years ago. The proposed rule
defines and clarifies terms in the PSA in order to make
enforcement more effective and to provide clarity to all
players in the livestock market.
Critics of the proposed rule argue that its definition of
unfair preference is too broad and therefore will prohibit
buyers from paying a premium to livestock producers who produce
a premium product. This is not the case. The rule simply
requires that packers or processors explain why they provide
special pricing and contract terms to certain producers.
The GIPSA rule will reduce litigation in the industry by
clarifying the PSA. The GIPSA rule, also known as the Farmers'
and Ranchers' Bill of Rights, needs to be implemented without
further delay.
The 2008 Farm Bill made a critical and greatly appreciated
investment in conservation programs. One program that is
popular with livestock producers is the Environmental Quality
Incentive Program, or EQIP. Through EQIP, the Natural Resources
Conservation Service provides low-cost share of financial and
technical assistance to farmers and ranchers to install and
maintain conservation practices. Conservation practices like
EQIP give farmers and ranchers the tools necessary to sustain
the natural resources we depend on.
While producers face many challenges in today's economy,
they also have many opportunities to benefit. This hearing is
an opportunity for all aspects of the livestock sector to be
reviewed. As such, I urge the Committee to consider the
possibility of incorporating a grain buffer stocks program,
also known as a reserve, in the next Farm Bill. Livestock
producers ought to be especially interested in a mechanism to
better control the volatility of feed costs. That would make
livestock production more conducive to longer-term investment.
It would help the next generation of farmers and ranchers get
started.
Thank you for the opportunity to visit with you and share
my concerns. Please refer to my written testimony for further
detailed information, and I welcome any questions.
[The prepared statement of Mr. Jones can be found on page
70 in the appendix.]
Chairwoman Stabenow. Thank you very much, Mr. Jones.
Mr. Hunt.
STATEMENT OF STEVEN D. HUNT, CHIEF EXECUTIVE OFFICER, U.S.
PREMIUM BEEF, LLC, KANSAS CITY, MO
Mr. Hunt. Chairwoman Stabenow, Ranking Member Roberts,
members of the Committee, I am Steve Hunt, CEO of U.S. Premium
Beef.
Formed in 1996, our company is the producer and majority
owner of National Beef Packing Company. The intent of our
founding members was to create a company that would link
producers and consumers through ownership of meat processing
and marketing. Over 21 producers from 36 States have marketed
cattle through our company. We have paid more than $183 million
in premiums to those producers. Those premiums came as value-
based premiums through our many programs.
I would like to address two issues that are critical to the
U.S. beef industry--trade and the GIPSA rule.
Much of the success in 2010 and in the future can be tied
to our export markets. Last year, the industry set a record for
the value of beef exports of $4 billion. That equated to $153
per head.
Given the international consumer demand for our products,
it is critically important that Congress pass free trade
agreements with South Korea, Colombia and Panama as soon as
possible. Yearly exports of U.S. beef to South Korea could
increase to as much $1.8 billion if this agreement is fully
implemented. Without the FTA, our access to their 49 million
consumers will decline as South Korea increases trade with
other countries with FTAs.
It is equally important that we continue to work with
getting Japan to move from accepting cattle of less than 21
months of age to at least 30 months of age, which could add $1
billion to our exports.
Next, I would like to talk about the proposed GIPSA rule.
First, the proposed rule calls on USDA to scrutinize
transactions where producers are paid more than an average
price. Due to our value-based strategy, every lot of our cattle
will fall under this scrutiny. A burdensome requirement to
present private profit and loss information to a government
agency on every single lot of cattle sold will be very
burdensome.
As a result, variable pricing necessary to attract cattle
to fit our value-based programs--those are programs such as
natural cattle, age and source-verified and branded--will be
replaced with potentially a single-price commodity bid. The
method used by USDA to administer such practices is critical,
but to date unclear.
We believe the unintended consequences would be especially
harmful to small producers the rule is purported to support.
Our records show that producers of all sizes benefit from our
value-added programs. However, it is our smallest producers
that have earned the largest premiums.
Here are the facts: Through 2010, we have purchased more
than 8 million head of cattle through our program. In analyzing
the top 25 percent of those cattle delivered since we began,
the group of producers by segment that delivered the highest
premiums were those that delivered less than 250 cattle per
year, at an average premium of $63.48 per head. The second
highest, those that delivered less than 100 cattle a year
earned the second highest premium.
Based on our experience, I believe this rule will burden
the small producers who rely on these value-based programs to
compete with the economies of scale that large producers enjoy.
