    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

                      AN EXAMINATION OF PRICE DISCREPANCIES,
                          TRANSPARENCY, AND ALLEGED UNFAIR
                          PRACTICES IN CATTLE MARKETS

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

                                    HEARING

                                   BEFORE THE

                            COMMITTEE ON AGRICULTURE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 27, 2022

                                   __________

                               Serial No. 117-32

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

              Printed for the use of the Committee on Agriculture
                             agriculture.house.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    48-190 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                            COMMITTEE ON AGRICULTURE

                         DAVID SCOTT, Georgia, Chairman

    JIM COSTA, California                GLENN THOMPSON, Pennsylvania,
    JAMES P. McGOVERN, Massachusetts     Ranking Minority Member
    ALMA S. ADAMS, North Carolina, Vice  AUSTIN SCOTT, Georgia
    Chair                                ERIC A. ``RICK'' CRAWFORD,
    ABIGAIL DAVIS SPANBERGER, Virginia   Arkansas
    JAHANA HAYES, Connecticut            SCOTT DesJARLAIS, Tennessee
    ANTONIO DELGADO, New York            VICKY HARTZLER, Missouri
    SHONTEL M. BROWN, Ohio               DOUG LaMALFA, California
    BOBBY L. RUSH, Illinois              RODNEY DAVIS, Illinois
    CHELLIE PINGREE, Maine               RICK W. ALLEN, Georgia
    GREGORIO KILILI CAMACHO SABLAN,      DAVID ROUZER, North Carolina
    Northern Mariana Islands             TRENT KELLY, Mississippi
    ANN M. KUSTER, New Hampshire         DON BACON, Nebraska
    CHERI BUSTOS, Illinois               DUSTY JOHNSON, South Dakota
    SEAN PATRICK MALONEY, New York       JAMES R. BAIRD, Indiana
    STACEY E. PLASKETT, Virgin Islands   CHRIS JACOBS, New York
    TOM O'HALLERAN, Arizona              TROY BALDERSON, Ohio
    SALUD O. CARBAJAL, California        MICHAEL CLOUD, Texas
    RO KHANNA, California                TRACEY MANN, Kansas
    AL LAWSON, Jr., Florida              RANDY FEENSTRA, Iowa
    J. LUIS CORREA, California           MARY E. MILLER, Illinois
    ANGIE CRAIG, Minnesota               BARRY MOORE, Alabama
    JOSH HARDER, California              KAT CAMMACK, Florida
    CYNTHIA AXNE, Iowa                   MICHELLE FISCHBACH, Minnesota
    KIM SCHRIER, Washington              JULIA LETLOW, Louisiana
    JIMMY PANETTA, California            ------
    SANFORD D. BISHOP, Jr., Georgia
    ------

                                     ______

                          Anne Simmons, Staff Director

                     Parish Braden, Minority Staff Director

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Axne, Hon. Cynthia, a Representative in Congress from Iowa:
        Submitted letter on behalf of Bob Noble, President, Iowa
          Cattlemen's Association....................................   139
        Submitted statement on behalf of Iowa Cattlemen's Association   140
    Bacon, Hon. Don, a Representative in Congress from Nebraska;
      submitted letter on behalf of Brenda Masek, President, Nebraska
      Cattlemen......................................................   147
    Davis, Hon. Rodney, a Representative in Congress from Illinois,
      submitted letter...............................................   143
    Rouzer, Hon. David, a Representative in Congress from North
      Carolina, submitted letter.....................................   144
    Scott, Hon. David, a Representative in Congress from Georgia,
      opening statement..............................................     1
        Prepared statement...........................................     3
        Submitted article............................................   127
        Submitted chart..............................................   135
        Submitted statement on behalf of Robert L. Larew, President,
          National Farmers Union.....................................   135
    Thompson, Hon. Glenn, a Representative in Congress from
      Pennsylvania, opening statement................................     4
        Submitted letter on behalf of Neil L. Bradley, Executive Vice
          President, Chief Policy Officer, and Head of Strategic
          Advocacy, U.S. Chamber of Commerce.........................   140

                                   Witnesses

    Young, Coy, cow-calf producer, Young Angus Farm, Blythedale, MO..     7
        Prepared statement...........................................     9
    Stockton, Gilles, cow-calf producer, Stockton Ranch; President,
      Montana Cattlemen's Association, Grass Range, MT; on behalf of
      Northern Plains Resource Council; Western Organization of
      Resource Councils..............................................    11
        Prepared statement...........................................    13
    Schiefelbein, Donald K., cattle producer, Schiefelbein Farms LLC;
      President, National Cattlemen's Beef Association, Kimball, MN..    31
        Prepared statement...........................................    32
    MacLennan, David W., Board Chair, President, and Chief Executive
      Officer, Cargill, Inc., Wayzata, MN............................    65
        Prepared statement...........................................    67
        Submitted questions..........................................   171
    Schellpeper, Timothy O., Chief Executive Officer, JBS USA Food
      Company, Greeley, CO...........................................    68
        Prepared statement...........................................    69
        Submitted questions..........................................   173
    Klein, Tim, President and Chief Executive Officer, National Beef
      Packing Company, LLC, Kansas City, MO..........................    71
        Prepared statement...........................................    72
        Submitted questions..........................................   176
    King, Donnie, Chief Executive Officer, Tyson Foods, Springdale,
      AR.............................................................    81
        Prepared statement...........................................    82
        Supplementary material.......................................   150
        Submitted questions..........................................   177

                               Submitted Material

    Omar, Hon. Ilhan, a Representative in Congress from Minnesota,
      submitted statement............................................   153
    Potts, Julie Anna, President and Chief Executive Officer, North
      American Meat Institute, submitted statement...................   154

                   AN EXAMINATION OF PRICE DISCREPANCIES,
          TRANSPARENCY, AND ALLEGED UNFAIR PRACTICES IN CATTLE MARKETS

                                  ----------

                           WEDNESDAY, APRIL 27, 2022

                              House of Representatives,
                                      Committee on Agriculture,
                                                       Washington, D.C.
        The Committee met, pursuant to call, at 10:00 a.m., in Room
    1300 of the Longworth House Office Building, Hon. David Scott
    of Georgia [Chairman of the Committee] presiding.
        Members present: Representatives David Scott of Georgia,
    Costa, McGovern, Adams, Spanberger, Hayes, Delgado, Kuster,
    Maloney, O'Halleran, Khanna, Correa, Harder, Axne, Schrier,
    Panetta, Thompson, Austin Scott of Georgia, Crawford,
    DesJarlais, Hartzler, LaMalfa, Davis, Allen, Rouzer, Kelly,
    Bacon, Johnson, Baird, Jacobs, Balderson, Cloud, Mann,
    Feenstra, Miller, Moore, Cammack, Fischbach, and Letlow.
        Staff present: Lyron Blum-Evitts, Daniel Feingold, Lesley
    Weber McNitt, Prescott Martin III, Ashley Smith, Parish Braden,
    Caleb Crosswhite, Patricia Straughn, Erin Wilson, John Konya,
    and Dana Sandman.

      OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN
                         CONGRESS FROM GEORGIA

        The Chairman. Welcome, everyone, and I want to thank all of
    you for joining today's hearing. The Committee will now come to
    order.
        After brief opening remarks, Members will receive testimony
    from our witnesses today, and then the hearing will be open to
    questions.
        Good morning. I would like to make my opening statement.
    And first, I want to thank our House Agriculture Committee
    staff for pulling together this important and historic hearing.
    And I want to thank each of my Committee Members and of course
    our witnesses for appearing today before the Committee.
        Now, we are holding this very critical hearing to discuss
    cattle markets, concentration in the meatpacking industry--and
    may I also remind everyone to mute yourself so that we don't
    have noise interference.
        We are holding this critical hearing, very important, to
    discuss cattle markets, concentration in the meatpacking
    industry, and allegations that the big four meatpackers have
    partaken in unfair practices that have driven down prices for
    cattle producers and left distorted markets.
        Now, the one point I want to make up front is that I, as
    Chairman, am coming into this hearing with an open mind, and I
    hope and I am sure that my colleagues on the Committee are,
    too, because hearings provide us with opportunities to
    facilitate open discourse and get public answers to some very
    difficult questions. And I do not have any foregone conclusions
    on the subject of today's hearing, but I am alarmed at the
    serious allegations that are out there and concerning stories
    about what has been happening in our packing industry. So my
    goal for this hearing is to get answers to those questions and
    have the packers speak about these allegations.
        Since the 1980s, we have seen a steady increase in the
    concentration in the packing industry, and this consolidation
    has coincided with a steady decrease in the number of cattle
    ranchers over that same period. In one analysis that I read,
    the authors noted that over \1/2\ million ranchers have gone
    out of business since the 1980s. This threatens the food
    security of our great nation. That averages out to about 17,000
    cattle operations a year. This statistic is highly worrisome,
    and it is a direct and alarming threat to our nation's food
    supply, our nation's food security. And the family cattle
    farmer is an essential part of our country and its food system.
    And this hearing was inspired by what has been happening to
    those family cattle farms. And the purpose of this hearing is
    so that we can hear what our cattle farmers have to say.
        And in that line, I would like to enter into the record a
    well-researched article from The New York Times by Peter
    Goodman that describes in a very impactful way the
    circumstances that our ranchers are facing. And it was this
    article when I read it, I felt compelled to have this hearing.
    That is why I want entered into the record, and I would
    encourage everyone to read this article, to examine the passion
    and the difficulties of our farmers, our ranchers, those who
    produce our cattle.
        [The article referred to is located on p. 127.]
        The Chairman. And so my concern is the nation's concern
    about these family ranching farms shutting down, and I believe
    this hearing will be a catalyst, a key for turning this trend
    around. And that is why we are having this hearing. We on this
    Committee want the information so that we can determine how we
    in Congress can play our part in this.
        I am concerned that in the last 40 years this country has
    lost its grip on the free market component of capitalism. Fair
    and competitive markets should engender opportunities for many
    and not just benefit for the few at the top. We created
    antitrust laws for a reason, and unfortunately, we have gotten
    away from enforcing these anticompetitive practices. And we
    have moved toward a system that prioritizes efficiency at all
    costs.
        I was very glad to see President Biden's Administration
    reprioritize enforcement of competition laws through their
    Executive Order on promoting competition in our American
    economy. And I hope that this is a sign of more action to come.
    As we move through this hearing and examine this issue, I think
    we should keep in mind the idea of how competition and markets
    increase equity and fairness.
        Another issue with consolidated industry is that it can
    create less resiliency in our supply chains. We saw this
    directly during the Holcomb fire in 2019. And then the COVID-19
    pandemic when a small number of companies control an entire
    link in the supply chain, it makes it more susceptible to
    shocks and less resilient when black swan events occur. And in
    that vein, consolidation doesn't just hurt our ranchers, it
    also hurts our consumers who face supply bottlenecks, higher
    prices, and limited choices.
        Today's witnesses bring together many years of experience
    in the cattle industry and also different perspectives, and I
    thank all of our witnesses for being here. Unfortunately, we
    were supposed to have a fourth witness, a rancher on our panel,
    but due to intimidation and threats to this person's
    livelihood, to this person's reputation, they chose not to
    participate out of fear. Witness intimidation is unacceptable,
    and it is not conduct befitting this treasured institution, the
    Congress of the United States. And I never want to hear about a
    witness choosing not to come before our Committee because of
    fear again. We are looking into this. Fear cannot run our
    Congress. Fairness runs our Congress. Openness runs our
    Congress. And so I'm saddened and disappointed that we reached
    that point. And of course we will be following up with the
    incident. We have folks looking at it.
        I expect today that there will be differences of opinion,
    even disagreements. We are looking forward to it. That is why
    we are having this hearing. But I also expect civil discourse
    for our discussions from everyone, and I look forward to
    hearing our witnesses' testimony and leveraging the insights
    and solutions they offer to work towards a better future for
    our industry that we all care about.
        Thank you again for coming. We are in for a very, very
    important and significant moment in the history of agriculture
    in the United States.
        [The prepared statement of Mr. David Scott follows:]

     Prepared Statement of Hon. David Scott, a Representative in Congress
                                  from Georgia
        Good morning. I'd like to thank our House Agriculture Committee
    Members for joining us and our witnesses for appearing before the
    Committee today. We are holding this critical hearing to discuss cattle
    markets, concentration in the meatpacking industry, and allegations
    that the big four meatpackers have partaken in unfair practices that
    have driven down prices for cattle producers and led to distorted
    markets.
        One point I want to make up front is that I am coming into this
    hearing with an open mind--and I hope my colleagues are too. Hearings
    provide us with opportunities to facilitate open discourse and get
    public answers to difficult questions.
        I do not have any forgone conclusions on the subject of today's
    hearing, but I am alarmed at the serious allegations out there and
    concerning stories about what has been happening in the packing
    industry. My goal for this hearing is to get answers to those questions
    and have the packers speak about those allegations.
        Since the 1980s we have seen a steady increase in concentration in
    the packing industry. This consolidation has coincided with a steady
    decrease in the number of ranchers over that same period. In one
    analysis that I read, the authors noted that over \1/2\ million
    ranchers have gone out of business since the 1980s, that averages out
    to about seventeen thousand cattle operations a year. This statistic is
    highly worrisome.
        The family farmer is an essential part of this country and its food
    system. This hearing was inspired by what has been happening to those
    family farms and the purpose of the hearing is so that we can hear what
    those farmers have to say. In that light, I would like to enter into
    the record an article from The New York Times that described the
    circumstances that our ranchers are facing. I also hope to hear from
    the CEOs today on what they believe has led to so many small farms
    shutting down and how we can turn that around.
        In the early 20th century, the country saw what concentration did
    to small business and how it hurt the everyday American. In 1921,
    Congress passed the Packers and Stockyards Act because of concern
    around concentration in the packing industry and anticompetitive
    practices.
        I am concerned that in the last forty years this country has lost
    its grip on the ``free market'' component of capitalism. Fair and
    competitive markets should engender opportunities for many, and not
    just benefit a few at the top. We created antitrust laws for a reason,
    and unfortunately, we have gotten away from enforcing anticompetitive
    practices, and we have moved toward a system that prioritizes
    efficiency at all costs.
        I was glad to see the Biden Administration reprioritize enforcement
    of competition laws through their Executive Order on promoting
    competition in the American economy and I hope that is a sign of action
    to come. As we move through this hearing and examine this issue, I
    think we should keep in mind the idea of how competition in markets
    increases equity and fairness.
        Another issue with consolidated industry is that it can create less
    resilient supply chains. We saw this directly during the Holcomb fire
    in 2019 and then the COVID-19 pandemic. When a small number of
    companies control an entire link in the supply chain it makes us more
    susceptible to shocks and less resilient when black swan events occur.
    In that vein, consolidation doesn't just hurt ranchers, it also hurts
    consumers, who face supply bottlenecks, higher prices, and limited
    choices.
        Today's witnesses bring together many years of experience in the
    cattle industry and different perspectives. And I thank all of our
    witnesses for being here. Unfortunately, we were supposed to have a
    fourth witness on our producer panel but, due to intimidation and
    threats to this person's livelihood and reputation they chose not to
    participate.
        Witness intimidation is unacceptable, and it is not conduct
    befitting this institution. I never want to hear about a witness
    choosing not to come before our Committee because of fear again. I am
    saddened and disappointed that we reached that point, and I will be
    following up on the incident.
        I expect today that there will be differences of opinions and even
    disagreement--but I also expect civil discourse from everyone involved
    in this discussion. I look forward to hearing our witnesses' testimony
    and leveraging the insights and solutions they offer to work toward a
    better future for an industry we all care about.
        Thank you and I now recognize the Ranking Member, Mr. Thompson.

        The Chairman. And with that, I now recognize my good
    friend, the gentleman from Pennsylvania and our Ranking Member,
    Mr. Thompson.

     OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
                       CONGRESS FROM PENNSYLVANIA

        Mr. Thompson. Mr. Chairman, thank you so much. I would like
    to say I am pleased we are having this hearing today; but, I am
    little disappointed in the way it is coming together.
        I also want to say today the U.S. Chamber of Commerce sent
    a letter to the Chairman and I urging Congress and this
    Committee to refocus attention on, quote, ``the real underlying
    causes, namely, macroeconomic trends that include supply and
    demand shocks and monetary policies, rather than the strawmen
    of industry concentration or unfair business practices,'' end
    quote. And I have that letter here with me. I would like to
    submit that letter for the record.
        The Chairman. Sure.
        [The letter referred to is located on p. 140.]
        Mr. Thompson. Thank you.
        As I have said on numerous occasions, we need to focus on
    preparing for the next farm bill. And while I acknowledge there
    has been modest progress starting in February on that front and
    I am very appreciative of that, we are inexplicably veering off
    course today. Issues surrounding cattle markets are really
    important, and I agree with you on that, Mr. Chairman, and I
    think that the importance is exemplified by the time that this
    Committee has already spent exploring and debating them. We
    have had a productive closed-door roundtable on the matter and
    an insightful subcommittee hearing where we heard from a slate
    of esteemed economists, not to mention a 5 hour full Committee
    hearing where Senator Grassley was given a platform to promote
    his legislative proposal. Secretary Vilsack weighed in with his
    views, and we heard from a diverse array of livestock
    stakeholders and a packer representative.
        That work culminated in the bipartisan and ultimately
    bicameral passage of legislation to ensure the continued
    availability of crucial livestock mandatory reporting data and
    the establishment of a Cattle Contract Library to provide an
    additional layer of market transparency.
        As cattle markets continue on a steady trajectory and we
    await USDA's implementation of the Contract Library Pilot, I
    have to wonder why today's hearing was so urgent, so urgent
    that I wasn't even consulted in scheduling it. Rather, I was
    told it was happening as letters were drafted to send to
    packers' CEOs, and the threat of subpoenas began to fly. And
    that is just not the way this Committee should conduct its
    business.
        I do appreciate the Chairman's opening remarks, noting his
    open-mindedness, and I trust and enjoy a great relationship
    with the Chairman, and so I appreciate hearing that in your
    comments, being open-minded in this hearing as you gaveled us
    in.
        I said it before and I think it bears repeating, if there
    has been collusion, manipulation, or other wrongdoing by
    packers, then the law should be enforced under the existing
    authorities at USDA and DOJ. Absent such findings, it is time
    to stop demonizing the packing industry out of political
    convenience. And like the rest of us, the packers are dealing
    with, not causing, the record levels of inflation that are
    plaguing our economy with skyrocketing input costs across the
    board, not to mention severe labor shortages and continued
    transportation and supply-chain challenges. Despite these
    enormous obstacles, the packers continue to provide an
    invaluable service and do so with incredible efficiency.
        We know we need greater competition, and I think we are
    committed to doing the right things to help small processors
    become medium-sized, medium-sized processors become larger, and
    to have greater competition. Yet at every turn this
    Administration has pointed the finger at the packing industry,
    blaming them almost single-handedly for rising food costs. They
    have done so via blog posts, contrived public events, and press
    briefings, all without any acknowledgment of the culpability of
    their own reckless spending and heavy-handed regulatory agenda.
    And I fear that today's hearing is nothing more than
    perpetuating the Biden Administration's attempt to continue
    that desperate, baseless narrative.
        Now, if we are generally trying to better understand beef
    pricing dynamics, you would think we might benefit from having
    the heads of packing companies, beef units testify today. I
    know several of the companies proposed that alternative, and
    their suggestions were repeatedly denied. Perhaps a trusted
    economist or a seasoned market analyst would be a key to that
    conversation? Despite a bipartisan request from several of our
    Members, I understand that that idea also was rejected. Mr.
    Chairman, I am hoping I am wrong, but this hearing reeks of
    political point scoring on behalf of the Administration in an
    effort to justify drastic, unvetted, or controversial
    legislative action. The hearing title alone suggests the decks
    were stacked long ago in favor of a predetermined outcome.
        The Senate Agriculture, Nutrition, and Forestry hearing
    yesterday served as yet another reminder of the lack of
    agreement on proposed cattle market mandates. It also brought
    to light serious questions about the purpose, intended scope,
    and the need for special investigator legislation.
        So despite my concerns with today's hearing, I really want
    to extend my sincerest thanks to our witnesses who have come
    here from a great distance and at great expense, both producers
    and packing industry leaders alike. Thank you for taking the
    time to be with us and sharing your perspectives. I am looking
    forward to that insight, and I intend to make the best of the
    situation. I look forward to what, in the end, I am hoping will
    be a productive and insightful discussion.
        With that, Mr. Chairman, I yield back.
        The Chairman. The chair would request that other Members
    submit their opening statements for the record so witnesses may
    be able to begin their testimony and to ensure that there is
    ample time for questions.
        Our first witness for our first panel today is Mr. Coy
    Young, a cow-calf producer from Blythedale, Missouri.
        Our second witness today is Mr. Gilles Stockton, who is
    testifying on behalf of the Northern Plains Resource Council
    and the Western Organization of Resource Councils. He is from
    Grass Range, Montana.
        And to introduce our third and final witness for this
    panel, I am pleased to yield to the gentlewoman from Minnesota,
    Mrs. Fischbach.
        Mrs. Fischbach. Thank you, Mr. Chairman. I am very honored
    to introduce our witness today, Mr. Don Schiefelbein, President
    of the National Cattlemen's Beef Association and one of my
    constituents. Mr. Schiefelbein has a long history of industry
    service most recently as Chairman of the Beef Industry Long-
    Range Planning Committee. He has also held several positions on
    committees and the board of directors for the American Angus
    Association and was past President of the Minnesota Cattlemen's
    Association. He served as the Executive Director of the
    American Gelbvieh Association, and early in his career after
    graduating from Texas A&M University he worked for the North
    American Limousin Association. Mr. Schiefelbein also owns and
    operates a large, diversified farming operation in Kimball,
    Minnesota, along with his father Big Frank, seven brothers, and
    three nephews. His wife of 32 years and his three daughters are
    also active in the industry.
        And thank you so much for being here today. We really
    appreciate it. And I look forward to hearing your perspective
    on all of the issues. Thank you.
        The Chairman. And I thank the gentlewoman for her comments.
        Now, we are going to have swearing-in. If all witnesses
    would raise your right hands, thank you. And please jointly
    state your names for the record.
        Mr. Young. Coy Young.
        Mr. Stockton. Gilles Stockton.
        Mr. Schiefelbein. Don Schiefelbein.
        The Chairman. Now, do you solemnly swear that this
    testimony you are about to give today before this Committee in
    the matters under consideration is the truth, the whole truth,
    and nothing but the truth?
        Mr. Young. Yes.
        Mr. Stockton. Yes.
        Mr. Schiefelbein. Yes.
        The Chairman. Thank you.
        Mr. Young, thank you for coming. And now I would like for
    you to be our first witness, and please begin your testimony
    when you are ready.