The second issue is lowering the legal threshold
requirement from proving harm to the marketplace to harming an
individual. Proponents of this proposed rule believe that if a
deal is not reached in the marketplace between a cattle
producer and processor the producer should have the right to
sue the processor instead of the current threshold, which holds
substantial legal precedent that the processor is liable if the
actions were actually harmful to the entire marketplace. In
other words, if negotiations fail between a buyer and seller,
the producer could make a claim against the processor under
this proposed rule.
The broad and general nature of the rule opens the door for
frivolous lawsuits. If a single producer can sue based on their
thoughts of what is unfair, it is likely that price differences
based on value-added characteristics will continue and we will
return to a commodity one-price-fits-all system. If that
happens, both producers and consumers, who by the way have
demanded these programs, will lose.
Proponents to the rule responded to these concerns by
asserting well, you know, processors get their chance to defend
themselves in court.
Well, Madam Chairwoman, that is just simply not acceptable.
When we are sued, our employees do not sleep, our bankers do
not sleep, our investors do not sleep and I do not sleep. But
more importantly, our customers do not sleep. They depend on us
to supply products to their shelves at night, so when they open
their doors in the morning they are open for business.
The increased threat of frivolous lawsuits that this
proposed rule will create is a risk no business can withstand.
And by the way, this will change our behavior, in answer to
the question earlier.
In closing, I urge the Committee to insist on another
comment period once the pending economic analysis is completed.
This allows additional input on the rule to identify changes
that will minimize the damage.
I would encourage the Committee to make sure we put
ourselves in a position to compete for export business. At the
same time, I would ask you to scrutinize proposed government
regulations that will result in rolling back the vast
improvements that have helped make U.S. beef the product of
choice, not only in the United States but around the world.
Thank you.
[The prepared statement of Mr. Hunt can be found on page 63
in the appendix.]
Chairwoman Stabenow. Thank you very much.
Mr. Harper.
STATEMENT OF FRANK HARPER, PRESIDENT-ELECT, KANSAS LIVESTOCK
ASSOCIATION, SEDGWICK, KS
Mr. Harper. Madam Chairman, Senator Roberts and members of
the Committee, my name is Frank Harper, and I have a cow-calf
and cattle backgrounding and a farming operation near Sedgwick,
Kansas. I am President-elect of the Kansas Livestock
Association. I serve on the Board of Directors of the National
Cattlemen's Beef Association, of which KLA is an affiliate. I
am very pleased to be here today.
KLA is a trade organization representing nearly 5,500
members on legislative and regulatory issues. KLA members are
involved in many aspects of the livestock industry, including
seed stock, cow-calf and stocker production, cattle feeding,
dairy production, grazing land management and diversified
farming operations. The beef industry is a key segment of the
Kansas economy, and the Kansas beef industry is a major piece
of the U.S. beef industry.
KLA members believe the livestock industry is best served
by the process of free enterprise and free trade. Even with its
imperfections, free trade is relatively more equitable than
regulated and subsidized markets that tend to retard innovation
and distort production and market signals. KLA members oppose
attempts to narrow the business options or limit the individual
freedom of livestock producers to innovate in the management
and marketing of their production.
KLA and NCBA continue to strongly oppose the proposed
regulation commonly referred to as the GIPSA rule issued by the
Grain Inspection, Packers and Stockyards Administration last
year. In short, U.S. producers are concerned the GIPSA rule
would greatly expand the role of government in marketing
livestock and eliminate producers' ability to market livestock,
to capture the benefits of their efforts to improve the quality
of their livestock.
Over the years, I have invested in genetics that have
helped me improve the quality and consistency of the calves I
produce. To capitalize on this investment, I retain ownership
of the majority of my calves and feed them in a commercial feed
yard. This allows me to market my calves through U.S. Premium
Beef as certified Angus beef and other programs that allow me
to earn premiums for my high quality cattle.
The GIPSA rule would require purchasers of my cattle to
justify paying more than a standard price for my livestock. If
my competitors do not agree with the justification the packer
offers for paying me more than the standard price, the packer
may be sued.
Common business sense tells me it would not be long before
the packer no longer would be interested in our agreement. This
means I will be back to selling cattle for the same average
price as everyone else. My investment in superior genetics
would be lost.
It is clear to us the proposed rule will make forward
contracting and other alternative marketing arrangements
subject to so many regulatory hurdles and legal risks that the
effect, whether intended or not, is the elimination of these
marketing options. Without the consistent supply provided by
these arrangements, processors likely will be forced to reduce
or eliminate branded and natural beef programs that have helped
lead a resurgence in beef demand.
The rule also goes far beyond the intent of Congress.
Members of this Committee will recall several of the proposals
contained in this rule were either defeated or withdrawn during
consideration of the last Farm Bill. We strongly urge you to
take action to prevent the implementation of this rule.
Another area of concern is country of origin labeling.
Recent reports indicate the World Trade Organization will rule
in favor of Canada and Mexico in their complaint against the
U.S. mandatory COOL program. It is in the interest of the U.S.
beef industry to resolve this dispute before retaliatory action
is taken. KLA strongly encourages the inclusion of language in
the next Farm Bill to address the WTO finding.
For additional issues, including comments regarding the
next Farm Bill, I would refer you to my written comments.
Again, thank you for the opportunity to testify here today,
and I welcome any questions when the time is appropriate. Thank
you.
[The prepared statement of Mr. Harper can be found on page
54 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Mr. Welch.
STATEMENT OF MICHAEL WELCH, PRESIDENT AND CEO, HARRISON
POULTRY, INC., BETHLEHEM, GA
Mr. Welch. Good afternoon, Chairman Stabenow, Senator
Roberts and members of the Committee. Thank you for the
opportunity to participate in this important and timely hearing
on the issues impacting the state of livestock and poultry and
on behalf of the National Chicken Council. My name is Michael
Welch, and I am President and Chief Executive Officer of
Harrison Poultry in Bethlehem, Georgia. I have been President
of Harrison Poultry since 1992.
Harrison Poultry is a small, privately held, 52-year-old
company operating 1 slaughter plant, producing a variety of
products with more than 1,000 outstanding employees. Over 125
family farmers contract to grow broilers, and an additional 40
family farmers contract to produce hatching eggs for the
company-owned hatchery. Each week, Harrison Poultry processes
more than 6 million pounds of broilers on a live-weight basis.
Some of Harrison Poultry growers have been growing broilers
since Harrison Poultry became vertically integrated more than
40 years ago, even though the company contract is considered a
flock-to-flock arrangement.
Madam Chairman and Committee members, as you can
appreciate, there are many issues impacting the state of the
chicken industry as I speak to you today. The main issues of
concern to the poultry industry:
Number one is the corn-based ethanol policies and rules
need realignment. The policies and rules of the game for corn-
based ethanol must be rebalanced and the playing field must be
leveled to permit chicken producers and other animal
agriculture producers to more fairly compete for the very
limited supplies of corn this year and most likely for the next
few years. For more than 30 years the ethanol industry has had
an opportunity to learn how to compete in the marketplace. It
is now time, actually well beyond a reasonable time, for
ethanol manufacturers to move beyond government subsidies,
federally mandated usage and market protection from foreign
competition.
Broiler companies since last October, when the sudden,
unexpected runup in corn and other feed ingredient costs
incurred, have tried to weather the storm of very high,
volatile corn prices, but now companies can no longer withstand
the storm. Companies are trimming their production plans which
means growers will receive fewer chicks to grow into market-
ready broilers and processing plant work shifts are being
reduced or even eliminated. With less work time, more and more
workers are being laid off.
A broiler company in Georgia just announced 300 workers
will no longer be needed.
Also, this month a fourth generation family broiler company
in Delaware filed for bankruptcy protection while it works to
secure another owner for its assets.
Further, another company in Arkansas last week announced
plans to consolidate two processing plant operations into one
location and will similarly combine two hatcheries into a
single facility. This consolidation will result in 223 jobs
being eliminated. The company, in its announcement, indicated
that eliminating these jobs will give it a better chance to
survive.
Earlier this year, a third generation broiler company with
a complex in North Carolina and another complex in Arkansas
succumbed to the financial stress of high feed costs. The
result in this case is that its complex in North Carolina is
now owned by a foreign company and the Arkansas complex is now
owned by another broiler company that not only had the
borrowing capacity to purchase the assets but reserves that
will undoubtedly be necessary to carry financial losses until
the broiler market improves to at least a break-even point.
Banks and other lending institutions are telling these
companies enough is enough, meaning sell your assets and repay
your outstanding debt. I receive inquiries weekly, if not more
often, from financial firms, broiler companies and others
inquiring about my company's interest in acquiring troubled
assets in the broiler industry. What some analysts say about
the broiler industry of 10 companies in 10 years may become a
reality and perhaps sooner than in a decade.