     TESTIMONY OF COY YOUNG, COW-CALF PRODUCER, YOUNG ANGUS FARM,
                             BLYTHEDALE, MO

        Mr. Young. Mr. Chairman and Members of the Committee, I
    really appreciate you selecting me to be here today. My name is
    Coy Young. I'm a fourth-generation cattle farmer from the
    rolling hills of northern Missouri. I come here before you
    today and try to save what is left of rural America because
    rural America is under attack by the greed and corruption of
    the big four that are in question here today.
        For years, the packing industry has been concentrating more
    and more with fewer larger mega plants to process our proteins.
    The American cattle farmers and ranchers are tired, tired of
    being taken advantage of and losing money year after year while
    watching the big four post record profits every single quarter.
    The packers have manipulated the system with their alternative
    marking agreements or arrangements which is forming their own
    captive supply with the huge corporate-owned feedyards that
    control 87 percent of the fed beef in this country. AMAs have
    killed the cash market and competition within the beef
    industry, making the markets that cow-calf producers have to
    compete against so depressed for the times, bankruptcy rates
    continue to be on the rise and were at a 10 year high in 2019.
        The Packers and Stockyards Act of 1921 was put in place to
    protect the cattle farmers and ranchers from the very thing
    that's happening within the beef industry today. I ask, why are
    we not enforcing the Packers and Stockyards Act? Is everyone in
    Washington on the payroll of the big four to let them continue
    their free reign without consequence? AMAs are legalized market
    manipulation practices that should not be allowed and enforced
    under the Packers and Stockyards Act of 1921.
        There's an alarming number, the number is 40.27 cattle
    farms that call it quits every single day in this country for
    the past 3 decades because they can no longer make ends meet.
    Alone, that should grab the attention of leaders in Washington
    that there is a problem going on here. Family legacies and
    century farms are being ripped out of their hands and families
    are losing their loved ones from an unprecedented amount of
    suicides. Farming and ranching has the most suicides in any
    industry to distress a shrinking bottom line, and that's fueled
    by the greed and capitalistic nature that's everyday business
    in the big four that are in question here today. There's blood
    on the hands of the packers and leaders in Washington, and no
    one seems to care. No one seems to want to do anything about
    it. I know we live in a country where capitalism reigns
    supreme, and it's every man for himself, but packers take
    capitalism to a whole new level.
        We as cattle farmers and ranchers just want an even playing
    field and be able to raise our families and live a decent life
    as our fathers and grandfathers did before us. Nowadays in
    rural America everyone in the farming community has one, two,
    or even three extra jobs outside of the farm to help pay their
    bills and make ends meet. The cows no longer pay for themselves
    and haven't for a very long time now. I never thought I would
    see the day when feeding America would become a part-time job.
    It's wrong and it's not fair.
        There's enough money to go around in the beef industry.
    It's the distribution of profits that are proportionally
    unbalanced. That is the problem. I know I sound like a broken
    record, but it's from the manipulation of the big four packers
    that control 85 percent of the beef packing industry, but they
    also control 87 percent of all the fed cattle that are
    slaughtered.
        Mandatory Country-of-Origin Labeling, also known as MCOOL,
    was repealed in December of 2015, which was just another slap
    in the face of the American cattle farmers and ranchers, which
    now cannot differentiate their superior product from cheap
    foreign beef that now floods 20 percent of the market in this
    country. The public and consumers no longer have the option to
    choose between our superior American-raised beef or foreign
    beef. Restoring MCOOL would help restore some competition to
    the marketplace so the consumer would be able to choose their
    product every time they go to the grocery store, and the
    consumer would drive the demand for American-raised beef.
        Imagine waking up every single day and knowing that the
    cattle that you have birthed, fed, and raised are not going to
    make you any money because there isn't enough room in the
    rigged system for the small cattle farmer to make a buck. The
    share of the retail dollar of the complete disconnect from the
    farmer to the grocer is what's bankrupting the farmers and
    ranchers. We're only receiving 37 percent of the retail dollar
    as the farmer compared to 60 percent 30 years ago, now paying
    200 percent increases in equipment costs and overall inputs,
    it's a complete recipe for disaster and a losing proposition to
    raise cattle in this country anymore.
        My dad always said you could sell your calves in 1975 and
    go to the Chevy dealership and buy a new pickup. That still
    holds true today. You can go sell your calves and you can still
    go buy a 1975 Chevy pickup.
        The market share that was once the cattle farmers has since
    been redistributed to the middlemen, the packers, and the
    grocers. They make all the money and we pay all the inputs and
    go broke raising the very product they profit so handsomely
    from. And what's America going to do when there aren't any
    American family farms left to produce the most flavorful, juicy
    steak in the world? And that's all I have.
        [The prepared testimony of Mr. Young follows:]

     Prepared Testimony of Coy Young, Cow-Calf Producer, Young Angus Farm,
                                 Blythedale, MO
        Mr. Chairman and Members of the Committee I appreciate you
    selecting me to be here today. My Name is Coy Young, I am a 4th
    generation cattle farmer from the rolling hills of northern Missouri. I
    come from a long line of family farmers on both sides of my family; my
    mother's father was a dairy farmer from Stacy Minnesota and my great
    grandfather, grandfather, and father were all farmers on my father's
    side of the family. I was born into this life of cattle farming and had
    come to love it, raising quality Black Angus seed stock starting in
    2006 with my father, it's a way of life most people can't and don't
    understand. You become one with the animals you care for daily and it's
    a feeling only a cattle farmer can feel. Our way of life that we love
    so much is being infringed upon by the current system that is in place
    within the Beef industry by the multi-national packer Cartel known as
    the Big Four whom are here today.
        Concentration and unfair practices in the beef industry in America
    is a huge and unprecedented problem and needs to be addressed before
    all the American cattle farmers and ranchers are no more. We have stood
    by for years and said nothing while watching our way of life
    disintegrate before our eyes. There have been historical amounts of
    family farms that have went by the wayside in the past 4 decades,
    losing on average of 14,700 family cattle farms annually; that's a
    staggering 40.27 family cattle farms per day that have to call it quits
    because they can no longer pay their bills or even break even. Billions
    of dollars have been stripped from rural communities that are dying in
    America only to further the concentration of the industry for the sole
    benefit of the multinational packer Cartel so they can post multi-
    billion dollar profits quarterly. American cattle farmers and ranchers
    are resilient humble people; almost every person I have talked with
    over the years have had to tell their children and grandchildren there
    is no life on the farm when you grow up and you'll need to work outside
    of the farm to maintain it or even keep it in the family. The American
    cattle farmer has been taken advantage of for too long and it's come at
    hand of the multinational packer Cartel that controls 85% of the fed
    cattle industry in this Country.
        Our way of life that we love so much and have handed down for
    generations is under attack, and it is time for the American cattle
    ranchers and farmers to take back the industry they built many decades
    ago. First step would be reinstating MCOOL or Mandatory Country Origin
    of Labeling; it never ever should have been repealed in the first
    place. Once it was repealed it gave free reign of the market to the Big
    Four multinational packers to flood the United States with cheap
    foreign beef and slap Product of USA label on it as long as the mystery
    meat was processed and packaged in United States. The repeal of MCOOL
    came at about the same time as the collapse of the markets in the 2015.
    Since 2015 I and almost every single cow-calf producer I am friends
    with and have talked with have had nothing but a shrinking profit
    margin since coincidence, I think not! MCOOL would give the American
    consumer the chance to pick up a steak or package of hamburger from the
    meat case and make the decision if they want a steak from The United
    States of America or one from one of the other twenty different
    Countries it may be from, or a pound of hamburger that contains beef
    from more than one country in a one a pound package, hence the term
    mystery meat! Store bought hamburger contains beef from several
    countries, why do you think you can't see the meat in that pound of
    hamburger you buy from the big supermarkets labeled 80/20 it's not
    appetizing to look at and is served to our children on the government
    lunch program system because it's cheap. Reinstating MCOOL would give
    the American Cattle Farmers and Ranchers a fighting chance to compete
    with foreign beef that accounts 20% of all beef sold in this Country
    now days. But who I am kidding, the leaders in Congress and Washington
    D.C. will never allow such legislation to pass as long as they remain
    heavily influenced by the lobbyist of the Big Four to keep everything
    business as usual while the American Cattle Farmer and Rancher continue
    to go broke!
        There's a recession of epic proportions coming in this Country,
    this year 2022 and the next few. It's going to be the American Cattle
    Farmer and Rancher Great Recession. With over inflated inputs and
    unfair calf prices the concentration of the industry will further play
    into the hand of the multinational packer's and they'll control more of
    the marketplace than ever before unless something changes. There is no
    competitive market in the cattle industry with the Alternative
    Marketing Agreements or AMA's the packers have in play with the
    corporate feed yards they control [] 80% of the fed cattle in this
    Country on AMA's. Family feed yards are going by the wayside because of
    AMA's the Big Four have and the control they have over the marketplace.
    There's no competition with AMA's because they're a steady stream of
    private contracts with the giant corporate feedyards that are in
    collaboration with the Big Four. All this is illegal under the Packers
    and Stockyards Act of 1921 which needs to be amended to completely
    eliminate Alternative Marketing Agreements so the Packers have to
    compete in a cash market and not control all of the prices, it's legal
    illegal activity the Packer Cartel gets away with every, single, day.
    Members of Congress need to enforce the Packers and Stockyards Act of
    1921 to protect the family cattle farmers and ranchers but instead they
    listen to the NCBA and do nothing to enforce it. Maybe we should dig
    out The Original Packers and Stockyards Act of 1921 the NCBA uses as a
    door stop and take look at it and bring it into the 21st century so the
    American Cattle Farmers and Ranchers can possibly get an even playing
    field to sell their cattle in, rather than the rigged system that's in
    place today.
        We may be at the end of a viral pandemic but there's a new pandemic
    about to take over in the American Cattle Farmer and Rancher's world,
    and that's an astronomical amount of farmer and rancher suicides that
    will happen this year and in the next few if something doesn't change.
    The Markets are so broken they're breaking people, breaking them to the
    point of ending their own lives, and those lives could have been saved
    if the Congressmen and -women of this country would do what needs to be
    done to fix a completely corrupt and rigged system. There's blood on
    the hands of the multinational packers and Washington, D.C. and you
    could have and can prevent it from further happening with the stroke of
    a pen. I almost called it quits completely, meaning completely and
    entirely by committing suicide in the spring of 2020. I had a gun to my
    head and waited for my wife to leave for work and I was going end the
    pain and suffering that I've lived with for years knowing that I'll be
    the last of my generation to be or have attempted to be a cattle farmer
    in a completely corrupt and rigged beef industry. I was at my end; I
    had the bank collector calling me daily after a private seed stock sale
    that took years to prepare for and was killed by the market
    manipulation in March of 2020. Luckily my wife had forgotten something
    at home that day and I saw her pull back into the driveway and I took
    that as a sign, and changed my decision. I am alive today because of my
    wife, and that gave me the chance to be here before you today to give
    this testimony for the thousands of Cattle Farmers and Ranchers that
    want an even playing field and to not be taken of advantage of any
    longer. Rural America is tired, sick and tired of being squeezed to
    death of their last penny so corporate America and the Big Four can
    post Billion dollar profits every single quarter.
        Imagine waking up every single day and knowing that the cattle you
    have birthed, fed, and raised are not going to make you any money
    because there isn't enough room in the rigged system for a small cattle
    farmer to make buck. The share of the retail dollar the complete
    disconnect from the farmer to the grocer is what's bankrupting the
    farmers and ranchers. With only receiving 37% of the retail dollar at
    the farmer compared to 60% 30 years ago. Now paying 200% increases in
    equipment costs and overall inputs, it's a complete recipe for disaster
    and a losing proposition to raise cattle in this country anymore. My
    dad always said, ``You could sell your calves in 1975 and go to the
    Chevy dealership and buy a new pickup. That still holds true today, you
    can go sell your calves and still go buy a 1975 Chevy pickup.'' The
    market share that was once the cattle farmers has since been
    redistributed to the middlemen, the packers and grocers make all the
    money and we pay all the inputs and go broke raising the very product
    they profit so handsomely from. What's America going to do when there
    aren't any American Family Farms left to produce the most flavorful
    juicy steak in the world? You think Beef is high now, wait until the
    Multinational Packers own the entire industry from the farm, to the
    feeder, to the packer just like the pork industry. That's called a
    monopoly the last time I checked, the doorstop would be useful when
    that all happens. The Packers and Stockyards Act of 1921 that is.
    Change in Producers Share of Consumer Beef Dollar: Complete Reversal in
            Four Decades
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Cattle Prices Crash While Consumers Pay Record Beef Prices
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Economic Research Service.

        The Chairman. Thank you, Mr. Young.
        And now I recognize Mr. Stockton.

       TESTIMONY OF GILLES STOCKTON, COW-CALF PRODUCER, STOCKTON
    RANCH; PRESIDENT, MONTANA CATTLEMEN'S ASSOCIATION, GRASS RANGE,
                           MT; ON BEHALF OF
               NORTHERN PLAINS RESOURCE COUNCIL; WESTERN
                   ORGANIZATION OF RESOURCE COUNCILS

        Mr. Stockton. I hope my voice is coming through. Mr.
    Chairman, Members of this Committee, thank you for the
    opportunity to address you today. My name is Gilles Stockton. I
    raise sheep and cattle near Grass Range, Montana. And today,
    I'm representing the Northern Plains Resource Council, the
    Western Organization of Resource Councils, and the Montana
    Cattlemen's Association for which I am President. These
    organizations' mission is to preserve family agriculture and
    the rural communities upon which we depend.
        I took over the family ranch in 1975, the same year that I
    graduated from Montana State University with a master's degree
    in animal science. My wife and I started ranching with nothing
    except our degrees, the generosity of my parents, and a loan
    from the FHA. But if I had to start from scratch today, it
    would be impossible. We are losing an entire generation of
    motivated, talented, and trained young men and women because
    they cannot afford to take over the family farm or ranch. As
    Mr. Young has just testified, the economic realities just do
    not allow it.
        In 1975, the concentration in the beef packing industry had
    four firms controlling 25 percent of the market. Today, they
    monopolize 85 percent. I lived and ranched through the entire
    period and have seen the beef industry become subservient to a
    monopoly cartel. In 1975, the year I started ranching, the
    farm-to-retail spread for beef stood at 71.3 percent. We
    ranchers and feeders were able to retain 71.3 of every dollar
    spent by the consumer at the grocery store. In 2021, the farm-
    to-retail spread was 36.5 percent. Over the course of my career
    in ranching, my income has been cut in half. In terms that are
    very concrete and just like Mr. Young had said, in 1979 I
    purchased a 1 ton, four-wheel-drive truck from the proceeds of
    selling 18 calves. The equivalent truck today would cost me 59
    calves.
        Now, I don't want to give you the impression that I'm
    looking for sympathy. I've made my life, and it was a good
    life. But my concern is for my community, the future of
    agriculture and the future of food security for this nation. My
    community has, over the course of my life as a rancher, dried
    up and blown away like a tumbleweed. Today, Grass Range, which
    was once a thriving small town has only one functioning
    business on Main Street, a tire repair shop.
        And there is no part of U.S. agriculture that is not
    oppressed by monopolized dysfunctional markets. And this
    longstanding market dysfunction was laid bare by the COVID-19
    pandemic when illness in the packing plants slowed the
    processing of cattle, which resulted in empty shelves at the
    meat counter, and the packing cartel profited by buying cattle
    for less and selling beef for more. And I'm sure that we're
    going to hear here today how this is all about supply and
    demand, but it is also about having an entire meat production
    system funneled through a very narrow bottleneck where packers
    can exploit both producers and consumers.
        One tactic that the packers use is captive supply, also
    known as alternative market agreements, AMAs, which are cattle
    committed to packers through a type of forward contract that
    are never competitively priced. Recent research at Georgetown
    University reveals that for every one percent increase in the
    amount of cattle that's procured through AMAs, captive
    supplies, there is a 5.9 percent decrease in the price. Another
    study from Iowa State University shows that meatpackers are
    leveraging their market power across multiple plants, further
    eroding true price discovery in the cattle markets.
        So what's to be done? Actually, it's really not that
    complicated. First, pass the American Beef Labeling Act (H.R.
    7921). It is absurd that beef and pork are the only food or
    manufactured items that do not carry a country-of-origin
    labeling. So thank you very much, Representatives Gooden and
    Khanna, for introducing this legislation. American consumers
    have the right to know the origins of their beef purchases, and
    cattle producers have the right to a fair and transparent
    market.
        Second, do what your colleagues did in 1921. Require that
    the beef packers buy their cattle in a competitive and
    transparent marketplace that they neither own nor control. This
    is what the consent decrees that accompanied the passage of the
    Packers and Stockyards Act required. It was a perfectly free
    market, free enterprise approach, and it actually worked.
        I see I'm running long here, so thank you very much. Unless
    you, Congress, acts, the American people will find themselves
    with an unreliable, extremely expensive food supply, so thank
    you, Members of the Committee, and I look forward to your
    questions.
        [The prepared testimony of Mr. Stockton follows:]

      Prepared Testimony of Gilles Stockton, Cow-Calf Producer, Stockton
    Ranch; President, Montana Cattlemen's Association, Grass Range, MT; on
      Behalf of Northern Plains Resource Council; Western Organization of
                               Resource Councils
        Mr. Chairman and Members of the Committee, thank you for the
    opportunity to address you today on the urgent issue of price
    discrepancies, transparency, and unfair practices in our cattle
    markets.
        My name is Gilles Stockton. I raise sheep and cattle near Grass
    Range Montana. Today, I am representing the Northern Plains Resource
    Council, the Western Organization of Resource Councils, and the Montana
    Cattlemen's Association, organizations that work to preserve family
    agriculture and the rural communities upon which we depend. I took over
    the family ranch from my parents in 1975, the same year that I
    graduated from Montana State University with a Masters Degree in Animal
    Science.
        When my wife and I started ranching in 1975 we had no assets except
    for our degrees. We were fortunate to have support from my parents and
    a loan from the Farmers Home Administration. It was not easy but we
    were able to make it work. In 2022, a young couple starting with the
    situation that we had would find it impossible to make a living in
    production agriculture. The economic reality simply does not allow it.
    We are losing an entire generation of farmers and ranchers, the people
    upon which many of our Montana communities are built.
        In 1975, 25% of the beef packing industry was controlled by four
    firms. Today, approximately 85% of the beef packing industry is
    controlled by four firms. This corporate concentration is underlying
    and shaping the economic reality that prevents farmers and ranchers
    from thriving. Monopoly power extracts wealth from rural communities
    and takes a larger share of the retail dollar away from producers like
    me. From 2012-2017, in Fergus County, Montana, where I am from and the
    number one cattle-producing county in the state, we have seen
    devastating losses. In these 5 years, our county reported a 14% decline
    in market value of products sold per farm, and a 54% decline of net
    cash farm income per farm. In my community of Grass Range, I've seen
    this play out as a main street which now has only one functional
    business.
        In 1975, the farm to retail price spread for beef was 71.3%. That
    means for each $1 spent on beef at the grocery store, 71.3 made it
    back into the pockets of ranchers and cattle feeders. We spent that
    money in our communities, at truck dealers and farm suppliers,
    restaurants and grocery stores. In 2021, that spread is just 36.5%.
    This means that ranchers and feeders have lost half of the value of the
    beef that we raise, to the packing and retail cartels that have come to
    dominate the beef industry over the course of my lifetime as a rancher.
    Our profit share declined, and consumers pay higher prices for beef.
        I carry with me in my own experience over 5 decades. For example,
    in 1979, I purchased a 1 ton four-wheel drive truck with the proceeds
    of selling 18 steer calves. The equivalent truck today would cost me 59
    steer calves. No wonder our local businesses have not survived.
        That share of the beef dollar we've lost does not come back to me
    and my fellow ranchers, or my community. Marginal rises in prices for
    cattle, if appearing at all, are seasonal and volatile at best, and
    cannot be relied upon for feeders and ranchers who struggle to make
    ends meet and cannot be guaranteed a fair shake at date of sale.
        I do not want you to get the impression that I am looking for
    sympathy, far from it. I have had a wonderful life, working in an
    occupation that I love. I have had experiences as a routine part of my
    day, that many people can just dream of. I have been blessed, to have
    two wonderful women, willing to put up with me. My first wife passed
    away in 2003. Between us, we have three sons, one of whom has
    volunteered to look after my sheep, which are currently having their
    lambs. Without his help, I could not be here today.
        My concern is for my community, the future of agriculture, and the
    future of food security for this nation. My community of Grass Range
    has over the course of my life as a rancher dried up and blown away
    like a tumble weed.
        There is no part of the U.S. agricultural system that is not harmed
    by monopoly corporate power, but the beef sector and its experience
    during the pandemic may be the example of this that is most visible
    today. The disruptions during the pandemic revealed how vulnerable of
    beef and pork supply chain is. The lack of basic protections for
    workers that contributed to rampant illness in the packing plants
    slowed the processing of cattle with the result of empty shelves in the
    meat counter. Ranchers like myself and my neighbors were suddenly
    unable to sell our cattle, and were left desperately scrambling to find
    a buyer. Many could only find a ``take it or leave it'' price that was
    far below our cost. Prices to consumers skyrocketed, when they could
    find beef on the shelf at all. And the big four packers profited from
    buying cattle for less and selling beef for more.
        The packers have said that this is all about supply and demand, but
    it is also about having our entire meat production system funneled
    through a very narrow bottle neck, where a few big packers can exploit
    both producers and consumers.
        The big four packers exercise their concentrated market power to
    maximize their profits through the use of captive supplies: cattle that
    packers either own outright or have a commitment for delivery through
    formula contracts which are also called Alternative Marketing
    Arrangements or AMAs. Most of the remaining purchases are made on the
    cash market, referred to as the negotiated spot market.
        These captive supplies, which at times amount to \3/4\ of the
    market, allow for packer price manipulation. When cattle are sold in an
    open, public market with multiple buyers on a level playing field, the
    competitive bidding results in ``price discovery'' that reaches a sale
    price that reflects the true value. Even smaller buyers will bid on
    many more cattle than they ultimately purchase, and are therefore
    important competitors to even the largest packers. Use of captive
    supplies also allows packers to offer sweetheart deals to select
    ranchers and feeders. Prices to these operators have declined over time
    as well, but they make incrementally more than independent ranchers and
    feeders, who often face uncertainty over whether they will be able to
    sell their cattle at all.
        As increasing amounts of cattle are sold outside of an open market,
    prices decline. For every 1% increase in the level of captive supply,
    there is a 5.9% decrease in the price of cattle according to a study by
    Nathan Miller, et al., of Georgetown University.\1\ With captive supply
    levels now approaching 80% of all fed cattle, you can readily see how
    much ranchers and feeders are losing in this rigged market system.
    Another study, this case from Iowa State University shows that the big
    four packers are leveraging their power across multiple plants, further
    eroding true price discovery in the cattle market.\2\
    ---------------------------------------------------------------------------
        \1\ https://www.r-calfusa.com/wp-content/uploads/2022/03/220331-
    cattlemarkets.pdf.
        \2\ https://www.card.iastate.edu/products/publications/pdf/
    21wp630.pdf.
    ---------------------------------------------------------------------------
        The effect of captive supplies on U.S. cattle markets was
    demonstrated in 2003, when mad cow disease was detected in Canada, and
    imports of Canadian live cattle to the U.S. were banned. Canadian
    imports made up less than five percent of the U.S. slaughter at the
    time, and were all captive supplies. Within months of the Canadian
    border closure, U.S. fed cattle prices jumped an unprecedented $26 per
    cwt, or about $325 per head.
        Last summer in a Senate Ag Committee hearing, Senator Grassley of
    Iowa revealed that packers were making over $1,000 per head profits,
    for owning the cattle for just a few days. Ranchers and feeders were
    losing money on each head raised, and consumers were paying more.
        What to do? Actually, it is not that complicated, and the solutions
    can be executed through this Committee.
        The first solution is mandatory Country of Origin Labeling.
    Meatpackers oppose COOL because they don't think consumers should have
    the right to know where their beef comes from, and they want to be able
    to use international livestock trade to help keep the prices they pay
    producers low. With other markets food and manufactured items,
    consumers are able to exercise choice on where purchases are sourced,
    except for beef and pork. Consumers overwhelmingly support mandatory
    Country of Origin Labeling or COOL, and demonstrated that they are
    willing to pay more for U.S. beef and pork when COOL was fully in
    effect between 2013 and 2016. Consumer demand for U.S. beef and cattle
    prices increased. Unfortunately, after an adverse WTO ruling, Congress
    repealed COOL in 2015, before the dispute process had been completed,
    but it is still possible to negotiate a settlement that will allow
    mandatory COOL to be reinstated by passing the American Beef Labeling
    Act. We thank Rep. Gooden (TX-5) and Rep. Khanna for sponsoring this
    bill. H.R. 7291 will once again give consumers the ability to know
    where their beef comes from, which is a prerequisite in order to
    reignite competition at the retail level, and for cattle producers to
    have a fair and transparent market.
        The second policy that's needed is require that the beef packers
    purchase their cattle in a competitive and transparent marketplace that
    they neither own nor control. USDA can do this through rules under the
    Packers and Stockyards Act, or Congress can do so by strengthening
    amendments to the Act to require this free enterprise approach to anti-
    trust enforcement. In fact, your colleagues from a century ago used
    this method to restore competition to the cattle industry. It is really
    just that simple. In order to have a market that works for producers,
    packers, and consumers you need to pass the two following provisions,
    as included in the Captive Supply Reform Act of 2007, which was
    sponsored by Senators Enzi and Tester:

      1.  That all forward contracts and alternative marketing agreements
                for slaughter livestock be offered or bid in an open,
                public market and contain a fixed base price (one that can
                be equated with a specific dollar amount on the day the
                contract is entered).