Although the Volumetric Ethanol Excise Tax Credit for corn-
based ethanol is scheduled to sunset at the end of this
calendar year, along with the import duty on ethanol, a sunset
not so far on the horizon would be prudent. An Iowa State
University study determined that VEETC results in 4 percent
more ethanol, or 500 million gallons, this year. This means
that the VEETC costs about $11 per gallon for that additional
ethanol.
The provision of the Energy Independence and Security Act
of 2007 that generates the real demand for corn-based ethanol
is the Renewable Fuels Standard. The RFS is essentially an
immovable object even when there is an irresistible force. That
is when the shortfall in corn supplies, as is in the current
situation, RFS continues to be immune to the crisis in poultry
and livestock. A more realistic trigger mechanism is needed to
adjust the RFS.
Madam Chairwoman, that is our number one issue.
Our number two issue is the GIPSA that has been well stated
here already in terms of the reasonable step to call a timeout
and take over as the intent of the Congress we do not feel has
been met by the agency, and then the three pending free trade
agreements we would hope that Congress would take action.
The National Chicken Council appreciates the chance to
present here, and improving the state of the poultry industry
not only helps poultry companies and poultry farmers, but more
importantly will allow consumers of poultry products to
continue to enjoy an ongoing adequate supply, appropriately
priced, of animal protein at reasonable prices.
[The prepared statement of Mr. Welch can be found on page
101 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Mr. McPherson.
STATEMENT OF HANS MCPHERSON, RANCHER AND MEMBER, MONTANA FARM
BUREAU, STEVENSVILLE, MT
Mr. McPherson. Thank you, Madam Chairwoman Stabenow and
Ranking Member Roberts and members of the Committee for
the opportunity to travel to Washington, D.C. today and
participate in this hearing and voice my concerns about
agriculture. I would also like to thank the man all Montanans
know simply as Max for the invitation to come here.
Mr. Baucus. Thank you, Hans. Appreciate that.
Mr. McPherson. You are welcome.
I would like to ask you to look at my face. I want you to
see the face of a 58-year-old American family farmer. I am the
median age of the American family farmer.
I am, by no means, rich. I do not own a trophy ranch. I do
not live in a trophy house or drive a trophy pick-up. I feel I
am a pretty typical family farmer.
I get out of bed each day with more to do than I will ever
get done and often have to figure out how to do more with less,
prioritizing what can wait and what needs to be done right now.
I go to bed at night without the aid of sleeping pills but
with a prayer and a belief that better days are ahead. Many
people want to refer to the good old days. I have never been
more optimistic about the future of farming. That is why I came
here today to testify and to answer your questions.
When Senator Baucus's staffer, Alexis Taylor, called and
extended the invitation to me, I did not immediately jump for
joy and say oh, yes, I will hurry right over. I first had to
figure out how I would pay for the trip, and did I feel, did I
really feel that I would make an impact on you. My wife and I
decided that it was worth the investment of time and money to
give you the opportunity to hear from a real down-to-earth
Bitterroot farmer.
I feel that even though you hear from highly polished
lobbyists with very elegant speeches on a daily basis, in
reality, you probably are not much different from me and many
other Americans who are tired of the lobbyists and activists. I
do not want to totally downplay the importance of lobbyists
because, in reality, organizations like the Farm Bureau and
others are often the single voice of thousands of American
farmers like myself, banded together to be heard.
While I am very passionate about the future of agriculture,
I also realize in reality that rural America is under attack by
people who often have little understanding about the life and
struggles on the farm. With issues like animal rights, horse
slaughter, farm labor, banking, the American family farm needs
your help. I also realize that there is great need to trim
budgets. So as you and your staff, Senators, take the task of
writing a new Farm Bill, it is with my hope that you will be
able to protect those of us who provide the American people
with the most abundant, safest and affordable food in the
world.
I hope that you have weighed my testimony and gave my
thoughts careful consideration. It was written by me, not by a
staff of researchers.
Again, I want to thank you for your time and consideration
today. I hope that you understand what I am trying to say, and
I have to tell you it sounded a lot better on the tractor seat.
[Laughter.]
Mr. McPherson. Thank you.
[The prepared statement of Mr. McPherson can be found on
page 85 in the appendix.]
Chairwoman Stabenow. Well, thank you, Mr. McPherson. We
really appreciate your being here, and everyone that is here
and took the time, Mr. Sietsema as well, each of you, to be a
part of this because this ultimately is about how we support
all of your and how does the Farm Bill, how does it work for
each of you. You are literally right where the rubber meets the
road, and that is why we have these hearings, and that is why
we very much appreciate your coming in.