      2.  That all livestock owned and fed by packers more than 14 days
                before slaughter be sold through an open, public market.

        The Cattle Price Discovery and Transparency Act, currently being
    considered in the Senate, is a step forward to increase the percentage
    of cattle purchased on the cash market, but falls short in restoring
    competition to cattle markets.
        Creating a fair, open, and competitive marketplace for cattle
    producers is important because our food and economic security depend on
    it. We must act now for ourselves and future generations. As states
    across the West, including Montana, are dealing with a megadrought,
    wildfires, and economic devastation, we don't have time for baby steps
    and false solutions. We need bold and transformative change. Mr
    Chairman, I urge you and the Committee to pass the American Beef
    Labeling Act and reintroduce and pass the Captive Supply Reform Act.
        Thank you for the opportunity to speak to these issues.

    Member, Northern Plains Resource Council.
    President, Montana Cattlemen's Association.
                                   Attachment
    Country of Origin Labeling: Restoring Power to the People
              A report on Country of Origin Labeling looking at its
            progression through Congress and the Montana State Legislature,
            economic impacts and where it stands today.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    [Northern Plains Resource Council, 2018]
    Introduction
        Agricultural producers in the United States today are subject to
    some of the most highly concentrated markets in the world. This is
    particularly the case for cattle ranchers. Once a cow is fattened for
    slaughter, it must be processed and packaged before it is ready for
    consumption. Yet, the meatpacking industry is becoming so concentrated
    that four meat packers have gained control of 84 percent of the market
    for fed cattle since the 1980's,\1\ and that number is climbing. Not
    only do these packers own their own cattle herds all over the world to
    flood the markets and depress prices for ranchers, they misrepresent
    the origin of meat. This gives American consumers no transparency or
    choice over what meat they want to eat. American ranchers have no
    opportunity to negotiate or receive fair prices for their livestock,
    nor can they distinguish their product in American markets.
    ---------------------------------------------------------------------------
        \1\ Western Organization of Resource Councils. 2016. Growing The
    16%. Pg. 2.
    ---------------------------------------------------------------------------
        Country of Origin Labeling (COOL) is one solution to give American
    producers recognition for their product, and consumers a choice about
    their food. COOL is a comprehensive labeling system that requires
    specific commodities sold in the United States to bear a label or
    placard indicating where a product was born, raised, and slaughtered,
    yet beef and pork are currently exempt.
    Livestock Markets
        Packers work internationally to import meat cheaply from other
    countries and commingle the product to make American-raised beef
    indistinguishable from foreign beef. Under current food inspection
    laws, as long as meat is processed or repackaged in the United States,
    it can be labeled as ``Product of USA'', regardless of how much of the
    production occurred in countries with standards different than that of
    the United States. Meat processors can thus pass off meat products as
    meeting USA standards entirely when, in fact, a large portion of
    production was dictated by varying safety, environmental, and labor
    standards. The current system undercuts the valuable work of American
    producers to meet high domestic standards in order to grow high-quality
    beef. It also forces family-scale domestic producers to compete with
    large-scale corporations abroad.
        Trends of the last 20 years show that the American cattle herd is
    continuously shrinking. Without a strong American herd, the cattle
    industry is vulnerable to market changes and foreign disease. Country
    of origin labeling demands more transparency in our food system, which
    gives consumers free choice to support local and trusted producers.
    Increased support for U.S. beef would prompt packers to buy more
    domestic products. Competition would influence U.S. cattle prices, not
    meatpacking corporations. COOL is practical way to support the U.S.
    cattle industry and to give consumers their right to know where their
    food is coming from.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Why COOL?
        COOL is essential to build a more robust domestic food and
    agricultural system. Mandatory COOL increases consumer choice by
    providing information to consumers that is necessary for a more
    efficient marketplace, supports U.S. farmers and ranchers, and
    establishes trade relations built on fairness. Ranchers benefitted when
    COOL was in place and have been losing profits since its repeal.
    Researchers also proved it to be cost effective if implemented in a way
    that maximizes use of existing labeling requirements. Additionally,
    COOL restores transparency in our trade policies and food system, which
    works in favor of local producers and economies. Implementation of COOL
    is a necessary step to promote economic and social wellness to U.S.
    consumers and producers.
    COOL is important because:
    (1) People have the right to know where their food is coming from.
        COOL creates a more efficient marketplace where consumers have
    access to information that allows them to make purchases based on their
    individual concerns. This opinion has been reinforced by the Federal
    court. The United States Court of Appeals for the District of Columbia
    ruled in favor of COOL under the first amendment in Am. Meat Inst. v.
    United States Dep't of Agric., 760 F.3d 18, 411 U.S. App. D.C. 318,
    (2014). The Federal court recognized the legitimacy of COOL and its
    usefulness to consumers worried about ``production standards or
    contamination threats.'' \2\ The court also determined COOL disclosed
    ``purely factual and uncontroversial'' information about covered
    commodities. This case was a milestone for COOL because the Federal
    court recognized government's right to disclose country of origin
    information and consumers' right to access it.
    ---------------------------------------------------------------------------
        \2\ Anon. 2015. ``American Meat Institute v. USDA.'' Harvard Law
    Review. Retrieved August 2, 2018 (https://harvardlawreview.org/2015/03/
    american-meat-institute-v-usda/).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              COOL promotes transparency in our food system which allows
            consumers to make more informed purchases based on their
    ---------------------------------------------------------------------------
            individual concerns.

        Research supports a strong public approval of COOL. Consumers have
    shown a preference for COOL for reasons of traceability and access to
    information. In a study conducted with 273 consumers in Denver and
    Chicago in 2003, researchers found the most commonly cited reasons
    consumers prefer COOL to be:

       ``food-safety concerns about imported beef,

       a preference for labeling source and origin information,

       a strong desire to support U.S. producers, and

       beliefs that U. S beef was of higher quality.'' \3\
    ---------------------------------------------------------------------------
        \3\ Umberger, Wendy J., Dillon M. Feuz, Chris R. Calkins and
    Bethany M. Sitz. 2003. ``Country-of-Origin Labeling of Beef Products:
    U.S. Consumers' Perceptions.'' Journal of Food Distributional Research
    34(3): 104-116. Pg. 113.

        Since information on country of origin is already being tracked in
    most cases, it is a matter of ensuring that this information is passed
    on to the consumers. A study reviewing 20 years of COOL-related
    research reiterated similar consumer motivations for COOL, explaining
    that these labels can serve as a ``proxy'' for consumers to get valued
    information such as ``food safety, traceability, and health
    information.'' \4\
    ---------------------------------------------------------------------------
        \4\ Newman, Christopher L., Anna M. Turri, Elizabeth Howlett, and
    Amy Stokes. 2014. ``Twenty Years of Country-of-Origin Food Labeling
    Research: A Review of the Literature and Implications for Food
    Marketing Systems.'' Journal of Macromarketing 34(4) 505-519. Pg. 513.
    ---------------------------------------------------------------------------
        Consumers value COOL as a way to determine the safety of the food
    they eat. The country of origin of a product can be used alongside
    other food inspection laws to better inform consumers about the quality
    and growing practices of the source of their meat. Without COOL,
    decreased transparency increases the risk of the U.S. unknowingly
    importing diseased livestock and beef. In the case of a meat-borne
    illness outbreak in a country that imports meat to the U.S., meat can
    be easily avoided if bearing labels indicating where it came from. When
    consumers know exactly where their meat is born, raised and
    slaughtered, they can make informed decisions about the health and
    safety of the food they buy. This allows consumers to leverage their
    purchasing power to support trusted producers.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              COOL creates niche markets for domestic producers and
            retailers to market local meat at higher premiums.

        What about the Money?

        Consumers have demonstrated they would pay more for COOL,
    specifically for beef products. The Denver and Chicago study from 2003
    found that 73% of respondents were willing to pay a premium for COOL of
    about 11% for steak and 24% for hamburger.\5\ Consumers were willing to
    pay more for products when they had access to information about where
    it came from. An additional study in the same year found that consumers
    were concerned about labeling issues and were willing to pay $184 more
    per household per year for COOL.\6\
    ---------------------------------------------------------------------------
        \5\ Umberger, Wendy J., Dillon M. Feuz, Chris R. Calkins and
    Bethany M. Sitz. 2003. ``Country-of-Origin Labeling of Beef Products:
    U.S. Consumers' Perceptions.'' Journal of Food Distributional Research
    34(3): 104-116. Pg. 113.
        \6\ Loureiro, Maria L. and Wendy J. Umberger. 2003. ``Estimating
    Consumer Willingness to Pay for Country-of-Origin Labeling.'' Journal
    of Agricultural and Resource Economics 28(2): 287-301. Pg. 287.
    ---------------------------------------------------------------------------
        Studies have also shown that consumers would choose domestic beef
    over imported beef and would be willing to pay more for it. In 2014,
    researchers found that consumers valued beef labeled ``Born, Raised and
    Slaughtered in the U.S.'' nearly $1 more than beef labeled ``Born in
    Canada, Raised and Slaughtered in the U.S.'' \7\ COOL increases the
    competitiveness of domestic agricultural products and improves the
    bottom line of producers by providing consumers with accurate
    information.
    ---------------------------------------------------------------------------
        \7\ Lusk, Jayson and Susan Murray. 2014. Food Demand Survey.
    Retrieved July 26, 2018 (https://www.usda.gov/oce/about_oce/
    corrective_action/Attachment13FoodDemandSurvey.pdf).

              ``Researchers found consumers valued beef labeled `Born,
            Raised and Slaughtered in the U.S.' nearly $1 more than beef
    ---------------------------------------------------------------------------
            labeled `Born in Canada, Raised and Slaughtered in the U.S.' ''

        While much research demonstrates positive impacts of COOL, there is
    some conflicting research about COOL's impacts. A 2015 USDA economic
    analysis of COOL explains that, ``evidence does not support a
    conclusion that COOL significantly increases consumer demand even
    though consumers desiring such information benefit from its
    provision.'' \8\ Researchers found that consumers did not make much
    difference in their purchasing patterns after COOL was put into effect.
    Another report, conducted by many of the same researchers involved in
    the USDA economic analysis of COOL, similarly found that there was no
    change in demand for meat products following the implementation of
    COOL.\9\ The exact effects of COOL are highly debatable and
    unclear.\10\ Whether a majority of consumers are willing to put their
    money where their mouth is and buy local beef or not, their ability to
    choose should be nonnegotiable.
    ---------------------------------------------------------------------------
        \8\ Office of the Chief Economist. 2015. Economic Analysis of
    Country of Origin Labeling (COOL). Washington, D.C. Pg. 8.
        \9\ Tonsor, Glynn T., Jayson L. Lusk, Ted C. Schroeder, and Mykel
    R. Taylor. 2012. Mandatory Country of Origin Labeling: Consumer Demand
    Impact. Kansas State University. Retrieved July 26, 2018 (https://
    www.r-calfusa.com/wp-content/uploads/cool/121113Tonsor_KSU_FactSheet_
    MCOOL.pdf).
        \10\ Newman, Christopher L., Anna M. Turri, Elizabeth Howlett, and
    Amy Stokes. 2014. ``Twenty Years of Country-of-Origin Food Labeling
    Research: A Review of the Literature and Implications for Food
    Marketing Systems.'' Journal of Macromarketing 34(4) 505-519. Pg. 515.
    ---------------------------------------------------------------------------
    (2) COOL requires minimal costs to implement when it works with
            existing labeling requirements. These costs are outweighed by
            the benefits.
        Before mandatory COOL was passed into law, USDA researchers
    projected high costs of implementation. Research has proven, however,
    that COOL can be implemented in a way that requires minimal changes to
    existing labeling infrastructure and requirements. This would alleviate
    potential burdens to producers, processors and retailers.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Ranchers move pasture with their cattle in the winter. COOL
            supports long-standing ranching communities.

        Projected COOL Implementation Costs

        When COOL was first added to the 2002 Farm Bill, the USDA published
    an estimate of record keeping costs in the Federal [Register]. The
    total cost was calculated to be $1.96 billion, with producers bearing
    $1 billion in record keeping costs.\11\ These estimates faced
    opposition from groups like Northern Plains Resource Council and
    Western Organization of Resource Councils who felt this cost of
    implementation was largely over estimated. Their opposition was
    supported with a 2003 economic analysis of COOL by the International
    Agricultural Trade and Policy Center (IATPC). IATPC researchers found
    the cost of record keeping from COOL to be 90-95% less than the USDA
    projection, at between $69.86 million and $193.43 million.\12\ The
    researchers assert that the benefits of COOL substantially outweigh the
    cost, which comes out to less than \1/10\ of 1 per pound for covered
    commodities. They also highly recommend the cheapest system of labeling
    to assume U.S. origin of all products unless it is carrying a mark from
    another country. This eliminates a need for a costly third party
    verification rule as well as a self-verification rule. A self-
    verification rule requires all entities to report country of origin,
    which is largely unnecessary and possibly unlawful.\13\
    ---------------------------------------------------------------------------
        \11\ John J. VanSickle. 2003. Country of Origin Labeling--A COOL
    Update. International Agricultural Trade and Policy Center Washington,
    DC: University of Florida. Pg. 3.
        \12\ VanSickle J., R. McEowen, C.R. Taylor, N. Harl, and J. Connor.
    2003, ``Country of Origin Labeling: A Legal and Economic Analysis.''
    Policy Brief Series. International Agricultural Trade and Policy
    Center. University of Florida. PBTC 03-5. https://www.iatp.org/sites/
    default/files/Country_of_Origin_Labeling_A_Legal_and_Economi.pdf.
    Accessed July 12, 2018. Pg. 3.
        \13\ VanSickle J., R. McEowen, C.R. Taylor, N. Harl, and J. Connor.
    2003, ``Country of Origin Labeling: A Legal and Economic Analysis.''
    Policy Brief Series. International Agricultural Trade and Policy
    Center. University of Florida. PBTC 03-5. https://www.iatp.org/sites/
    default/files/Country_of_Origin_Labeling_A_Legal_and_Economi.pdf.
    Accessed July 12, 2018. Pg. 7.

              The International Agriculture Trade and Policy Center
            estimated COOL record keeping costs to be 90-95% less than USDA
    ---------------------------------------------------------------------------
            projections.

        Differing cost estimates of implementing COOL comes down to the
    method. Lower estimates are based on implementation that works with
    existing labeling requirements while more costly estimates create new
    systems of regulation which would be resource intensive to establish.
    The 2002 USDA economic analysis of COOL estimated large expenditures in
    employee time to create new labeling systems. The USDA estimated high
    job wages along the supply chain to perform more work than would be
    needed to implement labeling systems for producers, handlers and
    retailers. The IATPC argues this report is inaccurate because:

       For Producers: Due to state and Federal animal ID laws,
            livestock producers already maintain records sufficient to
            prove origin of their animals and no new record keeping would
            be necessary.

       For Handlers: The large majority of commodities covered
            under COOL are produced within the U.S. and only the few
            dominant processing firms for each commodity are likely to
            import from foreign countries. These firms that import goods
            must already keep records on country of origin for custom
            regulations. As a result, the burden on record keeping for
            imports will be minimal.

       For Retailers: Retailers will mainly need to pass country of
            origin information onto customers, which they will be required
            to get from suppliers. This would require small changes to
            display processes and existing record keeping.\14\
    ---------------------------------------------------------------------------
        \14\ VanSickle J., R. McEowen, C.R. Taylor, N. Harl, and J. Connor.
    2003, ``Country of Origin Labeling: A Legal and Economic Analysis.''
    Policy Brief Series. International Agricultural Trade and Policy
    Center. University of Florida. PBTC 03-5. https://www.iatp.org/sites/
    default/files/Country_of_Origin_Labeling_A_Legal_and_Economi.pdf.
    Accessed July 12, 2018. Pg. 15-19.

    ---------------------------------------------------------------------------
        Actual COOL Implementation Costs

        When implemented in 2008, COOL was proven to cost much less than
    estimated. It allowed anyone who visually appraises cattle to issue a
    U.S. origin if there was not branding for Canada or Mexico found.
    Producers signed an affidavit indicating that the cattle were of U.S.
    origin. This essentially removed the need for all record keeping for
    U.S. producers.\15\ This was a change from the intended implementation
    strategy from 2003 where all cattle, foreign and domestic, would have
    needed to be labeled country of origin. An assessment by Informa
    Economics compared estimated costs to implement COOL in the beef
    industry from 2003 to costs in 2009.\16\ Costs of COOL from 2009 turned
    out to be \1/2\ of $1 billion less than expected in 2003. This largely
    has to do with the fact that under COOL, beef supply chain workers
    opted to handle more U.S. only origin beef and cattle, meaning born,
    raised and slaughtered in the U.S., because of lower costs, opposed to
    handling beef and cattle from mixed countries of origin. Figure 1.
    shows how costs were significantly cheaper along the supply chain for
    U.S. only origin cattle and beef. Costs were estimated to overall be
    highest for retail distributors, who paid $.75 a head for U.S. origin
    beef and $35.00-$40.00 a head for mixed origin meat products.
    ---------------------------------------------------------------------------
        \15\ Peel, Derrell S. 2008. ``Implementation of Country of Origin
    Labeling (COOL) in the Beef Industry.'' Choices, 35-38. Pg. 37.
        \16\ Informa Economics. 2009. ``Update of Cost Assessments for
    Country of Origin Labeling--Beef & Pork.'' Retrieved July 13, 2018
    (http://www.informaecon.com/coolstudyupdate2010.pdf).
    ---------------------------------------------------------------------------
    Figure 1--Beef Supply Chain COOL Cost Estimates.

                  Table 1 Beef Supply Chain COOL Cost Estimates
    ------------------------------------------------------------------------
                                                                 2009 Mixed
                                                  2009 U.S.        Origin
                                 2003 $/head *   Only  Origin     Animals/
                                                    $/head      Products $/
                                                                    head
    ------------------------------------------------------------------------
            Cow-calf Producer            4.88            .25            Not
                                                                 applicable
         Feedlot/Backqrounder       3.75-5.75            .25       .50-1.00
             Packer/Processor     15.00-18.00            .25    10.00-18.00
      Retail distribution and           23.00            .75    35.00-40.00
                  Retail Store
                                --------------------------------------------
      Total....................   46.63-51.63           1.50    45.50-59.00
    ------------------------------------------------------------------------
    * Costs reported in the Sparks April 2003 analysis.

              Informa Economics 2009. Costs of COOL implementation to the
            U.S. beef supply chain per unit costs compared from 2003 to
            2009. Implementation costs are lowest along the supply chain
            for cattle and beef of U.S. only origin compared to those of
            mixed country of origin.

        Opposition to COOL

        The USDA has generated data, unsurprisingly, that conflicts with
    this research. The 2015 USDA economic analysis of COOL determined
    economic effects of mandatory COOL when in place to be consistent with
    the costly projections from the USDA 2002 economic analysis. This 2015
    report found that ``the economic benefits of implementing COOL
    regulations would be insufficient to offset the costs of
    requirements''.\17\ The researchers evaluated the first-year
    implementation costs to be $305 million for beef producers, $373
    million for beef intermediaries and $574 million for beef retailers.
    Research on COOL produced by the USDA repeatedly uses models run on
    grossly overestimated costs. Other research has found COOL to increase
    overhead costs along the beef supply chain, which could reduce profits
    if consumers are not willing to pay more.\18\ It has been noted,
    however, that with these higher overhead costs in some parts of the
    supply chain comes the opportunity for producers, processors and
    retailers to benefit off of niche markets worthy of higher premiums.
    ---------------------------------------------------------------------------
        \17\ Office of the Chief Economist. 2015. Economic Analysis of
    Country of Origin Labeling (COOL). Washington, D.C. Pg. 2.
        \18\ Newman, Christopher L., Anna M. Turri, Elizabeth Howlett, and
    Amy Stokes. 2014. ``Twenty Years of Country-of-Origin Food Labeling
    Research: A Review of the Literature and Implications for Food
    Marketing Systems.'' Journal of Macromarketing 34(4) 505-519.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Opponents argue that if COOL is beneficial to the market, than it
    would be more widely used when in place as a voluntary model. Yet, once
    COOL was repealed, a standardized voluntary COOL program also failed to
    pass for beef and pork. Now, some brands label origin, but with no
    specific standards as originally envisioned with COOL. This leaves room
    for fraud. Voluntary COOL is not widely used because consumers are less
    likely to trust a private entity's labeling quality, giving retailers
    less motivation to implement a self-created COOL marketing system.\19\
    It is also in meat packer's best interest not to label country of
    origin on products when they can repackage imported meat and label it
    of USA origin for higher premiums. This makes it nearly impossible for
    retailers to track COOL information on their own. COOL being mandatory
    is the only way to fully understand its cost effectiveness. Since COOL
    has been in place already, these costs have been taken on so they will
    not be as significant.
    ---------------------------------------------------------------------------
        \19\ Lusk, Jason L., Jason Brown, Tyler Mark, Idlir Proseku, Rachel
    Thompson, and Jody Welsh. ``Consumer Behavior, Public Policy, and
    Country-of-Origin Labeling'' Review of Agricultural Economics 28(2)
    284-292 Pg. 286.
    ---------------------------------------------------------------------------
    (3) COOL boosts profits for U.S. ranchers.
        Cattle prices have fluctuated in correlation with the
    implementation and repeal of COOL. Figure 2. shows the relationship
    between the enactment of COOL and feeder cattle prices between 2002 and
    2018. Created by the Ranchers--Cattlemen Action Legal Fund United
    Stockgrowers of America (R-CALF USA), this graph emphasizes a strong
    correlation between the gradual implementation of COOL and an increase
    in cattle prices, with cattle prices reaching their peak in the
    beginning of 2015, just before COOL was repealed by Congress in
    December 2015. The fact that cattle prices started falling before
    COOL's official repeal can be explained by opponents strong attack on
    COOL that made it clear COOL was going to be repealed before it
    actually was. Cattle prices continued to fall after COOL was repealed
    in December 2015, falling an additional $61 per cwt from Dec. 2015-Oct.
    2016. The Organization for Competitive Markets (OCM) supports these
    claims by reporting that, ``Pricing research clearly demonstrates that
    the 2016 fall in the price cattle producers receive for their calves,
    of almost 50%, can be tied to the abandonment of COOL. U.S. calves are
    now worth half of what they were prior to COOL being repealed.'' \20\
    U.S. ranchers saw a boost in profits with COOL in place and have been
    losing money since its repeal.
    ---------------------------------------------------------------------------
        \20\ Anon. 2018. ``Country of Origin Labeling.'' Organization for
    Competitive Markets. Retrieved July 11, 2018 (https://
    competitivemarkets.com/cool/).
    ---------------------------------------------------------------------------
        Montana rancher Jeanie Alderson and her community experienced
    significant price cuts from the repeal of COOL first hand. Alderson
    notes that before COOL was repealed, prices for feeder cattle were
    going up. After COOL was repealed, the price per pound for feeder
    cattle dropped a full dollar. Montana ranchers generally sell their
    feeder calves by the semi load, with one semi load carrying around
    60,000 pounds. A drop in feeder cattle prices by $1 translates into a
    $60,000 loss for every truck leaving the community. A loss this large
    is crippling, considering ranchers make all of their money selling
    calves in just a couple of days a year at shipping time. Most of that
    money is also already spent on bills and other expenses throughout the
    year, leaving ranchers with limited options to make back their
    expenses. Large meatpacking corporations are benefitting from cheaper
    cattle prices while rural communities are devastated by it. Alderson
    explains that these price cuts were not widely spoken about even though
    many ranchers shared the experience. Mandatory COOL clearly benefited
    United States ranchers while in effect and the repeal of COOL has lost
    Montana ranchers and rural communities significant amounts of money.
    Figure 2. COOL & Feeder Cattle Prices (500 to 550 lbs) Oklahoma City,
            January 2002 to April 2018.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              R-CALF USA. Feeder cattle prices were going up with COOL in
            place and have dropped since its repeal.