I want to take a moment just to ask each of you as we look
at the future, as we look at economic opportunity, and ask each
of you what you think is the biggest opportunity for economic
growth. Where is the opportunity?
Mr. McPherson, you said you were optimistic. And maybe I
will just start here and go this way across the panel.
I also want, Mr. Sietsema, for you to talk about some of
the innovations on your farm because it is really a tribute to
you and your family, and what you have been able to do in the
vast potential within the livestock sector to diversify and
create value-added opportunities.
But Mr. McPherson, let me start with you. You said you are
optimistic about the future. What is the number one
opportunity, do you think, that there is as it relates
particularly to the livestock industry for economic growth?
Mr. McPherson. Well, I am optimistic----
Chairwoman Stabenow. You might need to push the button.
Mr. McPherson. Okay. I am optimistic about the future of
farming and the future of livestock. We run a small cow-calf
operation. We have about 250 mother cows. We sell the calves
off of those cows in the fall and run about 500 yearlings. So
we buy about 500 yearlings each fall and feed them over the
winter and run them on grass, and then we send them back to the
Midwest to one of these other gentlemen's States to finish
them.
The thing that gives me the most optimism about the future
is the amount of people in the world that are hungry and that
have money. And they are in developing countries, and they want
to eat, and they want to eat American--well, I hope they all
want to eat Montana beef, but they want to eat American beef
and pork and chicken.
I believe that the other area that gives me lots of hope is
the research that has been done and the research that continues
to be done, the crops that are being raised. In Eastern
Montana, we have many sugar beet farmers, and their production
with Roundup Ready sugar beets has raised their yields
considerably, oftentimes making it more economical for them to
stay in the sugar beet business. That is just one area of
research.
Chairwoman Stabenow. Well thank you. I appreciate that. So,
research and global markets.
I am going to ask just quickly before my time is up.
Mr. McPherson. Sure.
Chairwoman Stabenow. Mr. Welch, if you were to name an
economic opportunity for the future, related to livestock, what
would it be?
Mr. Welch. Well, the condition of the poultry industry
right now is survival at the moment, but the evidence of
history proves that in the last 25 years the chicken industry
has doubled its production and head count from 80 million
chickens a week to now about 160 million chickens a week, at
the same time improved the--increased the live weight from 4
pounds average per bird to almost 6 pounds now.
So if you take the head count and the weight increase, in a
mere 25 years we have tripled the production of broilers in the
United States, which is a testimony to the animal itself and
technology and genetics that a chicken now can--we can make a
live chicken with a little bit less than two pounds of feed to
make a pound of live weight, which is incredible, efficient and
cost effective. I would expect those situations to continue if
we can get through this economic distress.
Not only agriculture is one of our country's proudest
industries, and not only feed our own population. The effect we
have had on feeding the world, we honestly hope that our task
can continue in that.
Chairwoman Stabenow. Absolutely.
Mr. Harper?
Mr. Harper. Well, I see probably the biggest opportunity is
meeting the challenge of providing food for a growing world. I
think we have the opportunity to do our best to meet that
demand, I think, and we can do that by not only utilizing but
protecting our natural resources in the process. I think we
have been blessed here in the United States with an abundance
of natural resources.
And I think some of the comments previously. I think we
have been able to produce more with less, and I think that will
continue to be what we strive to do, specifically in the beef
industry, and we have to do that by the help of you folks up
here in Washington kind of somewhat keeping your hands off and
letting us do business the way we know how to do it best.
Chairwoman Stabenow. Okay. Great.
And I am going to ask that Mr. Hunt take just a moment to
answer the same question.
Mr. Hunt. Well, at the risk of being redundant, certainly
the opportunities in Southeast Asia in our export markets are
tremendous. As we see a growing middle class, they are going to
want to upgrade their diets. And we in the Midwest in the
United States, I am just so optimistic with the potential of
agriculture producers, whether it be livestock or grain.
I think we need to be cautious of laws like COOL that are
counterproductive to those export markets, and we need to pass
FTA.
Chairwoman Stabenow. Thanks.
Mr. Jones?
Mr. Jones. I think technology----
Chairwoman Stabenow. You want to push the button there.
Mr. Jones. I pushed the button the last time.
I think technology is going to be one of the leaders in
agriculture today that is going to make us competitive.
The question is though who is going to be there to share
that? When you look at the trends of less producers across
America, it is a trend you cannot deny.
So who is going to be there to be in the sharing of that?
It is going to be the fewer and the bigger and the more
concentrated. That is what bothers me.
But as far as growth and demand, it is going to be there,
but it is who is going to share that.
Chairwoman Stabenow. Thank you very much.
And finally, Mr. Sietsema, again, I appreciate your
testimony and your innovation on your farm. What would you say
is the biggest?
Mr. Sietsema. Sure. Opportunities I see also are the global
marketplace. It was talked earlier today by USDA about trying
to find these markets, create these markets. Well, in my
opinion, markets will find us because we create, we produce the
highest quality meat products in the world.
But we have to do it at a reasonable cost. Regulations and
the GIPSA rule only are counteractive to reducing our costs of
production, plain and simple.
The other opportunities are if you as a Committee are to
move away from conservation reserve type programs in natural
resources to conservation practices and programs for working
lands. That would be similar to what we use the REAP program
for, which is Rural Energy for America, for a gasification
facility that we have put up for our turkey program, as well as
rural development funds and availability for loan guarantees to
allow our co-op to exist.
Chairwoman Stabenow. Thank you very much.
I have gone over, so I am going to add two minutes to
Senator Roberts and Senator Baucus since I took an additional
two minutes in that. Thank you.
Senator Roberts. Max, I think your witness ought to be from
Dodge City. I do not know----
Senator Baucus. It could be any place in America.
Senator Roberts. Let the record show there is one
optimistic farmer from Montana.
Senator Baucus. We are upbeat.
Senator Roberts. We are going to have to pass the hat for
him to get back and farm, but at any rate.
I am just happy to hear one, two, three, four, five, six
optimistic producers here, from many sizes, segments, and some
opinions of agriculture, which is very encouraging.
Steve, my understanding that although the GIPSA rule does
not explicitly ban the more than 50 grid-pricing formula,
pricing or alternative marketing arrangements used by the beef
industry, there are others that assert that the actual effect,
the practical effect here of this proposed rule will cause
these arrangements to be reduced down to 2 or 3. So from your
viewpoint, how does this rule impact these marketing
arrangements?
Mr. Hunt. Senator, again, thank you for the kind
introduction earlier.
By the way, I am not attorney, but I believe you are right.
I do not believe anywhere in the rule does it explicitly say
that these value-based opportunities are eliminated.
I think many of us on the panel have alluded to this, but
the plain and simple facts are for those of us that have worked
hard, with the direction of our consumers and the requests of
the producers, have come to processors and say let's develop
these value-added programs, our costs will go up and our risks
will go up.
Now it does not take a very smart person to say if that is
the case what will happen over time is to eliminate that risk
and protect the investment that we have. We have to narrow that
band and width of price differentiation.
And how narrow that band gets is how aggressive the
proponents are of this rule in their litigation and taking
advantage of the gate swinging wide open. If it is real
aggressive, they will be eliminated. We cannot stand the risk.
We cannot stand the costs to protect our investment.
Senator Roberts. Well, we certainly hope that does not
happen.
Let me ask a real quick follow-up. Did we not actually see
this happen--I referred to it earlier--in Missouri in 1999?
Mr. Hunt. Yes, Senator.
Senator Roberts. By the way, I think Kansas State beat
Missouri in 1999, but I just want to throw that out.
Mr. Hunt. Well, as one with my money in Missouri and my
heart in Kansas today, that may be true.
Missouri did in 2001. The legislature passed a law that had
many of the same aspects of the GIPSA rule.
And I think it is Professor Ron Plain of the University of
Missouri will recognize that, Senator.
Senator Roberts. Right.
Mr. Hunt. He indicated that this was a horrible action on
the part of the legislature and cost the producers $1 million
per month while it was enacted. They called a special
legislative session later on that fall and reversed that
decision and repealed that law.
So you know, history is a pretty good indicator of future
action, and I think history tells us we should learn from that,
that this could have a devastating impact.
Senator Roberts. Frank, let me just ask you this question.
If these alternative marketing arrangements go away, does it
change your business model and the type of cattle you raise?
Mr. Harper. Oh, absolutely. I have been retaining ownership
I think since around 1996, and basically by doing that I have
learned, number one, what my cattle were at that time. And by
getting the information back that I have received from
participating in these arrangements, in these marketing
arrangements and getting the premiums that the market has
offered, I have been able to modify my genetics, and that is
the way I base my business model.
If those options were eliminated or even somewhat
compromised, I think that definitely would lend me to
completely looking differently at how I would move forward with
my cow-calf operation.