        Opponents argue that drought is the cause for drop in feeder cattle
    prices around the repeal of COOL.\21\ Regardless of the root cause of
    this market crash, it shouldn't happen and can devastate any industry.
    It is proof that the United States need stronger agricultural and trade
    policies to better support ranchers and beef production workers.
    ---------------------------------------------------------------------------
        \21\ Lusk, Jayson. 2016. ``Country of Origin Labeling and Cattle
    Prices.'' Jayson Lusk. Retrieved July 13, 2018 (http://jaysonlusk.com/
    blog/2016/11/13/country-of-origin-labeling-and-cattle-prices).
    ---------------------------------------------------------------------------
    (4) COOL allows for more fair globalized trade.
        COOL protects domestic cattle markets by reducing incentives for
    transnational processors to import cheap meat from abroad. U.S. cattle
    are proven to bring in more money than Canadian cattle, but without
    labels there is no market distinction. Because meatpackers are sourcing
    cheaper cattle from Canada in order to meet demand shortages in the
    U.S., our domestic prices are falling. COOL would allow more consumers
    to buy locally produced beef. This would stimulate and strengthen the
    U.S. cattle herd diminishing packers need and ability to outsource
    cheap foreign meat. Currently, global trade is dictated by
    transnational corporations who do not advocate for fair and free trade.
    COOL would shift power to consumers by providing information they need
    to support local economies.

        COOL and Current Trade Agreements

        When mandatory COOL was in place, Canada and Mexico alleged it
    violated the WTO Technical Barriers to Trade (TBT) Agreement because
    domestic products were treated more favorably than foreign products.
    Both countries claimed that COOL would cost them $2.1 billion from loss
    of exports because U.S. consumers would buy more domestic goods.\22\
    The WTO ruled in their favor in 2012.
    ---------------------------------------------------------------------------
        \22\ Food and Water Watch. 2005. ``Trade Damages from WTO COOL Case
    Massively Overstated.''
    ---------------------------------------------------------------------------
        With the investor-state dispute settlement (ISDS) provisions in
    NAFTA, which allows investors to sue countries for alleged
    discriminatory practices, Canada and Mexico were able to threaten the
    U.S. through the WTO for the loss of profits they projected to
    experience from COOL. Though the volume of meat the U.S. imports from
    Canada and Mexico is small in relation to the total U.S. import market,
    these imports represent significant shares of these country's
    exports.\23\ These financial loss claims by Canada and Mexico are
    extremely high, however, considering the total hog and cattle exports
    from both of these countries amounted to $2.5 billion in 2014. Canada
    and Mexico alleged that eliminating COOL when it was in effect would
    increase the value of their livestock exports by 77 percent.\24\ More
    research should be done to confirm the market effects in Canada, Mexico
    and the U.S. since the repeal.
    ---------------------------------------------------------------------------
        \23\ Pouliot, Sebastien and Daniel A. Sumner. 2014. ``Differential
    Impacts of Country of Origin Labeling: COOL Econometric Evidence from
    Cattle Markets.'' Food Policy 49: 107-16. Pg. 107.
        \24\ Food and Water Watch. 2005. ``Trade Damages from WTO COOL Case
    Massively Overstated.''
    ---------------------------------------------------------------------------
        ISDS provisions in NAFTA give transnational corporations the power
    to fight for policies that work in their favor and takes the power to
    pass policy away from local communities. Though COOL may lead to a
    higher demand for U.S. meat, it does not apply different labeling
    requirements to foreign imports and domestically produced goods.
    Advocates argue COOL can be implemented in a neutral manner and is
    compatible with WTO trade agreements.
        NAFTA has also historically hurt domestic cattle ranchers and put
    the rights of transnational corporations over the viability of local
    communities. While COOL may affect international trade flows,\25\ R-
    CALF USA estimates the U.S. cattle and beef trade deficit with NAFTA
    countries contributed more than $1.04 billion annually to the trade
    deficit during the past 22 years.\26\ The U.S. cattle industry is
    losing money because of NAFTA, which is also preventing the U.S. from
    creating policies to protect the cattle industry. COOL would restore a
    sense of sovereignty over our food system in the U.S. Renegotiating
    NAFTA to eliminate ISDS and include COOL would improve trade policies
    to work for family-scale producers, rather than against them.
    ---------------------------------------------------------------------------
        \25\ Newman, Christopher L., Anna M. Turri, Elizabeth Howlett, and
    Amy Stokes. 2014. ``Twenty Years of Country-of-Origin Food Labeling
    Research: A Review of the Literature and Implications for Food
    Marketing Systems.'' Journal of Macromarketing 34(4) 505-519.
        \26\ R-CALF USA Presentation to the U.S. Trade Representative on
    the Columbian Free Trade Agreement, U.S Cattle/Beef Trade Deficit with
    NAFTA Countries Contributed More than $1.04 Billion Per Year to the
    Trade Deficit During Past 22 Years; April 18, 2011 slide 4.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Western Organization of Resource Councils advocates for NAFTA
    ---------------------------------------------------------------------------
            renegotiations to include COOL and eliminate ISDS provisions.

        An alarming loophole that is surfacing today is that, without
    mandatory COOL in place, meat that is imported can be passed off as a
    ``Product of USA'' under current USDA Food Safety and Inspection
    Services' (FSIS) Standards. While 91% of U.S. beef consumption is from
    domestic production, the grass-fed beef market in the U.S. is largely
    imported. 75% of grass-fed beef sold in the U.S. is imported from
    Australia, New Zealand and South America. This imported meat can be
    stamped as ``Product of USA'' if processed or repackaged in the
    U.S.\27\ This labeling loophole gives consumers a false notion that
    their beef is born, raised and processed in the U.S., when none of that
    may be true. This false advertising may be just one more loophole that
    erodes trust in our labeling systems that are so critical to consumer
    choice.
    ---------------------------------------------------------------------------
        \27\ Anon. 2018. ``A New COOL Debate.'' DTN Progressive Farmer.
    Retrieved July 11, 2018 (https://competitivemarkets.com/cool/)
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Domestic grass-fed beef shares the same ``Product of USA''
            label as grass-fed beef that is imported from [overseas].
    COOL Today
        Grassroots groups are recognizing the importance of COOL and are
    working to reinstate it today. Several states have seen COOL bills
    since the repeal of a national mandatory COOL policy. Wyoming,
    Colorado, and South Dakota have tried to pass legislation in 2017 with
    limited success. United Food and Commercial Workers International Union
    (UFCW) is currently prioritizing efforts in Iowa and Oklahoma to pass
    state COOL bills. They are looking at other states to work with as
    well.
    Recent Efforts for State COOL Bills
       Wyoming

         Introduced: 2017

         Bill: House Bill 198 would have required Country of
                Origin Labeling for beef sold in the state of Wyoming.

         Outcome: Passed the House Ag Committee. Committee of
                the Whole opted to not consider this bill and it died for
                not meeting the deadline.

         Introduced: 2018

         Bill: House Bill 0090 was a Country of Origin
                Placarding law for beef.

         Outcome: This law is on the books but it is not being
                implemented. Bills in Wyoming have died by pocket veto in
                that last couple of years due to fears of Federal
                preemption.

       Colorado

         Introduced: 2017

         Bill: House Bill 17-1234 was a placarding act. It
                would have required retailers to post signs next to
                displays of fresh beef indicating if it was a ``Product of
                the USA'' or imported. Imported meat was to be indicated
                what country it was from.

         Outcome: Political disputes caused democrats to vote
                heavily against the bill. It was postponed indefinitely by
                House Agriculture, Natural Resources and Livestock
                Committee.

       South Dakota

         Introduced: 2017

         Bill: Senate Bill 135 would have required grocery
                stores to label country of origin of beef and ground beef
                sold in grocery stores. Beef originating in U.S. would bear
                a ``Product of USA'' label, imported meat would bear a
                label of all countries of production and meat of unknown
                origins would be labeled ``Country of Origin Unknown''.

         Outcome: The bill made it out of the Senate State
                Affairs Committee on a 5-3 vote, only to be killed on the
                floor.

       Oklahoma

         Introduced: 2018

         Bill: Senate Bill 1486 requires food labels indicating
                country of origin for muscle cut and ground beef and pork.

         Outcome: Status is pending in a second reading in the
                Senate Agriculture and Wildlife Committee.

       Iowa

         Introduced: 2018

         Bill: H.F. 2357 mandates that muscle cut and ground
                beef and pork have a label stating the country of origin.
                Regulations are based on 2009 COOL rules.

         Outcome: Status is pending in the House Agricultural
                Committee.
    Major Players Today
        Prominent groups in the fight for COOL today have been focusing
    efforts to prevent meat from being labeled ``Product of USA'' if
    imported from abroad. R-CALF USA and Cattle Producers of Washington
    (CPoW) filed a lawsuit against the USDA in 2018 alleging that the USDA
    was unlawful in allowing imported beef to be sold without a country of
    origin label and as a ``Product of USA'' if the animal was born,
    raised, or slaughtered in a foreign country. They also argued that lack
    of COOL regulations in place causes financial harm to U.S. producers.
    The U.S. District Court Eastern District of Washington acknowledged
    that the ranchers faced financial harm from lack of COOL requirements
    on imported beef and that the harm was ``fairly traceable'' to USDA
    actions.\28\
    ---------------------------------------------------------------------------
        \28\ Campbell, Chris. 2018. ``When It Comes to Labeling, COOL Is No
    Longer the Rule.'' The Food Institute Blog. Retrieved July 25, 2018
    (https://foodinstitute.com/blog/cool-is-no-longer-the-rule).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
              R-CALF USA.

        The court did not rule in the cattle producer's favor, however,
    arguing that they were time-barred from challenging regulations because
    regulations removing COOL on imported beef were promulgated in 1989 and
    the statute of limitations expired in 1995.\29\ This lawsuit succeeded
    in validating the financial harm cattle ranchers' face from lack of
    COOL regulations and highlighting ways national COOL can be reinstated.
    The court determined that only executive or legislative action could
    pass COOL legislation. President Trump can issue an Executive Order
    requiring the USDA to reinstate COOL on imported beef and pork or
    include COOL in NAFTA renegotiations.\30\
    ---------------------------------------------------------------------------
        \29\ Anon. 2018. ``R-CALF USA Urges Origin Labels on Beef so
    Consumers Can Choose to Respond to Canada's Retaliatory Tariffs.''
    News.MikeCallicrate.com D A NoBull News Service. Retrieved July 24,2018
    (https://news.mikecallicrate.com/r-calf-usa-urges-origin-labels-on-
    beef-so-consumers-can-choose-to-respond-to-canadas-retaliatory-tariffs/
    ).
        \30\ Muraskin, David. 2018. ``Trump Can Guarantee a Win for
    Farmers: Country-of-Origin Labeling.'' TheHill. Retrieved July 25, 2018
    (http://thehill.com/opinion/energy-environment/391046-trump-can-
    guarantee-a-win-for-farmers-country-of-origin-labeling).
    ---------------------------------------------------------------------------
        In a similar vein, The Organization for Competitive Markets (OCM)
    and American Grassfed Association (AGA) have filed a petition with the
    USDA to close the FSIS loophole. Grassroots groups around the country
    are rallying support for the petition to put pressure on the labeling
    loophole and raise public awareness. The petition will end August 17th
    2018.
        The United Food and Commercial Workers International Union (UFCW)
    is pushing COOL because it rebuilds the U.S. cattle herds, improves
    consumer choice and safety, and supports high quality jobs for working
    Americans. UFCW is advocating for a renegotiation of NAFTA to meet
    these goals. In 2014, the U.S. cattle herd reached its lowest level
    since 1941. The weakened beef industry has prompted growth of the
    poultry industry, which has lower labor standards. According to UFCW,
    red meat employment in slaughter fell by over 14,000 jobs between 2008-
    2017. Rebuilding the U.S. cattle herd is an important step to restore
    good paying and union protected jobs that guarantee hard-working
    families a better quality of life. UFCW sees COOL as an important way
    for consumers to ensure they are buying beef from safe and reliable
    domestic sources, which would provide ranchers with a premium for their
    products and ultimately stimulate growth of the U.S. cattle industry.
    Conclusion
        COOL is necessary to promote consumer choice, support local
    producers, and foster more fair and free global trade. Opponents of
    COOL are using strong tactics to convince the public and elected
    officials that COOL is not good for the American people. The facts are
    clear. Consumers place higher value on meat that they know originated
    from safe and reliable sources, which boosts markets for local
    producers. Domestic producers benefit from higher premiums and niche
    markets. COOL can also be implemented in an affordable and efficient
    way when it is assumed that all meat is domestic unless labeled
    otherwise. Last, renegotiating COOL into NAFTA would reverse the
    substantial economic losses the U.S. cattle industry has faced over the
    years and restore a sense of national sovereignty over our food system.
    A strong network of allies are pushing for COOL to restore power over
    the food system back to the American people and away from large
    meatpacking corporations.
        The time is ripe for Montana to bring back COOL legislation in the
    2019 Montana State Legislature. The Trump Administration runs on an
    American-First narrative, which COOL is a fundamental part of.
    Reinstating a COOL bill in Montana could get the ball rolling on more
    widespread COOL legislation, open conversations about how to improve
    trade policies, and determine which elected officials in the state are
    serious about supporting local producers.
    COOL Timeline
    1976
    Judicial
       American Meat Institute v. B. Dale Ball, Director of
            Michigan State Department of Agriculture and Ronald M. Leach,
            Chief of Food Inspection Division. 424 F. Supp. 758, 1976 U.S.
            Dist.

         The court ruled that placards or notices placed near
                products are not ``labels'' and do not violate the Federal
                Meat Inspection Act (FMIA) (which regulates labels on
                meat). This ruling distinguished placards from labels under
                the Michigan Comminuted Meat Law, which imposed greater
                requirements to the content and labeling of meat products
                than FMIA . The case did not address country of origin
                information.
    2001
    Montana
       Montana's Country of Origin Labeling Bill (SB 196) passed
            the Senate with a 49-1 vote. The bill required placards
            declaring the country of origin be displayed for all meat.

         Meat needed to be segregated by country of origin in
                display cases clearly marked with placards stating one of
                three things about product:

            (1) that it was produced in Montana; or

            (2) that it was produced in the USA; or

            (3) that its country of origin is unknown.

         The bill was sponsored by Senators Jon Tester (D-Big
                Sandy) and Ric Holden (R-Glendive), Chairman of the Senate
                Ag Committee.

       SB 196 survived the House Agriculture Committee 10-9 with
            opposition led by Kraft Foods, Inc. (Phillip Morris), Anheuser-
            Busch, Montana Chamber of Commerce, Montana Food Distributors
            Association and Montana Retailers Association.

       SB 196 passed the House 63 to 37, minus the penalties
            section, with a 2 year delayed effective date, and with
            exemptions for grains and blended meats. The bill would not go
            into effect until 2003, and an amendment removing the penalties
            section makes the labeling provisions in the bill
            unenforceable.

       With a 5-1 vote, the house's amendments to the bill were
            accepted. Only Sen. Tester voted to reject the amendments. The
            committee consisted of Sen. Ric Holden (R-Glendive 01), Sen.
            Pete Ekegren (R-Choteau 44), Sen. Jon Tester, Rep. Don Hedges
            (R-Antelope 97), Rep. Karl Waitschies (R-Peerless 96), and Rep.
            Matt McCann (D-Havre 92). Sen. Tester proposed a number of
            amendments. Four of those amendments would have returned the
            bill to the state in which it entered the house. All four of
            those amendments failed.
    2002
    Congress
       The Farm Security and Rural Investment Act of 2002 (2002
            Farm Bill) and 2002 Supplemental Appropriations Act (2002
            Appropriations) amended the Agricultural Marketing Act of 1946
            to require retailers to notify customers of covered commodities
            origin with country of origin label.

         Mandatory COOL regulations were to be implemented in
                2004.

         This amendment includes regulations for muscle cut and
                ground beef, pork and lamb; wild and farmed fish,
                perishable ag. commodities (fruits and veg.) and peanuts.

         Labels stating ``United States Country of Origin'' are
                needed only if animals were ``exclusively born, raised and
                slaughtered in the U.S.'' The amendment did not speak to
                covered products derived from animals born, raised or
                slaughtered outside of U.S.\31\
    ---------------------------------------------------------------------------
        \31\ Butler, J. Dudley. n.d. ``The Story of COOL: The Saga
    Continues.'' The National Agricultural Law Center. Retrieved July 13,
    2018 (http://nationalaglawcenter.org/wp-content/uploads/2013/11/
    Discussion-Points-Butler.pdf). Pg. 2.
    ---------------------------------------------------------------------------
    Administrative
         AMS issues guidelines for the voluntary country of
                origin labeling of covered commodities.
    2004
    Congress
       FY 2004 Consolidated Appropriations Act delayed mandatory
            COOL for all commodities except wild and farmed fish until
            2006.
    2005
    Congress
       The Agriculture, Rural Development, Food and Drug
            Administration and Related Agencies Appropriations Act of 2006
            delayed mandatory COOL for all commodities except wild and
            farmed fish and shellfish until 2008.
    Montana
       Montana Legislature enacts Country of Origin Placarding Act
            (HB 406), which establishes placarding requirements for beef,
            pork, poultry and lamb. If meat is produced in a country
            outside of the U.S. it must be placarded. If meat is produced
            in Montana or the United States than placarding is voluntary.
            Effective 2006.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              COOL benefitted Montana ranchers when in effect 2006-2008.

         Sunset provisions are included in the bill for when a
                Federal COOL bill takes effect.
    2006
    Montana
       COOL put into effect April 2006.
    2008
    Congress
       The Food, Conservation and Energy Act of 2008 (2008 Farm
            Bill) amended COOL to:

         Include chicken, goat meat, [macadamia] nuts, pecans
                and ginseng.

         It further defined what the country of origin would be
                based on where the various production steps for meat (beef,
                lamb, goat, chicken and pork) animals took place.

           Three additional country of origin designations were
                added: multiple coun-
                  tries of origin, imported for immediate slaughter, and
                foreign countries
                  of origin.
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              A label from the initial implementation of COOL. Multiple
            countries of origin are listed.
    Administrative
       AMS published an interim final rule for the remaining
            covered commodities, not including fish and shellfish.
    WTO
       Canada and Mexico brought suit against the United States'
            COOL requirements for beef and pork.\32\
    ---------------------------------------------------------------------------
        \32\ Anon. n.d. ``Country of Origin Labeling Overview.'' The
    National Agricultural Law Center. Retrieved July 13, 2018 (http://
    nationalaglawcenter.org/overview/cool/).
    ---------------------------------------------------------------------------
    Montana
       COOL repealed because Federal rule enacted.
    2009
    Administrative
       The provisions of the Final Rule (FR) for the mandatory
            country of origin labeling of lamb, chicken, goat meat, wild
            and farm-raised fish and shellfish, perishable agricultural
            commodities (fresh and frozen fruits and vegetables), peanuts,
            pecans, ginseng, and macadamia nuts were passed.

         Mandatory COOL for all covered commodities in effect.
    2011
    WTO
       WTO issues initial ruling that COOL is inconsistent with the
            United States' obligations under the WTO Agreement on Technical
            Barriers to Trade (TBT) because COOL:

         Favored domestic livestock production over imported
                livestock from Canada and Mexico;

         COOL did not achieve its purpose of providing specific
                information to consumers about the country of origin for
                covered commodities.\33\
    ---------------------------------------------------------------------------
        \33\ Carter, Colin A. 2014. ``Some Trade Implications of the 2014
    Agricultural Act.'' Choices. Retrieved July 13, 2018 (http://
    www.choicesmagazine.org/choices-magazine/theme-articles/3rd-quarter-
    2014/some-trade-implications-of-the-2014-agricultural-act).
    ---------------------------------------------------------------------------
    2012
    WTO
       The WTO Appellate Body issued a ruling that COOL
            requirements were detrimental to imported livestock industries
            because costly record keeping and verification requirements
            incentivized producers to use exclusively domestic livestock.
            The United States government was given until May 2013 to rework
            COOL regulations to meet WTO directives.\34\
    ---------------------------------------------------------------------------
        \34\ Anon. n.d. ``Country of Origin Labeling Overview.'' The
    National Agricultural Law Center. Retrieved July 13, 2018 (http://
    nationalaglawcenter.org/overview/cool/).
    ---------------------------------------------------------------------------
    2013
    Administrative
       AMS issued a final rule that made changes to the labeling
            provisions for muscle cuts of covered animals to provide
            consumers with the specific countries where that meat was
            ``Born, Raised and Slaughtered''. Commingling of muscle cut
            commodities was prohibited.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              A label from the full implementation of COOL indicating where
            meat is born, raised and slaughtered.
    Judicial
       A lawsuit was filed by Meat Packer Trade Associations, the
            National Cattlemen's Beef Association (NCBA), the National Pork
            Producers Council (NPPC) and Canadian and Mexican cattle
            associations in U.S. district court alleging that COOL law is
            unconstitutional.

         WORC and other groups joined Federal lawsuit as
                interveners to support USDA's defense of COOL;

         The U.S. District Court upholds the COOL law by
                rejecting the request by the meatpackers and their allies
                for a preliminary injunction against the 2013 amendments to
                COOL.
    2014
    Judicial
       Am. Meat Inst. v. United States Dep't of Agric., 760 F.3d 18

         The Court of Appeals for the D.C. Circuit sitting en
                banc held 9-2 that the meat labeling requirement was
                constitutional.
    WTO
       The WTO compliance panel ruled that the changes the United
            States made to COOL regulations in 2013 were inadequate.
    2015
    WTO
       The WTO authorizes Canada and Mexico to institute
            retaliatory tariffs against the U.S. in the amount of
            approximately $1.1 billion based on the WTO's determination
            that the COOL law violated U.S. trade obligations.\35\
    ---------------------------------------------------------------------------
        \35\ Anon. n.d. ``Country of Origin Labeling Overview.'' The
    National Agricultural Law Center. Retrieved July 13, 2018 (http://
    nationalaglawcenter.org/overview/cool/).
    ---------------------------------------------------------------------------
    Congress
       Country of Origin Labeling Amendments Act of 2015 (H.R.
            2393) is introduced to repeal mandatory COOL for beef, pork and
            chicken.

         Rep. [K. Michael] Conway sponsored the bill and it was
                supported by Montana Representative Ryan Zinke;

         Congress voted 300-131 to repeal mandatory COOL.

        The Chairman. Thank you, Mr. Stockton, for your excellent
    and very informative testimony.
        And now Mr. Schiefelbein--I hope I got that right.
        Mr. Schiefelbein. You did pretty well, sir.
        The Chairman. Thank you.

              TESTIMONY OF DONALD K. SCHIEFELBEIN, CATTLE
             PRODUCER, SCHIEFELBEIN FARMS LLC; PRESIDENT,
           NATIONAL CATTLEMEN'S BEEF ASSOCIATION, KIMBALL, MN

        Mr. Schiefelbein. Chairman Scott, Ranking Member Thompson,
    and Members of the Committee, my name is Don Schiefelbein. I am
    a cattle producer from Kimball, Minnesota. Together with my
    wife, my three fabulous daughters, parents, seven brothers, six
    nephews, and our spouses and children, we own and operate
    Schiefelbein Farms, an entirely family-owned diversified
    farming operation, which includes both seedstock production and
    cattle feeding.
        Our livelihood is completely dependent upon the success of
    our customers, cow-calf producers from Iowa to Montana and
    others across the entire land. I have also served as President
    of both the Minnesota State Cattlemen's Association and the
    American Angus Association. I am appearing this morning as the
    President of the National Cattlemen's Beef Association or NCBA,
    the oldest, largest national trade association representing
    U.S. cattle industry. Our direct membership of over 26,000 and
    roughly 178,000 members of our 44 state affiliate organizations
    are comprised of a wide array of seed stock producers, cow-calf
    operators, stockers, backgrounders, and cattle feeders. My
    testimony today is rooted in policies submitted, debated, voted
    on, and adopted by cattle producers through NCBA's century-old
    policymaking process.
        It has been said many times over the cattle industry is
    home to the most complex markets on Earth. The intricacies of
    this system have been highly scrutinized over the past years,
    but the fundamental dynamics at play have been consistent
    through times of plenty and hardship. Let me be clear. Cattle
    producers know best what they do and do not need to do in order
    to be successful. I implore you to listen to what producers are
    telling you.
        The hearing focuses on meatpackers. We share the
    Committee's concern about the consolidation, but we would have
    preferred to discuss a host of more pressing challenges with
    you today. Make no mistake, curbing rampant inflation and
    skyrocketing input costs, addressing urgent labor shortages,
    and increasing market transparencies are the true immediate
    needs of producers. I urge you, do not let today's proceedings
    disguise that fact.
        Producer leverage with packers has been a hot topic for
    over a century. However, of greatest concern to NCBA is the
    current shortage of adequate beef packing capacity not seen in
    several decades. NCBA supported measures both in Congress and
    with the Biden Administration to increase packer capacity. Most
    importantly, we have continued to advocate for those new
    facilities to be small, regionally focused small businesses.
        Following both the Holcomb fire and COVID-19, packer
    capacity losses resulted in the highest recorded spreads
    between boxed beef and live cattle, $67.17 per hundredweight
    and $279 per hundredweight respectfully. This behavior is
    rooted in basic laws of supply and demand, but given the
    magnitude of these price disparities, it would have been
    imprudent not to further scrutinize the packers. That is
    precisely why NCBA called upon the Department of Justice to
    investigate the four major packers. The results of this
    investigation have yet to be released, but I urge Congress to
    proceed carefully as we await the findings. I ask that you
    continue to engage with the Attorney General as he continues
    this investigation and hold off on crafting new legislation
    until a determination has been made.
        NCBA strongly supports robust enforcement of the Packers
    and Stockyards Act and believes the Department of Agriculture
    has adequate legal authority to enforce it properly. We support
    the Biden Administration's effort to streamline collaboration
    between the Packers and Stockyards Division and the Justice
    Department, but we do not believe creating a new office within
    the USDA is the proper way to enhance enforcement.
        Briefly, I would like to address the Cattle Price Discovery
    and Transparency Act, Senate Bill 4030 and its House companion
    H.R. 5992. NCBA opposes this legislation. Freedom to market
    matters. It has allowed cattle producers like myself to respond
    directly to consumer needs. If the government were to erode
    this freedom or completely take it away, everyone suffers. I
    will elaborate further on these highly complex issues in my
    written testimony.
        In closing, Mr. Chairman, I ask you and this Committee to
    listen to cattle producers and address the real threats to our
    industry. For too long Congress has been gridlocked by a
    handful of controversial policies while a host of widely
    supported measures await enactment. It is time to move on and
    focus on areas where agreement can be met. Thank you for your
    time to testify. I look forward to your questions.
        [The prepared testimony of Mr. Schiefelbein follows:]

        Prepared Testimony of Donald K. Schiefelbein, Cattle Producer,
         Schiefelbein Farms LLC; President, National Cattlemen's Beef
                            Association, Kimball, MN
    Introduction
        Chairman Scott, Ranking Member Thompson, and Members of the
    Committee, on behalf of America's cattle producing families, thank you
    for inviting me to provide a producer perspective to today's
    proceedings.
        My name is Don Schiefelbein, and I am a cattle producer from
    Kimball, Minnesota. Along with my father, seven brothers, and five
    nephews, I own and operate Schiefelbein Farms, a diversified farming
    and ranching operation. I have also worked to advance beef quality
    through my previous staff roles at the American Gelbvieh Association
    and the North American Limousin Association. In addition, I am a past
    President of both the Minnesota State Cattlemen's Association and
    American Angus Association.
        I am appearing today on behalf of the National Cattlemen's Beef
    Association, where I currently serve as President. NCBA is the oldest
    and largest national trade association representing the U.S. cattle and
    beef industry. In addition to our over 26,000 direct members, NCBA
    represents forty-four state affiliate organizations whose members
    number some 178,000 cattle farmers and ranchers.
        The testimony I am submitting today is based on policies submitted,
    debated, voted on, and adopted by cattle producers through NCBA's
    century-old grassroots policymaking process. Each of our members has a
    voice in the discussion, and everyone has a vote. Our membership
    includes seedstock producers, cow-calf operators, stockers,
    backgrounders, and cattle feeders from all fifty states. The vast
    majority of these small businesses--each of which are crucial to their
    respective rural communities and local economies--are, like my own,
    family owned and operated. This diversity of business models,
    production practices, and unique regional challenges inherently results
    in a wide range of thought and opinions. Our role at NCBA is to
    facilitate a dialogue between those viewpoints and provide a platform
    for consensus-building. Since 1898, we have taken that responsibility
    seriously and are proud to continue that time-honored tradition today.
    Background
        It has been said many times before, including in this very room
    before the Members of this Committee, that the U.S. cattle industry is
    home to some of the most complex commodity markets on [E]arth. The
    intricacies of this system have been on full display in recent years,
    but the fundamental market dynamics at play have been present through
    bull and bear periods for decades. The 2019 Holcomb fire, the COVID-19
    pandemic, cybersecurity breaches, and supply chain disruptions have
    troubled cattle producers nationwide. As they work to problem-solve and
    innovate new ways to capture value and cut costs, Congress is debating
    a number of legislative proposals which would substantially impact
    their day-to-day dealings.
        Let me be clear, the only people who know exactly how cattle
    producers should navigate these uncertain times are the individuals who
    work around the clock, day in and day out, to raise the safest and
    highest quality beef in the world--in other words: cattle producers
    themselves. They have used their voice through their involvement in
    organizations like NCBA and the American Farm Bureau Federation to tell
    Congress exactly what they need and, perhaps more importantly, what
    they do not need to be successful. As you consider various ideas in the
    coming days, I implore you to listen to what they have said and not be
    distracted by fringe elements or those who claim to speak on their
    behalf. The overwhelming majority of cattle producers are trying to
    tell you how to help them and how to avoid adding to their
    difficulties.
        The purpose of this morning's hearing is to examine the
    relationship between cattle ranchers and meatpackers. This issue has
    been the subject many hearings during the 117th Congress, including in
    both the House and Senate Judiciary Committees which also have
    legitimate jurisdiction over such matters. While NCBA shares the
    concerns of many Members of Congress regarding consolidation in the
    packing sector, we would have preferred to discuss a host of immensely
    more pressing needs with you today. Curbing runaway inflation,
    arresting soaring input costs, resolving on-going supply-chain
    vulnerabilities, addressing labor shortages, and increasing market
    transparency are the true immediate needs of cattle producers. Please
    do not allow today's proceedings to disguise that fact. I urge you to
    take action on these issues as expediently as possible.
    The Relationship Between Cattle Producers and Meatpackers
        From very beginnings of NCBA, producer leverage has always been top
    of mind. In fact, it was the subject of many of our association's first
    meetings. The situation in the marketplace today is strikingly similar
    to the landscape which existed over a century ago, during the tenure of
    our ninth President. Consolidation at the packing sector had captured
    the attention of cattle producers even then. John B. Kendrick, who
    wrote the original draft of the Packers and Stockyards Act and was
    later elected Governor of Wyoming and U.S. Senator, told a gathering of
    the American National Live Stock Association in 1919, ``this squall
    between the packers and the producers of this country ought to have
    blown over forty years ago, but we still have it on our hands.'' In the
    hundred years since that time, cattle producers have experienced times
    of great profit and times of immense hardship--all with little change
    to the market power structure of the packing sector.
        Cattle producers rely on the services provided by meatpackers of
    all sizes to convert livestock into a consumer product. Without access
    to beef processing, raising cattle would not be a profitable
    enterprise. This problem has been on full display since 2016, when our
    industry realized a shortage of adequate packing capacity for the first
    time in decades.\1\ As a result, cattle producers have experienced
    reduced negotiating leverage in pricing negotiations with meatpackers.
    Cattle herd inventories fluctuate over the course of a fairly
    consistent 10 year cycle, and the value of cattle is further influenced
    seasonally within the calendar year. The relationship between cattle
    supplies and the availability of processing (or ``hook space'') is the
    primary factor in determining the price of fed cattle. The best
    solution to improving producer leverage is to increase hook space with
    more independent processors controlling more diversified hook space,
    and NCBA has long supported processing capacity expansion through
    investments in small to midsize, regional packing ventures.
    ---------------------------------------------------------------------------
        \1\ Aherin, Dustin. The Case for Capacity. RaboBank: 2020.
    ---------------------------------------------------------------------------
        NCBA supported the Butcher Block Act (H.R. 4140) when it was
    introduced earlier this Congress. The legislation would establish loan
    and grant programs for prospective entrants to the meat and poultry
    processing sector. These resources are intended to increase the
    diversity of processing options available to producers by helping small
    and very small meatpackers meet capital needs. We were also pleased by
    this Administration's actions to direct approximately $1 billion in
    Federal resources to this effort via the authorities granted to the
    U.S. Department of Agriculture (USDA) in the American Rescue Plan Act
    (Pub. L. 117-2). USDA programs like the Meat and Poultry Processing
    Expansion Program, Food Supply Chain Guaranteed Loans, and Meat and
    Poultry Inspection Readiness Grants programs help to alleviate the
    overwhelming costs associated with construction or expansion of these
    small packers. Many of our members have expressed an interest in these
    programs, and we anticipate additional opportunities will be announced
    in the near future.
        Disruptions at the packing sector have a ripple effect on cattle
    prices as evidenced most recently by the Holcomb fire and pandemic-
    related closures of high-throughput plants. Congress must do everything
    in its power to prevent further volatility due to packing capacity
    reductions. Innovative solutions are needed to address labor
    recruitment and retention, reduce arduous regulatory red tape, and
    increase resiliency within the food supply chain, and I ask Members of
    the Committee to seek those bipartisan answers out.
    Exertion of Meatpacker Market Power
        The price disparities recorded between boxed beef and live cattle
    following the most recent black swan events were some of the most
    drastic in the over twenty year history of Livestock Mandatory
    Reporting (LMR). In the case of the Holcomb fire, the price spread
    reached $67.17/cwt.--the highest ever recorded at the time.\2\ Months
    later, temporary plant closures and line speed slowdowns resulting from
    the COVID-19 pandemic took roughly 40% of domestic beef processing
    capacity offline. The resulting shockwaves caused the fed cattle and
    boxed beef price spread to jump to a new high of $279/cwt.\3\ Despite
    the fact that this market behavior was rooted in basic laws of supply
    and demand, the impacts to family farmers and ranchers was abrupt and
    brutal, and the magnitude of the disparity warranted further scrutiny.
    ---------------------------------------------------------------------------
        \2\ Boxed Beef & Fed Cattle Price Spread Investigation Report.
    USDA-AMS: 2020.
        \3\ Ibid.
    ---------------------------------------------------------------------------
        In response, NCBA called upon both the Packers and Stockyards
    Division (PSD) at USDA and the U.S. Department of Justice to (DOJ)
    investigate the four largest meatpacking companies to ensure that
    anticompetitive practices did not artificially depress cattle prices to
    increase their profits. Both agencies promptly responded to our
    requests, and PSD released a report detailing the market reactions to
    both events in July 2020. That report, however, did not elaborate on
    any potential findings of corporate malfeasance on the part of the
    packers. As of this writing, we are still awaiting the results of the
    DOJ investigation. NCBA greatly appreciates the bipartisan and
    bicameral efforts of our friends on Capitol Hill to urge DOJ to provide
    an update on their findings. However, before attempting to fix a
    problem, we must know if things went awry, if so then whether or not it
    was illegal, and if it was unlawful how to prevent it from happening
    again. It is essential that DOJ conclude their investigation and report
    their findings to the public in order to ascertain this information,
    and we ask you to continue your engagement with the Attorney General to
    that end.
    Meat Packing Special Investigator Act
        NCBA policy strongly supports robust enforcement of the Packers and
    Stockyards Act of 1921 (Pub. L. 67-51). This landmark law, which
    recently observed its hundredth anniversary, is designed to secure a
    fair and transparent environment for all participants in the cattle
    marketplace. Through various amendments over the past century, it has
    been adjusted and improved upon to accommodate the ever-changing
    dynamic of the livestock marketing complex. NCBA is confident that the
    current enforcement authorities provided by the Act are adequate to
    realize its objectives and maintain fairness, provided adequate
    resources are allocated to PSD. We don't need another enforcement
    agency; we need action from that entity which currently has the power
    to enforce.
        Largely in response to the aforementioned price disparities, some
    Members of Congress have introduced legislation to establish an Office
    of the Special Investigator for Competition Matters within USDA. While
    well-intended, the Meat Packing Special Investigator Act (H.R. 4103),
    and its Senate companions S. 3870 and S. 2036, would divert critical
    resources from other mission areas at USDA and blur the jurisdictional
    lines between such an office and the PSD. At a time when oversight of
    the marketplace is so important, it is redundant and misguided to
    create an entirely new entity. Further, NCBA has grave concerns with
    the latest Senate proposal to establish a special investigator's office
    as a politically-appointed position completely separate from the PSD.
    If such an unnecessary office were to be established, its goal should
    be to exercise objective enforcement of relevant statutes, not
    frivolous investigation for political gain.
        NCBA supports the Biden Administration's efforts to increase
    collaboration between PSD and DOJ, including the newly launched online
    portal which allows producers to submit tips to both agencies at once.
    However, we do not believe that granting USDA new prosecutorial and
    subpoena power would improve enforcement capabilities, and I urge you
    to oppose this legislation.
    Cattle Price Discovery and Transparency Act
        While not the specific subject of today's hearing, it is
    appropriate to address the Cattle Price Discovery and Transparency Act
    (S. 4030) and it's House companion H.R. 5992. This legislation is often
    billed as a means to give the cattle producer more leverage by forcing
    packers to compete in the negotiated market. In reality, it does
    nothing to change the underlying supply and demand dynamics and would
    empower the Federal Government to arbitrarily choose winners and losers
    in cattle pricing negotiations. If enacted, the bill would restrict
    cattle producers' economic freedom to market cattle in a manner best
    suited to their unique needs.
        The bottom line here is that freedom to market matters. It is this
    very economic freedom which has allowed cattle producers, like myself,
    to respond directly to consumer demands. Consumers use their purchasing
    power to communicate back to us precisely what they want and do not
    want--and if we want them to continue buying beef it is critical that
    we maintain our ability to communicate directly in this manner. We are
    paid based upon how well we have responded to those demands. This
    direct consumer interface has literally transformed the beef market
    both in terms of traditional metrics, such as quality and yield grade,
    and newly emerged ways to differentiate products like branded programs,
    breed affiliations, and production techniques.
        I can speak firsthand to the importance of this economic freedom
    based on my experience as both a seedstock producer and cattle feeder.
    For generations my family has sought to develop top-quality beef
    genetics which are both economical for the producers who buy our
    breeding stock and prone to yield those beef qualities desired by the
    public. Through trial-and-error, we have seen successes in striking
    that balance over the years. Consequently, it is not uncommon for the
    offspring of our bulls and females to fetch premiums when they are sold
    by our customers. We know this because, like many others in the beef
    genetics business, Schiefelbein Farms maintains a customer buyback
    program. In order to improve upon our role as seedstock producers, and
    provide our customers with consumer-level insights to improve their
    operations, we buy feeder calves back from those commercial cow-calf
    operators who have integrated our genetics into their herd. We then
    grow the cattle to market weight at our feedlot, and market them as fed
    cattle. By utilizing a value-based grid, we are able to collect
    performance data on each individual animal we market. This information
    is critical, both to us and our customers, as we try to remain
    responsive to the consumer's evolving demands.
        While I am proud of my family's continued commitment to
    improvement, I want to be clear: it is cow-calf producers across this
    entire country, including our customers from Iowa to Montana, who have
    put in the hard work to achieve near-record beef demand both
    domestically and in our major export markets. They are the ones who
    deserve the credit for utilizing land and water resources more
    efficiently, improving livestock handling, and tending most closely to
    animal wellbeing--all of which makes the United States the most food
    secure nation in the world with the most choices available to
    consumers. Those cow-calf producers deserve to be rewarded in the
    market for these improvements, and I implore you not to impose measures
    which could jeopardize their ability to be so rewarded.
        Please do not stifle our innovation and our hard work by taking
    economic freedom away from me and my fellow cattle producers. A
    marketing system mandated by the Federal Government, which would
    constrain our industry to a less transparent and less consumer-focused
    enterprise, is not the solution to our needs as cattle producers. I
    urge you to oppose the Cattle Price Discovery and Transparency Act.
    Conclusion
        Congress should focus its efforts on finding solutions to the real
    threats facing our industry, and it should consult with genuine
    stakeholders like NCBA to identify them. Broadly supported proposals
    have seen tremendous legislative success in this chamber recently. We
    supported, and continue to, the extension of LMR authority and the
    establishment of a cattle contract library, both of which passed this
    Committee and the full House with ease. However, repeatedly belaboring
    the same divisive issues has detracted from that collaborative work to
    the benefit of no one.
        It is time to move on and focus on areas where agreement can be
    reached. NCBA stands ready to aid in that effort, and I encourage you
    to reach out to our Center for Public Policy if you have ideas or
    questions.