Senator Roberts. What is your priority list of items that
would need to be in the Farm Bill, and I am specifically asking
do we need a livestock title in the next Farm Bill?
Mr. Harper. Well, I think that is a very fair question. And
my concern with the livestock title is based on what might come
out of that. And when we see things like GIPSA and the
mandatory COOL, I think that makes us in the beef cattle
industry pretty nervous about a livestock title in the upcoming
Farm Bill. So I do not know if that answers your question.
You know, we like to see some of the--we would like to see
a robust conservation title and a robust research title, but
the livestock title is the one that we move forward with, with
some caution.
Senator Roberts. I think the Chairwoman and I are big
supporters, without question, of EQIP.
Chairwoman Stabenow. Yes.
Senator Roberts. We are going to take a good hard look at
that and see if we cannot be helpful there, if we can ever get
to a Farm Bill with the way things are going.
I want to thank all the panelists, and I am going to quite
with two minutes ahead.
Chairwoman Stabenow. All right. Thank you very much.
Senator Baucus.
Senator Baucus. Thank you, Madam Chairwoman.
I am heartened that so many of you talked about the need to
increase our beef export market and also the free trade
agreements that need to be passed. Several hours ago, I
announced that the Finance Committee is going to mark up the
free trade agreements on Thursday to get them all rolling, get
things going here, because we have been delaying this a bit too
long.
And they will help us export more beef; there is no
question. Certainly, the Korean agreement will help export more
beef. My goal is to then put more pressure on other Asian
countries, especially China and Japan, so they eventually--not
eventually, very soon--take all ages, all cuts because that is
a huge opportunity for the American producer.
I urge you though when you talk about these FTAs--the
Korean and Colombian and the Panama--to also recognize that
they will pass only if trade adjustment assistance is also
passed, and they are all together. And we are not going to get
the FTAs, whether it is Korea or any of the other two, unless
trade adjustment assistance is also passed. It is all or
nothing, and my judgment is it is a package that is worth
pursuing.
So I urge all of you when you are talking to your
colleagues and your friends and the industry, and so forth,
just you might advise them that heck, if we are going to get
these FTAs, part of the deal is we also have trade adjustment
assistance as part of it. Then I think we can start putting
more pressure on these other countries.
I must tell you it was hard getting the extra beef
provisions in the Korean bill. It was very hard. I ran into a
lot of resistance in different quarters, but we got some bump-
up in Korea. So that is a good precedent I hope for future
agreements.
I would just like to know, standing back a little bit. We
talked about the Ag Bill, and for some of you, the livestock
title. What other factors really affect your viability?
I mean there are going to be tax issues, I am sure. We
talked about trade. I am just curious. When you think about
your operation, you think about your family, you think about
your future, how much of it is just cost, the cost of
production?
How much of it is tax provisions, including the Federal and
State tax?
How much of it is marketing opportunities overseas?
Just what about the sense of space?
In my State, in Montana, we Montanans do what we can to
keep farms and ranches operating mostly for the operators and
the owners and the producers, but also we in Montana like the
space. We like all that land that people can drive through and
drive around rather than having it subdivided.
So when you think, I am just curious what some of the
thoughts are and do you prioritize them?
Mr. Hunt?
Mr. Hunt. Senator, one thing I would mention related to
tax, I do not know how many members understand that many of our
ag companies are formed in pass-through entities.
Senator Baucus. Right.
Mr. Hunt. These are entities that the owners pay the tax,
not the company. So when we think about corporate America and
paying corporate taxes and so on, and personal income taxes,
actually for many companies like ours, our producer-owners are
actually paying the tax for the company. So when you talk about
raising personal income taxes, that is actually raising the
taxes on the owners of these business.
Senator Baucus. Okay. Other thoughts?
Hans, you have some ideas about that? And thank you for
coming
Mr. McPherson. Yes, thank you, Senator.
Senator Baucus. Your testimony sounded just as good here as
it did in your tractor, believe me.
Mr. McPherson. Okay. Thank you.
I think one of the things that affects our operation is
new--and it was in the last Farm Bill, and it is just you Chief
White talk about it here earlier--was the CSP program. The
Conservation Stewardship Program is a program that really
benefits livestock producers. We were able to take advantage of
that.
Programs like CRP got tweaked back in, I think, 2002 to
allow some rotational grazing and some rotational hay on it.
That helps livestock producers. In our State right now, with
the flooding, CRP ground has been able to be used for some
calving and to move calves, or the cows, off the lower ground
where it is flooded. So I think that is a good program.
But for my personal operation, the CSP program has been
very, very beneficial, and it has helped us.
Senator Baucus. Do you use EQIP?
Mr. McPherson. Yes, we have used EQIP?
Senator Baucus. That has been helpful too?
Mr. McPherson. Absolutely.
The other livestock disaster programs, I stated in my
written testimony that I feel very fortunate that I do not have
very much experience in the livestock disaster programs. So
that is personal experience.
I have seen it in my experience with the county FSA office
and with the State FSA committee, to where these livestock
disaster programs have made the matter of whether a family eats
this summer or not over some disaster with livestock.
Senator Baucus. I would just be interested in your thoughts
in addition to what you just said because when we wrote the
last Farm Bill, frankly, I insisted on a disaster section of
the bill, so we have a permanent agriculture disaster
assistance program. The thought being that we have got to get
away from the ad hoc. You know, some years we get disaster
assistance, some years we do not, and it just waiting for
Congress to act, and so on and so forth.
Now nothing is perfect, but just your honest assessment of
whether the provisions that are currently in the Farm Bill with
respect to livestock indemnity or forage, or what not, do they
tend to work or not? Would you suggest improvements?
Mr. McPherson. Well, I believe they work very, very well.
And prior to 2008, it seemed to me like all the Farm Bills were
written for the corn and soybean producers and wheat producers.
I will not win many friends with them guys today, but it is
nice to have something in the Farm Bill that is for the
livestock producer or the diversified farmer.
Senator Baucus. So you find that it is better than earlier
practice where sometimes Congress acted and sometimes Congress
did not act?
Mr. McPherson. I believe that is true, yes.
Senator Baucus. Okay. What about others? I am curious what
others think about the disaster provisions in the Farm Bill.
Mr. Sietsema. I would go along with the personal tax issue
that was brought up earlier. Our entities also are pass-through
entities. With increasing personal tax rates, there can be
large profits in an organization of different sizes, and they
are not realized cash profits. They are corn in a bin or they
are livestock in a feed operation. They have not turned into
cash yet. But with the current volatility in the markets these
past few years, you could have a substantial profit on December
31 and have it all vaporize by April 1st of the following year,
but you paid a tax liability on that dead date of December
31st.
Senator Baucus. My time is expiring, but I would just be
curious. Are all of you organized as pass-through companies?
Are any of you C corporations? Are you pass-throughs? I am just
curious how you all are organized from a business tax
perspective.
Mr. Hunt. LLC.
Senator Baucus. LLC, so you are pass-through.
Mr. Sietsema. And the other would be the estate tax issue.
Senator Baucus. Okay. Are any of you C corps?
So you are all pass-throughs. Sub-chapter S, another pass-
through. Okay.
Mr. Sietsema. And the estate tax issue. We have got three
generations working in our farm operation, shoulder to
shoulder. And as we continue to grow and expand our operations
it is going to be more and more difficult to maintain those
operations without having to sell a chunk off to send
Washington a check so that I can maintain the balance of my
operation for myself and my next generation.
Senator Baucus. There was a change in the State and Federal
estate tax law last year, last December. Have you looked at
that? It was a big change in your favor.
Mr. Sietsema. Yes, in our favor, but there are still some
areas there that----
Senator Baucus. I am just curious.
Mr. Sietsema. --it is amazing how large a farm can be
valued today also.
Senator Baucus. Yes. Right. Okay. Thank you very much.
Chairwoman Stabenow. All right. Well, thank you.
Senator Baucus. Thank you.
Chairwoman Stabenow. Thank you very much to all of you for
coming forward. This certainly is not the last time we are
going to be talking about the importance of the livestock
industry and the issues that you are facing. We appreciate your
raising all the issues you face.
And as we go forward in the Farm Bill we want to make sure
that we are doing the right thing to be able to be your
partners, to be able to make sure that you have every
opportunity to continue to be successful and move forward. We
are looking--whether it is GIPSA or other issues that affect
the industry we talked about today, we are going to continue to
be involved and engaged in the discussions with the Department.
And I would just say in closing that we need to remember
again that the livestock industry supports two million jobs
nationally, and we need to make sure that each of you and the
people you represent have the tools and the support to be
successful because it is important for all of us.
So, thank you very much.
The meeting is adjourned.
[Whereupon, at 5:19 p.m, the hearing was adjourned.]
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A P P E N D I X
JUNE 28, 2011
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QUESTIONS AND ANSWERS
JUNE 28, 2011
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