        The Chairman. Thank you, all three of you, and your
    testimonies reflect why we are here and the urgency and the
    critical challenges that the meat industry is facing right now.
    And so with that, I just want to say thank you. We are going to
    move now to questions.
        And at this time, Members will be recognized for questions
    in order of seniority, alternating between Majority and
    Minority Members. Everyone will be recognized for 5 minutes
    each in order to allow us to get in as many questions. And
    again, please keep your microphones muted until you are
    recognized in order to minimize the noise.
        And now I want to start by recognizing myself for a few
    minutes here. As I said before, this issue is urgent, and each
    of your testimonies express the urgency of it. Our food
    industry is without question our single most important
    industry. We can all do without a lot of things, but the one
    thing we cannot do without is food. And so this is why we are
    here. And you all have expressed the problems and the
    challenges, and we are here to help solve the problem, not to
    spread blame.
        But you mentioned the point about legislative action. And,
    as I said to my friend Senator Grassley, who came over and
    asked to speak with me, and we met. And we expressed our
    concerns. There are legislative pieces moving, but I said, let
    us hear from the people who have to solve the problem so we
    will know what we need to legislate on. And that is why I
    believe we are doing it the correct way. And this Committee is
    going to take your testimonies here and the testimony of the
    meatpackers. We are going to put this together and be able to
    show and point a direction for solving the problem that is
    multidimensional. And so I wanted to get that out of the way.
        Let me start with you, Mr. Young. As I said, The New York
    Times article hit me right in my heart. And when I read about
    your story, all I can say is I thank God for your wife
    returning. And I want to hit on this, Mr. Young, because you
    said not only were you contemplating suicide, but you said that
    there are others. How serious is this? Please express this to
    our Committee.
        Mr. Young. Yes, thank you. I mean, as we all know, one
    percent of the population feeds the world, and farmer suicides
    are 2.5 percent of that one percent. And that's an alarming
    rate. There's roughly only, the last time they checked in 2017,
    720,000 cattle farmers left, and we're being squeezed,
    pressured, and that has in turn caused a lot of people to not
    see another way out. They're so far in debt that it would take
    them years to get out of debt. And, like I say, it's 2.5
    percent of the one percent. This is an alarming number of, like
    I say, the 729,000 that were in the Census in 2017. And that's
    all.
        The Chairman. And I just want to say--and I think your wife
    has joined you here as well. And that is a very dramatic story,
    and it shows us the seriousness of this issue. And now, I think
    it was Mr. Schiefelbein. I'm going to get it right in a minute.
    You mentioned some things that you would like to see as far as
    a legislative movement in this. Would you share with us what
    you feel we should do as we are moving with additional
    legislation to address this problem?
        Mr. Schiefelbein. Yes, thank you very much. Congressman
    Johnson knows full well there there's a group of agricultural
    entities that got together in Arizona, and we laid out a pretty
    clear plan on items that we thought would move the industry
    forward. They included things that I'm pleased that you acted
    upon, and that is the Contract Library, which is crucial. The
    other thing we agreed on is the fundamental support we need is
    more packing capacity. And I know the Butcher Block Act (H.R.
    4140) is going through Congress, but those are very, very
    important to the well-being of our industry.
        The other item that we discussed, I think it's very
    important, given the concentration that's been discussed, and
    that is that we have proper and effective oversight of the
    packers. Those are the three big areas I think that we agreed
    on, and to me, fundamentally that is the role of government in
    solving those three issues.
        The Chairman. Thank you. I appreciate that. And now I
    recognize the Ranking Member, the gentleman from Pennsylvania,
    you are recognized for your 5 minutes.
        Mr. Thompson. Thank you, Mr. Chairman.
        Mr. Schiefelbein, thank you so much. My first question here
    is for you. I mean, we are talking about what government can do
    but also it is important within industry we look at innovation,
    right? I mean, the solutions come from many different places. I
    am very proud in Pennsylvania we have an initiative, there is a
    grocery store, it is a moderate-sized grocery store chain, it
    is not huge actually, but they have been working with ranchers,
    beef farmers, and they have actually put together a Karns beef
    program consisting of 15 farms. It is not huge compared to some
    of the places where you all are from 40 to about 170 head, but
    they are working together with this grocery store chain to be
    able to provide a great steak experience, right? These grocery
    stores, that is what they sell, and so they have been working
    together collectively. And it is kind of a unique model. It is
    just one of probably many innovations that we need to see out
    there.
        My question for you, in your opinion are there more
    pressing issues or proposals that we should be working on?
    Thank you for the kind words for the work that we have done. We
    have our Livestock Subcommittee Chairman sitting here and our
    Livestock Subcommittee Ranking Member. Under their leadership,
    we have been able to get some success. And you have named a few
    things. Is there anything additional that we should be focused
    on and spending our time on exploring?
        Mr. Schiefelbein. Well--made sure it was on. The other
    thing that's awfully crucial, and again, it's the role of
    government as I see it. When people are in desperate need,
    that's when government comes in and provides them a safety net.
        Mr. Thompson. Right.
        Mr. Schiefelbein. What you've done with the drought
    assistance is superb, and the immediacy that you provided that
    here just in the last week, I can't tell you how many phone
    calls I received saying thank you very much. You're probably
    clearly aware that there's a portion of our country that is
    still suffering the drought, but there's also a portion just
    north of you, Congressman Johnson, that is dealing with a
    horrible blizzard. If you have not seen the photos of what
    these producers are experiencing, you need to get hold of them
    and see. And to me, providing that safety net is really a
    critical function of government when Mother Nature or things
    outside your own control cannot be managed.
        Mr. Thompson. Yes, correct me if I am wrong, but I think we
    had a significant number of cattle that went to market
    prematurely and not at the best price point, because of the
    lack of feed and forage over the past couple years, given the
    drought conditions. From your perspective, what are the
    benefits of alternative marking arrangements to cattle feeders?
    And do these benefits trickle down to their cow-calf suppliers?
        Mr. Schiefelbein. Yes, and again, you mentioned it just a
    moment ago, and I think it's important for the whole Committee
    to hear this. Innovation is the engine that drives agriculture.
    Drive across this country, go to any other foreign country and
    you'll see the manner in which we adopt innovation and make
    things better is really what drives our competitiveness. My
    father, who Congresswoman Fischbach mentioned, Big Frank, he
    gets asked a lot of questions. He says how does your family
    succeed in a family of that many members, yet how can you be
    successful? His quote that he is quoted on saying, and I think
    it's a lesson everybody could learn, my dad's quote is, ``The
    reason our family is successful is because we don't raise
    cattle the way I used to.'' And I want you to absorb that just
    for a moment. That is critical and it plays exactly into AMAs
    and new ways of doing business and new ways of marketing. We've
    got to evolve, and you've got to allow innovation to enter your
    business.
        Mr. Thompson. Well, I always appreciate the grassroots
    efforts of both NCBA and quite frankly the American Farm Bureau
    Federation that are able to tell Congress and the
    Administration what producers need to be successful, but maybe
    more importantly what they don't need. And so can you also
    share with us a little bit more about some of the things that,
    as you suggest, producers don't need that we shouldn't do?
        Mr. Schiefelbein. Yes, and again, I--and this is where
    government should be involved. I am a strong believer,
    government, please stay out of our markets. We mentioned
    earlier that the marketplace is an incredibly complex situation
    in agriculture. I don't know how many of you recall the 1986
    dairy buyout when the government decided to put its finger into
    the marketplace. I was a victim of that. That was the most
    awful disruption of beef cattle prices in the history of the
    beef cattle industry. And again, it's those points when you say
    I know the marketplace needs some adjustment to get back into
    play, but the last thing we want to do is inject the government
    into the marketplace in a manner where we can't get it back
    out.
        Mr. Thompson. Thank you, sir. Thank you, Mr. Chairman.
        The Chairman. Thank you. And now the gentlewoman from
    Connecticut, Mrs. Hayes, who is also the Chairwoman of the
    Subcommittee on Nutrition, Oversight, and Department
    Operations, is recognized for 5 minutes.
        Mrs. Hayes. Thank you so much, Mr. Chairman. Thank you for
    hosting this hearing today, and thank you to all our panelists
    for being here. My first question is for Mr. Young. I first
    would like to thank you for your very moving testimony and for
    all of the very important information that you have added to
    this hearing today.
        Alternative marketing arrangements, or AMAs, arose in the
    1970s and are increasingly used in cattle market transactions.
    The meat packaging industry has consistently championed AMAs,
    claiming that they allow farmers to secure better prices with
    less risk. Mr. Young, cattle farming has clearly been in your
    blood for generations. Can you explain to us how your farm's
    experience with AMAs has evolved over time?
        Mr. Young. Yes. I mean, I don't deal directly with AMAs
    because I'm not a feedyard. I raise the calves from birth, sell
    them at market, and feedyards are the ones that set up the AMAs
    and the arrangements with the packers. And, it's come to my
    attention several years ago, I mean, they are bad for the cash
    market. And the cash market is what I sell my calves in. Well,
    if you keep the cash markets suppressed by contracting 87
    percent of the beef and nobody knows what the price is, you're
    basing the cash calf market off 13 percent of the cash market
    that some beef is sold on. But everything through the AMAs is
    directly from the feeders to the packers and then on from
    there. Like I say, I raise the calves that you will consume
    from birth, up at midnight, digging them out of snowbanks,
    saving their lives, and giving you the next best steak.
        Mrs. Hayes. Thank you. I think that is very important
    because as we have been talking a lot about inflation and food
    prices, and I think as a Committee we have to look at the
    entire continuum. And just like you said, the cash markets
    affect that.
        Mr. Schiefelbein, in your testimony you voice support for
    the newly launched Farmers Fairness Portal * that allows
    producers to submit antitrust complaints to the U.S. Department
    of Agriculture and DOJ at the same time. How has this system
    been working for farmers in the National Cattlemen's Beef
    Association, and do you see any room for improvement?
    ---------------------------------------------------------------------------
        * https://www.usda.gov/farmerfairness.
    ---------------------------------------------------------------------------
        Mr. Schiefelbein. Yes. The bottom line is when you look at
    it, we've asked the DOJ to do an investigation on beef packers
    almost 2 years ago, right? Where are we today? We have not
    heard boo or squat. We don't know what the situation is, what
    the response ought to be. So what cattle producers need more
    than ever is answers to the questions, is everything being done
    correctly? And if not, how can we adjust it to make sure things
    are done fairly? And to me the laws are on the books. It's
    enforcement that matters and making sure that we're carrying
    out the rules that are already in place to ensure that we have
    a fair market system.
        Mrs. Hayes. Thank you. Mr. Schiefelbein, one last question
    for you. I know there has been a lot of conversation
    surrounding country-of-origin labeling. I just would like to
    know, in your role on the NCBA, how has that product of USA
    labeling system impacted the market?
        Mr. Schiefelbein. Well, it's hard to say, but the bottom
    line is country-of-origin labeling--I am a huge supporter of
    U.S. beef. I travel the world telling them how good U.S. beef
    is. The rub with country-of-origin labeling has nothing to do
    with labeling beef as made from the United States and has
    everything to do with the government mandating--that's what the
    M stands for in MCOOL--mandated country-of-origin labeling
    where you're forcing the government to get into the marketing
    of your product and not the retailers or the purveyors or
    others who will have a cash incentive. So we want to make sure
    it's a market-driven innovation, and that's why we're opposed
    to MCOOL but we're 100 percent supportive of labeling beef
    properly as U.S. beef.
        Mrs. Hayes. Thank you. That's very helpful. Mr. Chairman,
    that's all I have. I yield back.
        The Chairman. Thank you. And now the gentlelady from
    Missouri, Mrs. Hartzler, is recognized for 5 minutes.
        Mrs. Hartzler. Thank you very much, Mr. Chairman. As a
    fellow cattle producer, I feel your pain, and I appreciate you
    all being here today and advocating for our industry and
    feeding the world because that is what you do.
        I wanted to start with fellow Missourian, Mr. Young, very
    compelling testimony. You mentioned in there that you think the
    Packers and Stockyards Act is not being enforced. Could you
    expand on that a little bit, please?
        Mr. Young. I feel a little unprepared because I don't have
    it here before me and I have read it multiple times, but within
    the Packers and Stockyards Act, everything that's happening in
    the industry that shouldn't have happened is here,
    concentration of the packing industry and the fair prices to
    the American cattle ranchers and farmers are not there. And,
    the legislation and everything in that Packers and Stockyards
    Act has been there for 100 years and it just needs to be
    enforced.
        Mrs. Hartzler. Right. Okay. Thank you. I appreciate that. I
    recently introduced with Representative Panetta, who was here a
    little bit ago, the Amplifying Processing of Livestock in the
    United States Act (H.R. 7438), which works to fix the
    regulatory roadblocks to increasing meat processing capacity
    and allowing livestock auction market owners to invest in small
    and regional packing facilities. So, Mr. Schiefelbein, you
    discussed processing capacity and the relationship between
    cattle producers and meatpackers. In fact, you state in your
    testimony about how without access to beef processing, raising
    cattle would not be a profitable enterprise. So can you share
    your thoughts about the A-PLUS Act and ways Congress can work
    to increase processing capacity and competition for livestock?
        Mr. Schiefelbein. Yes, absolutely. And we are 100 percent
    supportive of the A-PLUS Act. We believe anytime you can allow
    another group of individuals to come in and help add hook
    space, it's a good solution for the industry. And I think what
    we're living with, the current situation is just an antiquated
    law, a law that defined an industry much differently than what
    it is today. And I think allowing those sale barn operators to
    participate in owning a packing processor, provided it's small,
    makes a great deal of sense and I commend you for your efforts.
        Mrs. Hartzler. Well, thank you. You would think this would
    be a no-brainer, something that we could get passed very
    easily. Hopefully, the Chairman and others and the Ranking
    Member maybe can help support this because it just makes sense
    to allow these sale barn owners to be able to invest in
    meatpacking plants and start one locally there.
        And last summer, I introduced the Optimizing the Cattle
    Market Act of 2021 (H.R. 3766), which, among other things,
    included the creation of the USDA-maintained Cattle Contract
    Library and I was very, very pleased to work with
    Representative Johnson and others to get that passed. So do you
    believe that establishing a Contract Library for cattle similar
    to establishing the Swine Contract Library would provide more
    transparency to cattle producers in my state as well as others,
    Mr. Schiefelbein?
        Mr. Schiefelbein. Yes, well, I hope so, and that's why it's
    a pilot project, and that's why I actually like the way it's
    played out is you can learn as you go. And we want to make
    sure, as you carefully construct that library, that it's done
    in the right way. And sometimes the devil's in the details,
    right, and that's why this pilot project makes a great deal of
    sense in that we want to make sure that, as we enlighten
    everybody into what the contracts look like, we don't enlighten
    the packers more than we enlighten the producers. So there
    needs to be a balance to make sure it's written correctly and
    make sure it's done correctly and initiated correctly so that
    it benefits the right people. So yes, we're in favor of it, but
    the devil's in the details on the Contract Library.
        Mrs. Hartzler. I am hopeful that that will be helpful. I
    think it is time to empower the cattle producers themselves to
    know what some of the deals are that the meatpackers are giving
    and maybe leverage that a little bit more so they can get a
    better deal in the process. So I am hopeful for that.
        And I appreciate your comments about the DOJ investigation.
    I just want to say on the record I am very frustrated with the
    Department of Justice in that it has been over 2 years, and we
    have heard nothing. I cosigned a letter with Representative
    Johnson and many others in this room asking the Department of
    Justice, several months ago, can you give us an update? When
    can we anticipate this will be done? We just got this generic
    letter back basically saying, well, we can't comment on any
    investigation. We deserve to know as Members of Congress but
    certainly as cattle producers what happened and if there was
    any collusion, if there was any price-fixing. It really hurt
    not only consumers with these high costs but the boxed beef
    spread that you shared, those cattle producers, those of us
    weren't receiving an adequate price. So I just hope that the
    Department of Justice is listening and will wrap up that
    investigation as soon as possible so that we can have the
    information that we deserve. So thank you. With that, I yield
    back.
        The Chairman. Thank you. And now the gentlewoman from New
    Hampshire, Ms. Kuster, is recognized for 5 minutes.
        Ms. Kuster. Thank you, Mr. Chairman. I very much appreciate
    you holding this hearing this morning. It is a timely
    discussion to have as costs for food are rising while many
    Granite State families are still working to financially recover
    from the COVID-19 pandemic.
        The price of beef has climbed 16 percent just in the last
    year, and the price of bacon has risen over 18 percent. There
    are many reasons for this, and of course many existing
    challenges facing the food and agriculture sector were further
    aggravated by the pandemic. But it is incumbent upon Congress
    to ensure our markets are fair and competitive. I believe
    everyone along the supply chain can be fairly compensated while
    still producing food that consumers can afford.
        And for me a critical piece of the solution here is
    strengthening local food networks wherever possible. When
    consumers have access to locally-produced and grown food, we
    foster a healthy climate for small and midsize farms and
    businesses, and we reduce the pollution from the trucking of
    getting our food across the country, and we help to save our
    planet. It also helps to shrink our strained supply chains and
    offers greater certainty for those on both ends of the chain.
        In New Hampshire, we are fortunate to have numerous
    farmers' markets and agricultural businesses that market
    directly to consumers. I was gratified to hear from producers
    in my state about how they are able to remain connected to
    their local consumers despite the logistical hurdles that the
    pandemic presented. With that said, much more can be gained
    from cultivating more of these local food opportunities in New
    England and across the country, including meat processing.
    Growing the number and capacity of local small meat processing
    facilities like those we have in New England will help
    diversify the processing industry and reduce supply chains.
        I am grateful to President Biden for his Executive Order
    last summer initiating efforts to increase competition in the
    meat processing sector. The USDA's new Meat and Poultry
    Processing Expansion Program builds perfectly upon the
    President's goals by teeing up loans and grants to meat
    processors for startup and expansion operations. For New
    England livestock and dairy farmers facing long wait times at
    meat processing facilities around the region, this new capacity
    will be most welcome.
        To that end, I am also proud to be an original cosponsor of
    Representative Pingree's Strengthening Local Processing Act
    (H.R. 1258), which would support meat processing training and
    incentivize state inspection programs. By taking a holistic
    approach to building out our local meat processing capacity, I
    am convinced that we can help reinforce our food and ag sector
    for decades to come.
        I appreciate the opportunity to say a few words, Mr.
    Chairman. I yield back.
        The Chairman. And now the gentleman from California, Mr.
    LaMalfa, is recognized for 5 minutes.
        Mr. LaMalfa. Thank you, Mr. Chairman. I appreciate having
    this hearing today and to hear from our cattle growers who face
    so much turbulence these days here. And my understanding is
    they were told to swear in before this Committee today, the
    cattle growers here, Mr. Chairman?
        The Chairman. Yes.
        Mr. LaMalfa. Because that seems kind of----
        The Chairman. That is correct.
        Mr. LaMalfa. That is kind of unprecedented to me. What was
    that about?
        The Chairman. It is very important that we do that for this
    critical hearing.
        Mr. LaMalfa. Yes. All right. Well, I----
        The Chairman. And we will be doing it for the second panel
    as well.
        Mr. LaMalfa. Okay. I understand. I know many of these folks
    in my home district, and they don't need to be sworn in. I
    trust them, and I know they are going to give good testimony,
    and in this case, very heartfelt testimony. And we talk about
    their struggles and even suicide rates is what Mr. Young had
    mentioned there. So I hear you loud and clear, Mr. Young. And
    1975 Chevys were available back, 45 years ago, and you still
    have to buy them now. I am fixing up now an old 1974 F250 just
    to make things a little better around my place. In looking at
    my 1977 model 8630, I need a 619 engine for it because $600,000
    combines and $350,000 tractors doesn't really pencil great
    these days.
        But that all said, in California and the West we are facing
    drought levels partly because of nature and partly because of
    mankind's poorly managed water resources. So much of it is
    being flushed out of the delta in northern California to save a
    fish that doesn't exist anymore.
        Mr. Schiefelbein, would you talk about cattle operations
    that are downsizing, having to cut down the size of their
    heard, selling off their herds? And what is the longer-term
    effect of rebuilding that herd? What are they going to be
    looking at in 2 or 3 years if they are selling their herd early
    and they are not able to be replaced? Talk about that a little
    bit for me, please.
        Mr. Schiefelbein. Yes, and as you know, the--cattle is a
    cyclical business, and so this goes through ups and downs. And
    right now, we are going through a liquidation phase, and it's
    driven exactly based on the economics that say I can't afford
    to raise them so it weans off some of the cattle and then, as
    the markets get higher because there's fewer head involved, the
    markets respond and get higher, expansion reoccurs, and you go
    through this expansion, reduction cycle every 10 years. And
    it's almost 10 years on the year that cycle exists.
        Mr. LaMalfa. So that is a lot of mayhem and your ability to
    plan or not take a bath on if you are overstocked or maybe have
    to pay premiums in order to build your herd back up. Is that
    pretty fair?
        Mr. Schiefelbein. Yes, sir. And again, the other important
    issue is there's also this big variable called weather that
    comes into it, right? And weather can disrupt all the plans in
    the world. So you can have the best business plan for beef
    cattle and have a weather function hit you and just destroy
    that plan entirely.
        Mr. LaMalfa. Understood. I mean, I feel like weather, we
    can roll with the punches to some level. It is rolling with
    government punches of whether it is taking water like they are
    in California or taking your vehicles away or trying to turn
    them into electric tractors and combines and stuff they are
    talking about. I mean, I don't know how much more people can
    put up with. But we also understand there is a concerted
    effort. I was just looking at a grazing permit, one of the
    entities decide, well, we don't think we can do that grazing
    permit here in a portion of California because it might be an
    environmental problem, yet we burn the forest down, we burn
    half the landscape down where grazing would be a very helpful
    asset towards making things a little more fire-safe, not to
    mention the Forest Service has been busy hiring helicopters
    with snipers in them to shoot wild cattle down in New Mexico.
    Mr. Chairman, I think we need to have a hearing about that one
    day on Forest Service practices instead of fixing the problem
    of burning down a million acres like what happened in my
    district last year or chasing a few cattle down there because
    an environmental organization is offended they might be getting
    in the river, like elk and deer and other stuff do.
        So the priorities around here are really messed up, and our
    food source is in great peril. Prices are up, and it is not the
    growers seeing the high prices. It's somewhere in the middle of
    all that. And when we are seeing freezer shelves in the store
    empty in the United States of America, this isn't Russia. Why
    are we moving towards Russia in what we are doing? It is crazy.
        And so you guys, God bless you and hang in there because
    some of us understand the value you provide our communities
    even though I think a part of the effort around here is to have
    you be pushed out because everybody wants to become a vegan now
    or something. So we appreciate you, and we want you to
    continue----
        Mr. Schiefelbein. And I just appreciate you re-addressing
    food security because it is paramount to the success of the
    United States of America.
        Mr. LaMalfa. Absolutely. We are in a perilous world, and we
    are cutting our own throat with this, so thank you. Hang in
    there.
        The Chairman. The gentlewoman from Washington, Ms. Schrier,
    is now recognized for 5 minutes.
        Ms. Schrier. Thank you, Mr. Chairman. And welcome to our
    witnesses.
        Not for the first time on this Committee I want to discuss
    access to slaughter and processing for small- and medium-sized
    producers, which is a top concern for ranchers in my district.
    Most small producers in Washington State are served by
    slaughter and processor services operating under custom exempt
    licenses granted by the state, yet Washington has a shortage of
    inspected processing plants, and many producers are not able to
    pay the cost of those processors or to upgrade their own
    businesses to meet inspection requirements. As a result, many
    producers that want access to retail markets are currently
    unable to do so. To address the market access issues for local
    producers in Washington, better access to slaughter and
    processing would make the biggest difference, in addition to a
    pipeline of workers in that field.
        And let's be clear, a concentration of power in ownership
    for slaughter creates challenges for small farmers who are
    unable to access these facilities. And we need to have more
    USDA processing available to producers outside of just the big
    guys. If we want to better improve our food supply chains and
    create local food systems that better serve both producers and
    consumers, it is essential to increase our processing capacity
    and access to that.
        So I want to ask you, Mr. Stockton, what is your experience
    with slaughter and processing like?
        Mr. Stockton. Thank you, Madam. I have a number of friends
    in Montana who are doing direct-to-consumer marketing of their
    cattle, but it's a very, very tough business to get into. It's
    very hard to develop a client base and get in front of the
    consumers with your product. It's an expensive way to do so
    because of the lack of marketing infrastructure at that level.
        One of the concerns that I have about the movement here to
    produce more--to have more small packing plants is just exactly
    that. How do you get your product in front of the consumer when
    the meat case that's in Albertsons and Walmart and stuff is
    already committed to JBS or Tyson or Cargill? I mean, this is
    part of the dysfunction that we have in the cattle industry.
        So it's all very nice to say we want to produce more food
    locally, but those people also can't be competitive because the
    overall market is not competitive. I mean, you need to look at
    these issues holistically. Until you start addressing really
    the competitiveness of the cattle market, these direct-to-
    consumer things will be a struggle for people. God bless them
    for doing it and God bless the consumers who buy from them, but
    it's an uphill battle.
        Ms. Schrier. I am hearing very similar things from farmers
    in my district where even inspected and even looking for places
    outside of the big supermarkets, a small neighborhood
    supermarket or even a farmers' market or online sales is very
    hard to find those consumers, and there is a lot of education
    that has to happen with what it means to be a small local
    rancher. So thank you.
        I just want to close my remaining time by saying that we
    need, our ranchers need more transparency around what other
    ranchers are being paid. That would help them tremendously and
    give them a negotiating edge. And small family-operated ranches
    in my district need that kind of fairness because the margins
    are so thin, the distances to travel are so great, and the
    inputs to raise cattle are so high. And so setting prices from
    the top down has led to the farmers' percentage of final
    product falling for some time now, and that means producers
    can't get the income they need for certainty to make ends meet
    and to have a whole new generation of ranchers.
        So thank you, and I yield back.
        The Chairman. The gentleman from Illinois, Mr. Davis, is
    recognized for 5 minutes.
        Mr. Davis. Thank you, Mr. Chairman. I want to say thank you
    to the witnesses, very compelling testimony. I appreciate your
    willingness to be here. Although today's hearing is very
    compelling, hearing from each of you, but at the same time this
    Committee has disappointed me in the process because we have
    yet to talk about meaningful farm bill oversight. And more
    importantly, I don't think our discussion today actually gets
    to the root cause of the issues that most Americans are facing.
    ``Inflation: It's what's for dinner'' would actually be a more
    appropriate name for this hearing. After all, the latest CPI
    report showed the largest 12 month increase in the price of
    food since 1981. And here is the spoiler. I don't think it is
    all due to rising beef costs. I am certain it has a lot more to
    do with this Administration's reckless spending and policies
    than it does consolidation in the beef industry as the White
    House and the Chairman so desperately seem to want us to
    believe.
        In a good-faith effort to make this a more productive
    hearing, I teamed up with a bipartisan group of colleagues and
    sent a letter to Chairman Scott requesting an economist or a
    market analyst familiar with beef pricing dynamics to be able
    to testify today to give this Committee a more holistic view of
    the market situation. Unfortunately, that request was not
    granted even after one of the Majority's witnesses pulled out.
        I have that letter here with me, Mr. Chairman. I would like
    to submit it for the record.
        The Chairman. Without objection.
        [The letter referred to is located on p. 143.]
        Mr. Davis. Thank you. I know that the Minority was only
    offered one witness today and found it necessary to use that
    opportunity to hear from a more balanced producer panel. It
    seemed prudent for a representative from the nation's largest
    organization of cattle producers to have a seat at the table
    during discussions of ideas and legislation that could have
    enormous industry impacts. In a Committee that is used to being
    so bipartisan and solutions-oriented, it is really unfortunate
    that this bipartisan request couldn't be granted today.
        Meanwhile, inflation is up 8.5 percent. We are sitting here
    pointing fingers, and the Biden Administration demands more and
    more spending. There are so many things we should be addressing
    in this Committee when we talk about the market and consumer
    prices like work requirements; supply-chain issues; the waste,
    fraud, and abuse we continue to see in pandemic spending; the
    refusal to engage in new, free, and fair trade deals; and
    refusing to hold China accountable for the trade deals that we
    already have.
        So with that, I do have a question. I will start with you,
    Mr. Schiefelbein. To any of the producer witnesses starting
    with you, what do you think your operations would look like in
    terms of cash flow and bottom line, absent these record levels
    of inflation?
        Mr. Schiefelbein. Oh, they would be incredible. So the
    market prices have gone up. It's just that costs are huge. We
    call it the three F's, right? It's feed, it's fuel, and it's
    fertilizer. But if you look at those three components, the
    inflation marks on those three components which drive the
    engine of our farm are up incredible amounts, and it makes,
    regardless of almost the selling price, an almost impossibility
    to recover your initial cost. So those inflationary pressures
    are real, they're huge, and given everything we're talking
    about today, I couldn't agree more with you that that is
    fundamentally the most economic impactful thing that's
    occurring on the farm.
        Mr. Davis. I missed some of my colleagues' questions. I
    wonder if climate change came up, carbon issues or--have they?
        Mr. Schiefelbein. No, they have not.
        Mr. Davis. That is a shock because usually that is the
    discussion this Committee has been discussing at our hearings
    previously instead of inflation, instead of the issues that you
    talk about that are impacting your ability to survive as a
    producer. So I appreciate the opportunity. Any more comments
    that you might want to make that would----
        Mr. Schiefelbein. I just want to reiterate, you're right on
    track, Congressman. Refocus on the issues that are impacting us
    daily and are huge. I always focus on the big things. My dad
    always says successful people get the big things right, but the
    first thing you have to do is figure out what the big things
    are and then attack them. So I think you're right on track, so
    thank you.
        Mr. Davis. Well, thank you. I do have a few seconds left.
    Mr. Young, did you want to address the inflationary issues? How
    would your operations fare?
        Mr. Young. I mean, they're not--just from a year ago when I
    sold my calves to this year, there's only an 18 percent
    increase in calf prices that have remained stagnant for years.
    This is the first time it went up forever, I mean, as long as I
    can remember, and----
        Mr. Davis. Is it covering your other costs related to
    raising those calves?
        Mr. Young. Well, yes, and the cost to raise those calves
    have went up exponentially, especially you said the three F's
    of farming, they are your biggest expenses. I mean, they
    literally account for 35 to 40 percent of your overall expense,
    feed, fuel, and fertilizer. And, right now with the feed
    markets and everything going astronomically high, $10 corn to
    raise a buck-45 feeder calf, it doesn't pencil out very well.
        Mr. Davis. Well, I yield back. I am out of time. Thank you.
        The Chairman. The gentleman from California, Mr. Costa, who
    is also the Chairman of the Subcommittee on Livestock and
    Foreign Agriculture, is recognized for 5 minutes.
        Mr. Costa. Thank you very much, Mr. Chairman, for holding
    this hearing today. I think the examination of price
    discrepancies, transparency, and alleged unfair practices in
    cattle markets is something that clearly is on the minds of
    many. I appreciate our testimony by the witnesses on this first
    panel and look forward to the second panel.
        I think we all agree on this Committee that food is a
    national security issue. And I am one of the, I guess, handful
    of Members of Congress that actually derives my primary income
    from farming, three generations. And we like to say that
    farmers and ranchers, dairymen and -women, and the cattle
    producers are price-takers not price-makers. I am wondering
    based upon the testimony that you have made here on terms of
    the factors that we are trying to deal with today, how much
    that goes into account? I mean, there are a lot of factors of
    increased prices, and I think the incredible ingenuity of
    American agriculture has been the fact that change is constant
    and agriculture understands that and that innovation toward
    change. I don't farm the way my father farmed, and he didn't
    farm the way my grandfather did. It is a different operation.
    We had over 20,000 dairies in California 40 years ago. Today,
    we have a little over 1,200 dairies. We were milking less than
    200 cows per dairy over 40 years ago. Today, the average size
    is almost 2,000 cows per dairy. That is just one of many
    examples.
        Let me get to some of the questions here. Mr. Delbodic, you
    indicated that AMAs are often credited with incentivizing
    improved quality. Where do you think that really takes place? I
    know the genetics are much different today than they were in my
    father's generation.
        Mr. Schiefelbein. Sir, were you addressing me?
        Mr. Costa. Yes.
        Mr. Schiefelbein. Okay. I didn't catch the name, my
    apologies.
        Mr. Costa. I am sorry.
        Mr. Schiefelbein. Yes, AMAs basically is the--allows the
    transmission of what consumers want to producers. So it is
    basically a roadmap that says if I want a certain product,
    let's say non-hormone-treated beef, it sends the signal
    backwards and all of a sudden an AMA is written that says, you
    know what, I got some of my customers, some of my Schiefelbein
    Farms customers who have cattle that fit that need for those
    consumers. I am able then to procure those cattle, feed them in
    such a way with the understanding and realization that I will
    get paid to do the practices that are necessary to meet those
    consumer needs. So it's basically that transmission of what is
    necessary to be done, and then because some of these things are
    so costly up front, not having an agreement before you put them
    into production is very detrimental because you're giving away
    so much cost----
        Mr. Costa. Yes, well, I have family in the cattle business,
    a cow-calf operation and family in the dairy business, although
    I am not directly involved in that anymore, but I thank you,
    Mr. Schiefelbein, for your comments.
        Mr. Stockton, you talked about the difficulty of trying to
    get on the market shelf, and I think you spoke very well of
    that difficulty, having had some experience with that. How do
    you propose or how do you think the proposal to mandate
    regional cash minimums and cattle transactions would impact the
    cattle market?
        Mr. Stockton. Could you rephrase that? I didn't hear you
    completely, sir.
        Mr. Costa. The mandate for regional cash minimums that has
    been discussed in cattle transactions, how do you think that
    would impact cattle markets?
        Mr. Stockton. Well, that proposal was put forward because
    it--kind of an emergency proposal in order to get better
    prices, more confidence in the price that spot markets were
    giving to what Mr. Schiefelbein here says is so important, the
    AMAs, the captive supply cattle.
        Mr. Costa. Price finding is all part of the challenge.
        Mr. Stockton. Excuse me?
        Mr. Costa. I said trying to determine the prices in these
    markets is part of the challenge, right?
        Mr. Stockton. Right, yes, the confidence that you have that
    it's actually the price. The problem with--that I--it's my
    personal thing that--the problem with that position, that
    proposal is that it does not really go to the heart of what's
    dysfunctional in the cattle market, the lack of competition.
    And until that's being addressed directly, everything else is
    kind of just kicking the can down the road I'm sorry to say.
        Mr. Costa. Thank you, Mr. Chairman. My time has expired.
        The Chairman. The gentleman from South Dakota, Mr. Johnson,
    is now recognized for 5 minutes.
        Mr. Johnson. Thank you, Mr. Chairman. And for Mr.
    Schiefelbein, I thought you were right to bring up the Phoenix
    meeting because it gave us a sense of what are the consensus
    items for the marketplace. I think in your testimony you
    alluded to the fact that sometimes because the cattle industry
    can't agree, we don't get as much done as we should. And there
    are some consensus items. The Phoenix meeting had three areas
    of agreement, number one, the importance of transparency. We
    have made progress on that with the Cattle Contract Library,
    also about adding capacity, the Butcher Block Act has made
    progress. But then three, critically important, oversight,
    which you mentioned. And I don't know that we have made
    progress on that front. You mentioned that enforcement is
    important. Of course I agree with you.
        So a little thought exercise for you, sir. Let's say the
    President calls you, says that you are going to be the next
    head of Packers and Stockyards. I mean, give us a sense of what
    is your vision for the agency. How do we do it better, and what
    is your advice to Congress about what tools we can give you as
    the head of the agency to do a better job?
        Mr. Schiefelbein. Yes, and to me, it's all about
    enforcement. And I don't know if the funding's not there. I
    don't know the intricacies to be quite honest. But to me, the
    laws are on the books. We just need to make sure enforcement is
    occurring, and knowledge is also power. If we knew what was
    occurring and why it occurred, if it occurred, it would be so
    helpful to my membership, right? They're demanding answers.
    They're saying our lives are on the line here, okay? Our lives
    depend on fair markets. How come we can't get answers on what
    has happened and what has transpired and where we are today? So
    that's the push I would get is there's a lot of movement
    towards adding a new agency, a new oversight agency, but the
    reality is from a government standpoint, why don't you get the
    one that you have working first? That's my dad's thought
    process. Fix the tractor that you have before you buy another
    tractor.
        Mr. Costa. Mr. Johnson, would the gentleman yield?
        Mr. Johnson. Yes, sir.
        Mr. Costa. I think this is a very good question, and with
    your experience over the years, how would you say enforcement
    has changed one way or the other over the last 3 decades? You
    go back to your father and grandfather. Has it gotten more
    enforcement, less enforcement? Have you noticed?
        Mr. Schiefelbein. And again, I'm--I look older than I am,
    so I am actually not that big a span of ages. But the reality I
    believe is that it just seems like the wheels of the Department
    of Justice have gotten slower and slower and slower. Now, maybe
    that is just my perspective, but it seems--I understand justice
    takes time, but the progress is so slow that you cannot have a
    system in place to protect people if the timing on the process
    can put them out of business. And that's what I'm getting at.
        Mr. Johnson. And reclaiming my time, I think that is
    exactly right. And for me, we talk about transparency and
    transparency in the marketplace. I think it would be helpful to
    have some transparency within the government as well. I think
    we all understand the rationale of why they don't release a
    report if they haven't found any wrongdoing. But that silence
    is not good for the producer, it is not good for the consumer.
    I would submit it is not good for the packer. It makes
    everybody think something is going on behind the veil.
        So when we talk about--you mentioned earlier that we
    haven't heard boo or squat, which is exactly the right phrase,
    sir----
        Mr. Schiefelbein. Sorry.
        Mr. Johnson.--about the investigations in the wake of the
    Holcomb fire and COVID. I mean, let's set this information
    free. It seems to me that that is one key thing we could do to
    bring a higher level of understanding to what is going on from
    an enforcement perspective and tell those of us in this room
    maybe what we could be helping the DOJ do better with regard to
    enforcement. I will give you an opportunity to react.
        Mr. Schiefelbein. Yes, and again, it's--it goes back to a
    pretty simple principle you learn raising kids, right? The
    bogeyman disappears when you turn the light on, right? And
    there's a bogeyman out there. We don't know if it's real or not
    real because the light's off. We need the light flipped back on
    to know whether or not the bogeyman exists.
        Mr. Johnson. Anything else, Mr. Costa, before I yield back?
        Mr. Costa. No, I thank the gentleman for his good
    questions, as always.
        Mr. Johnson. Sounds good. Well, thank you. I think you are
    exactly right. Let's turn the light on, and that is something I
    think we could find robust bipartisan agreement on. With that,
    Mr. Chairman, I would yield back.
        The Chairman. The gentlewoman from Iowa, Mrs. Axne, is
    recognized for 5 minutes.
        Mrs. Axne. Thank you, Chairman Scott. Thank you so much for
    holding this hearing on such an important issue. I would first
    like to request unanimous consent to submit to the record a
    letter and a statement from Bob Noble, President of Iowa
    Cattlemen's Association.
        The Chairman. Without objection.
        [The documents referred to are located on p. 139.]
        Mrs. Axne. Thank you. In the letter, I see President Noble
    expresses the need for price discovery and transparency to make
    sure that we can combat the meatpacking industry consolidation,
    its captive supply, and price manipulation issues. And I
    appreciate his call to support my bipartisan legislation, the
    Cattle Price Discovery and Transparency Act (H.R. 5992), and
    share his urgency that it is now time for Congress to act on
    this on behalf of our nation's cattle producers. And after
    listening to some of the testimony this morning, I am sure many
    of my colleagues would agree that something has to be done.
        Mr. Young, thank you so much for being here. I am glad to
    have you here with us today, and thanks for sharing your story.
    And if there are others who are watching this hearing in a
    similar situation, please know it is okay to ask for help, and
    you can reach the 24/7 National Suicide Hotline Service at 800-
    273-TALK. And this summer you will be able to reach that by
    calling 988. And the sad part is I am sitting here at a hearing
    for our cattle producers having to put out information like
    that because it is so rough on our producers in Iowa and other
    places to get ahead.
        So here is my first question. I share many of the concerns
    raised in your testimony. And, Mr. Young, can you describe the
    value that cash trades have in the cattle market?
        Mr. Young. Yes. As a cow-calf producer, we base everything
    off the Chicago Board of Trade, and that's based off of what's
    supposed to be the free market, there's only, like I say, 13
    percent cash cattle on the market that are sold, and everything
    else is through AMAs and those are all private and you don't
    know what the pricing is. And the cash market if it was--
    everybody in the beef industry should be able to buy on the
    cash market, and all that information would be out there and
    you would know exactly what everything is selling for. And
    there would be more competition between the packers and they
    wouldn't have nearly as much control.
        And that's where we know it will never happen. We hope and
    pray it will but AMAs are not going to go away and they're
    going to continue to dominate the marketplace and keep the
    price of beef to the cow-calf producers suppressed.
        Mrs. Axne. So is it fair to say then that all producers
    benefit from a robust cash trade market?
        Mr. Young. That is correct.
        Mrs. Axne. Thank you. And, Mr. Stockton, in you're nearly
    50 years as a rancher, how has the value of your product
    changed, and what has that led to within your community?
        Mr. Stockton. Ma'am, as I said in my oral statement, my
    income has been halved. The retail price spread over the life
    of myself as a rancher has been halved over that 47 year
    period. And my community is devastated. There are less than
    half as many ranches every day taking up the, bought up the
    smaller ranches, consolidated them. One of the most disturbing
    things that's happening in my community is that millionaires
    and billionaires are buying huge ranches just for private
    hunting reserves, and all of us locals are simply locked out of
    that. And of course those people have no interest at all in the
    health of our community and the children in school and all of
    the things that it takes, the businesses that you can have a
    thriving group of people working together for a good life.
        So no, we call it the cheap food policy and the cheap food
    policy of the United States Government has been extraordinarily
    successful. It's hollowed out rural America all the way from
    Grass Range, Montana, to Lumpkin, Georgia, where--I was told
    not to use this word and I'm sorry but I can't think of another
    word. Rural America is one huge slum, and this is a result of
    the lack of antitrust enforcement.
        Mrs. Axne. Mr. Stockton----
        Mr. Stockton. And we've elected to conduct rural and
    agricultural policy through the farm bills.
        Mrs. Axne. Thank you. And if we do nothing, what do you
    think the future looks like? If we don't act on this in
    Congress now, what do you think the future looks like?
        Mr. Stockton. I think the food security of your children
    and your grandchildren is in jeopardy.
        The Chairman. That is right.
        Mr. Stockton. When you have--you know, it's--we're talking
    about the beef cartel at this hearing, but this isn't the only
    cartels or source of monopolization. It cuts across all of
    agriculture, but it cuts across a lot of the other most
    important industries of the United States. And until we start
    trying to deal with that and do something, we're simply
    vulnerable to every--vagaries of the weather, which I shouldn't
    call it vagaries because it's getting very pronounced, and
    things that are happening in other countries that--of which we
    have no control, for instance, this invasion of the Ukraine by
    Russia. I mean, that affects us. To use a phrase, America first
    here. When are we going to look after the interests of the
    people of the United States and their security and their needs?
        The Chairman. The gentlelady's time has expired.
        And now the gentleman from Mississippi, Mr. Kelly, is
    recognized for 5 minutes.
        Mr. Kelly. Thank you, Mr. Chairman, and thank you,
    witnesses, for being here.
        Mr. Schiefelbein, your testimony expresses clear opposition
    to the Cattle Price Discovery and Transparency Act, and you
    have answered a little bit why that is if you would like to
    expand on that. And further, what alternatives can we as
    Congress do that remedy this situation or aid cattle producers
    in the marketplace?
        Mr. Schiefelbein. Yes, to me it's all about empowering
    producers. Let producers come up with the solutions, and let
    them innovate, as the Chairman suggested, in terms of making
    the next best things. And to me the best government is a
    government that stays out of the way when it comes to marketing
    and lets the good of the people come up with the great ideas
    and move an industry in the direction it needs to go. And
    that's what we've done over the last 20 years. If you look at
    the mandate that's putting--that they're trying to push,
    they're basically trying to cram our industry back into the
    bottle the way it was 20 years ago, 15 years ago. That's not
    healthy for an industry. Change is a part of the industry, and
    especially if you look at the impact it's had on meeting
    consumer preferences, nothing could be more advantageous for
    the industry than to listen to your consumer.
        Mr. Kelly. And just some data, just according to the recent
    USDA Ag Census, we have lost over 32 percent of my home state's
    cow-calf producers over a 25 year time period from 22,097 to
    14,000 in 2017. That number today is probably really much
    worse. It concerns me greatly, also, the timing of a negotiated
    cash market to the point that there may not be a cash market
    one day. Are there any solutions or do you have any ideas on
    that?
        Mr. Schiefelbein. It's going to take innovation. I think--
    if I were to put on my crystal--look into my crystal ball, I
    would say there will be a time when the AMAs probably include a
    component of boxed beef price so that it allows you to share in
    the good and share in the bad with the person downstream so
    that if it's beneficial, everybody benefits, and if it's bad,
    everybody suffers. And to me it's those innovations we want to
    make sure continue to flow that allow the marketplace to figure
    out this awkward time and how do we distribute this money
    equitably.
        Mr. Kelly. I am kind of old-school. I grew up--my
    granddaddy ran about 20, 25 head of cows in a cow-calf
    production, and so I grew up in that environment. There are not
    a lot of those guys left, just like there are not small
    dairies, there are not a lot of other small things. But we need
    to get back to that. It is good to have lower prices and to
    have the big guys, that is great, but at some point there is no
    redundancy in that. And we don't want this nation to be relying
    on two, three producers that can be taken out and then we have
    no producers. We lose the ability. So what do we do to get more
    small cow-calf producers engaged in the process? Is there
    anything we in Congress can do to help do that so that we have
    some redundancy and backup?
        Mr. Schiefelbein. And I think some of the things you're
    doing is valuable. In terms of allowing local processings to
    occur I think is an absolute windfall for small producers. I
    was in Kentucky just a week ago and talked to two different
    guys who are now using the energy of being able to market their
    own products successfully to a consumer within 50 miles around
    them, right? And that invigorates them. That excites them. And
    I think we're doing something along those ways. So to me it's
    providing tools that allow them to be the best at what they do,
    not confining them or taking away tools that allow them to do
    the best possible.
        Mr. Kelly. I want to thank you guys, every one of you all
    again, for what you do for America. I truly am one of those
    guys--I am on the Armed Services Committee and the Intel
    Committee and I am on the Ag Committee because I think all
    those things are national security because I truly believe that
    food security and the ability to produce in all conditions is
    national security, and I don't think there is anything greater.
    To the one percent who farm in America of which you are, I just
    want to thank you.
        And with that, Mr. Chairman, I yield back.
        The Chairman. Well-stated, thank you.
        The gentleman from Arizona, Mr. O'Halleran, is recognized
    for 5 minutes.
        Mr. O'Halleran. I want to thank the Chairman and Ranking
    Member for this hearing today and also for those who are
    participating as witnesses.
        Cattle ranching is an important part of Arizona's economy.
    Earlier this month, I hosted a processing roundtable with beef
    producers from my district. I heard from a range of
    stakeholders, including rural producers, Tribal producers, and
    economic development specialists. The recent disruptions in
    capital markets have disproportionately harmed small and rural
    producers who were already at a disadvantage in competing in a
    highly consolidated marketplace. And because of an increase in
    the cost of fuel, feed, maintenance, land, and water, producers
    are dealing with a 75 to 80 percent increase in operating
    costs, making it nearly impossible for small family-run farms
    to compete, and this hearing today hasn't brought out anything
    to make my optimism grow.
        I think that the other concerns that we heard from where
    our young producers are coming from, what about the families
    that have historically been there? The beef packing capacity,
    and I will talk about co-ops in a little bit. The real
    problem--I come from both a family in--our family's history of
    dairy farming and also have spent time--I heard the Board of
    Trade mentioned a little while ago, and I was a trader on the
    Board of Trade and came up with those and worked in that
    environment where we knew what transparency was about. And I am
    sorry to see that [inaudible] it is impossible to be able to
    meet the challenges [inaudible].
        It came to my mind during the course of this that the word
    monopoly came to my mind, the word cartel came to my mind, and
    when I looked up the definition, it is the excessive possession
    or control of supply of trade----
        The Chairman. Excuse me for one moment, Mr. O'Halleran.
    There may be someone that is not muted. We are having
    difficulty hearing the Congressman. Everyone except the
    Congressman, let's get muted. You may continue, Mr. O'Halleran.
        Mr. O'Halleran. Thank you, Mr. Chairman. I will just
    continue on with the definition of a trade or a commodity or
    service. What we didn't talk about is the other powers, the
    economic powers, not only devastating economic powers to the
    producers, the smaller producers, but those powers that they
    are allowed to have economically to be able to overcome the
    type of costs that we have seen on the smaller market producers
    and that is feed, fuel, and fertilizer, also market control and
    many other aspects, and I do hope the Attorney General's office
    will go down a path of fairly identifying and working on these
    issues.
        I would like to ask a question of Mr. Young. Have you
    considered this in the past the process of the idea of
    establishing co-op processing facilities to increase processing
    capacity, which is scarce in rural areas, especially my area
    also? And if so, what were the hurdles you faced? And can the
    USDA be helpful in this process?
        Mr. Young. I didn't quite hear what you said. I can barely
    hear you.
        Mr. O'Halleran. I am sorry about that. I will try this
    again. Several Arizona producers brought up the idea of
    establishing a co-op processing facility to increase processing
    capacity, which is scarce in rural areas. Have you considered
    this in the past, and if so, what were the hurdles you faced,
    and can the USDA be helpful in this process?
        Mr. Young. I mean, yes, that idea has been out there for a
    long time. I've actually been talking about it recently. There
    were a lot of small processors that popped up during the
    pandemic. They saw the store shelves were empty so they took
    the opportunity to open their own small locker. The only
    problem they're having is getting USDA approval so they can
    sell their beef, as a farmer, directly to the consumer at a
    farmers' market, set up an online marketing system directly
    from their farm to the table, and that's the only hurdle that
    they face now is all the red tape associated with getting USDA
    approval for their small locker operations.
        And they're so overregulated and, I mean, there's a lot of
    red tape to get through to get that USDA stamp of approval,
    which I understand. The sanitation standards in this world in
    which we live now are so high that it--some of the regulations
    and the approval of USDA facilities may not be negligent or
    required, but yet the smaller producers that's--more power to
    them. That would be great if they could get 10, 15, 20, 30 guys
    to invest in a co-op locally owned processing facility. That
    empowers them as producers.
        Mr. O'Halleran. Thank you, Mr. Chairman. Thank you, Mr.
    Young, and I yield back.
        The Chairman. The gentleman from Kansas, Mr. Mann, is now
    recognized for 5 minutes.
        Mr. Mann. Thank you, Mr. Chairman, and on behalf of the
    farmers, ranchers, and agriculture producers in the 1st
    District of Kansas, thank you all for participating in today's
    full Committee hearing regarding beef markets.
        This issue is especially near and dear to me since both
    sides of my family have farmed and fed cattle in western Kansas
    for the last 120 years. I grew up on a preconditioning
    feedyard, spent thousands of hours doctoring sick cattle, kind
    of the best of times and worst of times all wrapped into one,
    but good family time.
        The Big First, my district, ranks number one in the country
    for the value of sales of cattle and calves at more than $9
    billion annually. There are more than 4.4 million cattle and
    calves raised in my district and significant packing capacity
    with more than 20 percent of the nation's beef slaughter
    capacity. We see the entire beef supply chain in the Big First
    from cow-calf producers to cattle feeders to packers. More
    broadly, the beef sector supports grain producers,
    manufacturers, veterinarians, and many other businesses that
    populate rural towns across Kansas and across the country.
        In a competitive cattle market, it is vital for producers
    to be able to differentiate their product to eventually suit
    the taste of the consumer. As seen by the growing demand for
    beef here in the U.S. and internationally, selective breeding
    and nutrition that have increased quality bring opportunities
    for producers to negotiate a premium for price for their
    cattle. These contracts allow feeders to benefit from making a
    value-added investment and provide some certainty in the
    volatile market.
        Across the country, cattle producers continue to face
    challenging market dynamics, including historically wide gaps
    between wholesale beef prices and fed cattle prices, packing
    capacity regulation, and more. I have talked to hundreds of
    cattle producers in Kansas ranging from small cow-calf
    operations to some of the country's largest feedyards.
    Overwhelmingly, I have heard that we need to increase price
    discovery in the cash market, make sure that producers benefit
    when they provide a superior product, refuse to let the
    government interfere in the free market, and acknowledged
    regional differences.
        There is currently discussion, here in Washington and
    around the Federal Government, about mandating a certain
    percentage of cash or spot transactions between the feeder and
    the packer, limiting the number of alternative marketing
    agreements. AMAs, are popular across the Big First and used by
    many because they cut costs, increase efficiencies, and reward
    producers for a higher quality product.
        So a few questions, first question for you, Mr.
    Schiefelbein, and thank you for being here. Do you feel that
    the legislation proposed to limit the use of AMAs would
    negatively affect the beef market? And how do you think it will
    impact beef quality?
        Mr. Schiefelbein. As I've mentioned before that AMAs and
    that transparency is basically the signals from the consumer to
    producers on what to do. So from that standpoint I know with
    certainty it's going to have an important negative impact,
    okay, because we need those signals strong and transparent and
    flowing freely from consumer to producer. The whole idea of
    mandating the packers, to me, is a misnomer because when you
    mandate one half of a dealmaker, you're also mandating
    producers, and that's where we get the rub. When you're
    mandating producers on how they ought to manage their cattle
    and market their cattle, I think bad things will occur and
    actually to the detriment of the people promoting it.
        I think the largest concern occurs into small- and midsize
    producers like myself because when you're limited to a certain
    number, all of a sudden now you have a packer picking winners
    and losers. And it doesn't allow me to exert my thing that says
    because I have a superior product, choose me, choose me.
    Instead, you're deferring to a packer. So I think it goes down
    a very dangerous road, especially for mid- and small-sized
    feeders.
        Mr. Mann. Okay. Thank you. Another question for you, sir.
    Do you believe the establishment of the Cattle Contract
    Library, that was done by this Congress really this year
    similar to what exists in the Swine Contract Library, do you
    think that is going to provide more transparency to the market,
    and how do you think it is going to impact producers in Kansas
    and around the country?
        Mr. Schiefelbein. Well, the intent certainly is there. And
    again, I've mentioned before--I testified previously--the
    devil's in the details. And that's what raises some concern for
    our producers is the way it's put together may actually tell
    you whether it's favorable or it actually could be neutral to
    unfavorable depending on if the packers have more utility with
    the contract than the producers. So to me I really like their
    approach of the pilot project, but I think constructing it in a
    manner that is a benefit to producers is of utmost importance.
        Mr. Mann. Okay, great. I see my time is expiring. Thank you
    for being here. And with that, I yield back.
        The Chairman. Thank you. The gentleman from Georgia,
    Congressman Austin Scott, is now recognized for 5 minutes.
        Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. And I
    want to apologize to the panel for being late. I was in the
    Armed Services Committee with the Secretary of the Air Force
    and a couple of generals going over their budget.
        Mr. Stockton, I believe it was you that brought up the
    antitrust and Federal Trade Commission. Is that correct? And
    the monopolization if you will of what is happening in
    processing?
        Mr. Stockton. Could you restate that for me, please? I have
    a little----
        Mr. Austin Scott of Georgia. I think I heard a statement
    from you that I very much agree with. The Federal Trade
    Commission has not been active enough in this and it has led to
    a significant amount of monopolization in the processing.
        Mr. Stockton. Yes, Federal but also particularly lack of
    enforcement of the Packers and Stockyards Act. When the Packers
    and Stockyards Act was first initiated in 1921 and there was a
    consent decree that required that the packers--the cartel at
    that time had to purchase all of their cattle in a marketplace
    that they did not own or control, it was a free enterprise
    approach to solving that problem that worked beautifully
    because by the time I started ranching in 1975, the packer
    concentration was down to about 25 percent, the four largest
    firms.
        Mr. Austin Scott of Georgia. Mr. Stockton, can I ask you
    something on another law at the time? If I am not mistaken, and
    this is going back many years--my grandfather and I ran a few
    hundred head in Georgia. And back at that stage in the--it
    would have been in the early 1990s, there were several
    stockyards in the area, there were multiple places where you
    could take a calf to get it processed. Most of those don't
    exist anymore. Would----
        Mr. Stockton. Exactly, yes.
        Mr. Austin Scott of Georgia. And it has been brought up as
    one of the problems. So there is not a whole lot of options for
    the farmers to sell their product. But there was a time when
    the packers were not allowed to actually own the animal up to
    and until maybe 2 or 3 days before the animal was processed if
    I am not mistaken.
        Mr. Stockton. Yes.
        Mr. Austin Scott of Georgia. Am I correct in that? And
    those laws have all gone away. Most of them were at the state
    level if I am not mistaken, not necessarily a Federal law, do
    you think that--that that is an issue that if it were
    revisited----
        Mr. Stockton. Well, yes. The Packers and Stockyards Act is
    very clear that there--a packer should not give an advantage or
    disadvantage to any buyer or seller. And if they are owning
    cattle, they are obviously giving an advantage to themselves.
    And yes, you need to revisit the consent decree that they had
    in 1921. If the packers were purchasing all of their cattle
    through some form of a competitive market, we wouldn't have any
    reason to be sitting here today. This whole problem would be
    solved.
        Mr. Austin Scott of Georgia. I do know that the Georgia
    cattlemen--and I am not saying all of them are in favor of
    this, but I do know there has been discussion with the Georgia
    cattlemen about them putting together some type of a co-op and
    the ability to slaughter and process. And slaughter is a word
    nobody likes to use, right, but the bottom line is our
    hamburgers come from an animal that has been slaughtered and
    processed.
        But most of the places that, as a kid, if you could go to
    and have something slaughtered, I mean, today, if they are
    still in business, they are cutting boxed beef. Very few of
    them actually have the license to actually kill the animal. And
    it is hogs as well as cows, and so I have hog farmers that have
    to ship their hogs from south Georgia all the way to Tar Heel,
    North Carolina. Well, that is a lot of transportation cost when
    diesel is $5 a gallon.
        Mr. Stockton. Yes.
        Mr. Austin Scott of Georgia. So I appreciate you all being
    here. I will tell you I am very concerned about some of the
    conduct I am seeing from some of the people that are about to
    testify in the differentials and what they are paying people
    based on race, and I am going to ask that question as we go
    forward with the next panel. But thank you for your time and
    your testimony.
        Mr. Stockton. Yes, thank you for your question, Mr. Scott,
    because I agree with you completely. What we need is a
    multiplicity of market channels, and now that we've
    concentrated it through this one funnel, until we solve that
    problem----
        Mr. Austin Scott of Georgia. The retailers are not innocent
    in this.
        Mr. Stockton. And the retailers are not innocent in this.
        Mr. Austin Scott of Georgia. I yield back.
        The Chairman. The gentleman from Georgia, Mr. Allen, is
    recognized for 5 minutes.
        Mr. Allen. Thank you, Mr. Chairman. And of course I presume
    the purpose of this hearing today is to deal with the cost of
    what we are paying for meat and who is responsible. Obviously,
    we are faced--I think it was a record 8.5 percent inflation in
    this last year. Obviously, one of the drivers of inflation is
    not only what the Feds are pumping into the economy to cover
    government spending but it is government spending, it is
    policy, and it is energy policy, and it is driving the cost of
    everything beyond anything we have seen probably in our
    lifetime, maybe even since the Carter presidency. So, that is
    the issue. That is why we are here. And of course what we have
    is apparently some allegations that we need to get to the
    bottom of as far as our industry is concerned.
        Mr. Chairman, you mentioned in your opening statement that
    due to intimidation or threats to a person's livelihood, one of
    our witnesses chose not to participate today. You also
    mentioned that you will be following up on the situation, and I
    hope you will. These are very serious criminal allegations. I
    know many of our Members are curious to know additional details
    of this situation. If true, this is deeply concerning. Are
    there additional details you can provide our Members so we can
    address it? And I understand if there is a desire to protect
    this individual, but why do you choose to raise the matter in a
    public setting? And with that, Mr. Chairman, I yield back to
    you.
        The Chairman. We are looking into it. It is a very serious
    situation. And the right thing for us to do is to address it so
    that it will not happen ever again.
        Mr. Allen. And so you are not prepared here to disclose
    any----
        The Chairman. Not until we get all the facts. It would be
    improper for me to discuss any details on it when I don't have
    the full facts.
        Mr. Allen. Okay. All right. Well, with that, I will yield
    back.
        The Chairman. Thank you. And now the gentlelady from
    Minnesota, Mrs. Fischbach, is recognized for 5 minutes.
        Mrs. Fischbach. Well, thank you very much, Mr. Chairman,
    and thank you all for being here today.
        Mr. Schiefelbein, as you know, the issues of price
    discovery, concentration, and market manipulation are serious
    issues, but I firmly believe that government mandates or
    strong-arming the private-sector when politically expedient is
    the wrong approach. The best solution in my mind is more
    transparency and more competition, and you mentioned some of
    that earlier in some other answers. Discussing these issues
    with you earlier, you clearly feel the same way. But we also
    discussed the grassroots effort that your organization took to
    get to this point, and I was wondering if maybe you could
    describe the voluntary 75 percent plan and the process that
    your organization uses to get your policy positions.
        Mr. Schiefelbein. Yes, I'd be glad to. And basically, we
    know negotiated trade is important. We know it's important. We
    know it's important to our members. So the question then became
    within our membership is we have the control because a buyer
    and a seller must agree on a way to sell an animal for it to go
    forward. So how do we push more negotiated trade into the
    system? So what we did is we put together a voluntary approach
    that said, producers, we know negotiated trade is important.
    How can we elevate this and especially in key regions? And we
    set targets, so we put robust marketing targets at each region
    to say if we meet this goal, the likelihood of successful price
    discovery is high. And we implemented that. And the remarkable
    results where we doubled in the State of Texas the percent of
    negotiated trade and met that threshold 75 percent or more of
    the time all the way through. So it was an incredibly good
    experience.
        Mrs. Fischbach. Thank you. And just, as I mentioned
    earlier, you are a constituent of mine. I have been out to the
    farm and visited with your family. But I just wanted you to
    maybe take a moment to briefly talk about the family and the
    farm so that we understand a little bit better about the
    company.
        Mr. Schiefelbein. Yes, and one thing maybe that this group
    could take to heart is we're a family affair, a large family
    affair. Just like this body, we have differing opinions, and
    when you have differing opinions, respect each other, but you
    have to go forward with something. And what we found out is
    when a body disagrees on an item, we don't keep pushing that
    item and pushing that item and pushing that item. And I think
    that plays well into the mandate question. We have lots of
    potential solutions for our industry to go forward, yet we
    continue to come back and say how do we get government involved
    in marketing through mandates when clearly that's a divisive
    wedge issue. Why can't we move on to some outcomes that are
    positive just like in the family that say let's do this item
    that makes sense that we all can agree on? And I would share
    that's probably the most fundamental thing similar to our farm
    that would show value in the Congress.
        Mrs. Fischbach. Thank you very much. And I appreciate that,
    and I yield back, Mr. Chairman.
        The Chairman. Thank you very much. And now the gentleman
    from Nebraska, Mr. Bacon, you are recognized for 5 minutes.
        Mr. Bacon. Thank you, Mr. Chairman, and I hope you don't
    mind a guy named Bacon asking some good beef questions to you.
        So in our district we have a lot of feedlots. We also have
    a lot of meat processing plants, so I think it is really
    important that we get this right for all involved with a
    balanced policy.
        So the first question is to Mr. Schiefelbein. Can you
    briefly talk us through the recent fed cattle and beef price
    trends and, in your opinion, are those reflective of market
    supply and demand? And how do these prices compare to pre-
    pandemic?
        Mr. Schiefelbein. Yes. And that's the perspective. That's a
    fantastic, fantastic question. From a perspective standpoint,
    everybody has to understand it's so hard to realize what you
    just lived through, but if you look at what occurred with a
    pandemic to the beef industry, there has never been anything
    like it before. When you talk about 40 percent of your market
    share disappearing overnight, I mean, the effect to the
    economy, to the beef industry is huge. And then you have to
    study on why it occurred the way it did, and that's where I
    think the question is really good.
        From a simplicity standpoint, when you have cattle numbers
    like this and you have to push them through a processing
    pipeline this size, somebody has to decide which of these
    cattle make it through the pipeline. In America, capitalism
    does that through describing prices. And so you're basically
    forced to say, through pricing, how do we eliminate this many
    cattle to this many cattle? And that's a huge price fall that
    occurred in the fed cattle market.
        Then I just want to say on the flipside people wonder why
    the beef price went so high. The beef price on the other hand
    went from that small funnel to all these producers who want
    good American beef, right? so that's why the discrepancy
    occurred. There was a funnel in the middle that had to ration
    on the left side and they had to ration on the right side and
    that's where the price discrepancy----
        Mr. Bacon. So it sounds like the answer is more capacity.
    And it takes a lot of capital investment to do that. What is
    the role for Congress in trying to facilitate more capacity?
        Mr. Schiefelbein. And it's going to go contrary to a lot of
    what Congress likes to do and that is as you put on more
    regulations, red tape, and oversight, okay, as you put on all
    three of those, it actually hinders the ability of mid- to
    small-packers to compete with large packers who can put in an
    enormous amount of the top line if you will into that. So you
    have to be able to--how do we streamline getting these in the
    process with the least amount of red tape and allow them to
    function efficiently?
        Mr. Bacon. A follow-up question with you there, sir. You
    mentioned the importance of knowing the results of the DOJ
    investigation before we go forward attempting to fix some of
    these alleged problems. Do you worry that Congress or the
    Administration are rushing ahead to attempt to fix problems
    that don't exist or that we simply don't know enough about at
    this point? What are your thoughts?
        Mr. Schiefelbein. I don't know. I wish I knew, and that's
    where, again, that--shining the light on that would be better.
    I'm hopeful. I'm an optimistic person at heart, so I'm hopeful
    that the answer is they just haven't come around to it yet and
    they're not trying to withhold information from us. So that's
    my optimistic nature.
        Mr. Bacon. So it is better to ready, aim, fire versus fire,
    ready, aim Feds first.
        Mr. Schiefelbein. Yes, sir. Yes, sir.
        Mr. Bacon. To all the panelists, I am curious, are any of
    you or your businesses directly involved in the trade of fed
    cattle with at least one meatpacker? If so, how often and can
    you describe what your typical interactions might be with that
    packer, just--do you deal with one or more packers, and what
    has been your relationship?
        Mr. Young. No, I said earlier I don't deal directly with
    the packers. I'm a cow-calf guy. I breed them, raise them, then
    sell them off as calves at 7 to 10 months of age to either a
    feeder or whomever purchases them, and they feed them out and
    have to sell their cattle through a packer, so the consumer can
    purchase their product. But I don't deal with them at all.
        Mr. Bacon. Thank you.
        Mr. Stockton. Yes, and I have probably sold calves to Mr.
    Schiefelbein.
        Mr. Bacon. Okay. Well, I appreciate your testimony today
    and we are learning from you, so I am grateful for your time.
    Thank you. Mr. Chairman, I yield back.
        The Chairman. The gentlelady from Florida, Mrs. Cammack, is
    recognized for 5 minutes.
        Mrs. Cammack. Well, thank you, Mr. Chairman, Ranking Member
    Thompson. I am very excited about this particular hearing as I
    come from a small cow-calf operation myself. I grew up on a
    small ranch in Colorado, so I appreciate and sympathize with a
    lot of our witnesses here today.
        Livestock is one of the most important agricultural
    commodities in my district and certainly in our state. And what
    I hear on the ground from our producers in Florida is a far
    more nuanced and complex picture of the current challenges
    facing the livestock industry than this Administration and the
    Majority are willing to admit. The Florida cattlemen are
    adamantly opposed to a cattle market mandate, and when I hear
    from folks back home, they typically express their concerns
    about government intervention and overreach that jeopardizes
    their own futures. Many of the mandates that have been
    proposed, the attacks on packers of all sizes, and an all-out
    war on the livestock industry, our producers from this
    Administration that has chosen to wage war in the name of
    unfounded, unproven allegations will ultimately do more harm
    than good to the folks that I know back home but of course
    elsewhere. Honestly, this seems like an oversimplification of a
    very complex issue is going to do more harm than good.
        Now, to that end, Mr. Schiefelbein--and I am so sorry, I am
    probably butchering that--I would like to pick your brain about
    what I perceive to be a very real threat to the industry.
    Cattle producers are the first line of defense in protecting
    the land, the environment, and our natural resources. Sadly or
    unsurprisingly, this Administration has ignored this fact and
    instead marshaled its regulatory agencies to stage an all-out
    assault on our livestock producers with a slew of burdensome
    regulations that lack both science and logic, for example, the
    April 11 SEC published rule talking about greenhouse gases
    emissions and the disclosures for publicly traded companies.
    Now, our producers may not immediately be impacted, but this
    may require these companies to disclose emission rates from
    their supply chain, which could include our cattle producers.
        So how does regulatory dysfunction at the Federal level, as
    I just mentioned, impact our U.S. cattle producers? And are you
    concerned that this Administration may be pushing an agenda
    that is based far beyond real, credible scientific evidence?
        Mr. Schiefelbein. To answer the question, yes, absolutely.
    There are times when facts don't matter, and facts should drive
    everything. If you look at the National Cattlemen's Beef
    Association, how we differ from many other organizations is we
    are fact-based. So what the truth is, is what the truth is, and
    when they start to hurtle around emissions that are way beyond
    the reality of what's occurring out there, boy, you start to
    diminish the case and diminish the reality of what we're
    dealing with. So to me it's all about getting the right
    information and the right people and promoting it correctly.
        If you look at the environmental grab of like Waters of the
    United States, to me, that is an all-out grab to take away
    stewards of the environment and put the government in charge.
    And, just from my perspective I would encourage anybody who
    believes the government should have more say in managing
    resources to come out by me and look at the land that the
    government owns and manages, contrasted with the land that our
    private citizens own, and I think there would be not a soul in
    here who wouldn't say the movement towards more government
    control and reach over environmental controls is not healthy
    for the industry.
        Mrs. Cammack. Thank you. Thank you, Mr. Schiefelbein. And I
    might just call you Don so that I don't continue to butcher
    your name----
        Mr. Schiefelbein. That's fine.
        Mrs. Cammack.--but I do appreciate that answer. And I do
    appreciate the fact that you have your hat sitting properly on
    the table. That is how I know that you are a true country boy.
        Now, you just further proved my point that the regulatory
    environment has helped kill our small- and midsize processors
    and packers. And I know it is not just from your testimony
    today but I can name about a half a dozen of these operations
    that have dissolved and are up for sale. And, it is just
    because simply the margins aren't there. We know that the
    margins aren't there. And I can tell you from experience that
    we don't always know what our inputs are. And I would challenge
    our producers to check on what our inputs are.
        Now, this is an ever-evolving situation, and we know that
    is in large part because of the government overreach that we
    are experiencing. When you have operations that are processing
    up to 2,500 cattle a week and they still can't make the numbers
    work and you would need at least 2,500 a week to make a
    regional dent in the marketplace, this isn't a mismanagement
    issue. This is a fact that this government and this
    Administration are doing more to harm our producers and by
    extension the industry and the very vertically integrated
    system that we have, and we cannot sustain the regulatory
    environment to make these operations work. So it is just not
    tenable, and I thank you all for being here today. I know that
    this is something that is a very complex and nuanced issue, but
    to our witnesses for appearing before the Committee, thank you
    for your testimony, and thank you to the Chairman and the
    Ranking Member for hosting a hearing on this very, very
    important topic. And with that, I yield back.
        The Chairman. The gentleman from Iowa, Mr. Feenstra, is now
    recognized for 5 minutes.
        Mr. Feenstra. Thank you, Chairman Scott, Ranking Member
    Thompson. Thank you to the witnesses concerning this very tough
    topic.
        During my time today, I would like to ensure that Iowa
    producers have a seat at the table by discussing Iowa issues
    concerning market reform. I have three out of four packers in
    my district. I have traveled all 39 counties in my district at
    least twice a year, and I hear the critical concerns of my
    producers about the industry. My district ranks number one in
    pork, number three in poultry, number six in cattle and calves,
    and out of 431 Congressional districts that sell agricultural
    products, my district ranks second. With all this information,
    one can conclude that agriculture is truly the economic engine
    in my district.
        According to the report from the University of Nebraska,
    the USDA cattle region with the highest cattle grading is the
    Iowa-Minnesota region. In fact, over 94 percent of the cattle
    in my region grade over 80 percent choice. This compares to
    less than 13 percent from Texas, Oklahoma, and the New Mexico
    region.
        Midwest cattle producers are hurting. They see everyone in
    the supply chain making large profits while they are losing
    anywhere from $100 to $150 a head. Fairness and transparency
    creates a sustainable agriculture supply chain, which is
    critical to our producers.
        The processing of cattle is mostly operated by four packers
    that control nearly 85 percent of the market. This market share
    lets them control the price through contracts, manage the
    amount of animals being slaughtered through line speeds, and
    the control of supply livestock to their satisfaction. The
    system is set up where the packers will never see a loss,
    creating massive guaranteed profits while rural farmers lose
    their livelihoods.
        We noted this earlier with one of the witnesses, Don
    Schiefelbein, saying that several months ago in Arizona four of
    the large meatpackers agreed to provide information to a
    cattlemen's organization for a producer-led initiative to
    achieve 75 percent of the negotiated trade needed for robust
    price discovery in each reporting region. Feeders made an
    effort to meet this voluntary threshold, but the initiative
    failed due to the lack of packer participation. Packers can
    manipulate the regional supply of cattle by simply shifting
    their captive supply from one region to the next. Without more
    transparency in the market, we will continue to see these
    downfalls.
        Senator Grassley said it best yesterday in their hearing in
    the U.S. Senate. In order to have a sustainable supply of meat,
    we need transparency in the marketplace and to protect the
    market from collapsing when there are supply chain disruptions.
    My producers in Iowa are constantly telling me that there is a
    lack of competition, an argument I often hear about the
    alternative marketing agreements increase efficiency. With the
    packers and the corporate feedyards that--they have
    relationships with only one, and that benefits them. The small
    producers don't, and certainly the consumers don't either.
        I want to be very clear. Efficiency is not an excuse for
    exploitation, and what is happening right now is the
    exploitation of smaller independent producers for the benefit
    of the big four.
        I taught economics at Dordt University. I am a strong
    champion of a fierce, competitive free market. However, open
    markets need free entry. It is clear that the cattle market is
    insufficient because there is no one that has access to the
    same information. It is because of this that I am a supporter
    of my Senate colleagues, Senator Grassley and Senator Fischer's
    Cattle Price Discovery and Transparency Act (S. 4030), and I
    intend to lead this bill with Congresswoman Axne to get it to
    the House Floor. The legislation has 19 bipartisan cosponsors
    in the Senate, and I am hopeful that we will receive the same
    support in the House.
        We all agree that cattle production is one of the most
    important agricultural industries in the United States,
    consisting of over 700,000 farms with more than 90 percent
    being family-owned or operated. Any manipulation of the markets
    that would threaten this must come to light. As the voice of
    our country's producers, it is our job and our responsibility
    and our duty to expose any inequity. Iowa's small independent
    producers deserve a level playing field, and it is time for the
    big packers to play by the rules that were set long ago.
        With that, I yield back.
        The Chairman. Thank you very much, Mr. Feenstra. And let me
    just say we come to the end of our first panel, and I just want
    to thank you, each of you, Mr. Young, Mr. Stockton, Mr.
    Schiefelbein. I hope I got that right. This has been just so
    revealing. It has been helpful to open our minds and our eyes
    to much of what we have been only dimly aware. And that is why
    I wanted to have the ranchers here. And you spoke for them. And
    this helps us tremendously.
        And now what I want to do, Mr. Young, Mr. Stockton, and Mr.
    Schiefelbein, is just to let you know that we are determined to
    bring some corrections so we can make sure that we don't have
    our cattle farmers not being able to make a profit in 4 years.
    We want to reverse the trend of them selling their farms, of
    their next generation, their children not being able to even go
    into the business.
        The meatpackers and the farmers, the beginning of our beef
    supply line, and here at the end and then our consumers, these
    are the main features that this Committee is vitally concerned
    about. But at the heart of it are you all who produce the
    cattle, put the time in, the years in, and we have listened
    carefully and we understand what we need to do. And you all
    have been very helpful. God bless you, and you have inspired
    this Committee to respond and join with our next panel because
    we can't come to this solution without the meatpackers. We are
    all partners in this. We are the greatest agriculture system in
    the world, and you all have given us the information to correct
    this imbalance. So I thank you.
        And right now, we are going to take a 5 minute break, get
    our other panel in of our CEOs while you all remove yourselves,
    and we will re-adjourn in 5 minutes. Thank you once again.
        [Recess.]
        The Chairman. Our hearing will now come to order. Thank you
    all. We now are going to start our second panel with the Chief
    Executive Officers of the four meatpacking companies. And I
    certainly want to--I see my good friend Senator Chuck Grassley
    has joined us in the back. Welcome, my friend. As I mentioned a
    little earlier ago, the Senator called me awhile back, came
    over and met with me in my office, shared the bill. So I think
    it is very important because we are moving both in the Senate
    and in the House to try to make sure that we bring together an
    effective piece of legislation to address this issue, to make
    sure that our ranchers are getting equity, to make sure that
    the next generation of farmers who are family members remain in
    the business. So we are going to address that right now, and
    thank you. Nice having you, Senator Grassley.
        And right now, we are going to introduce our panelists. And
    our first witness for our second panel today is Mr. David
    MacLennan, who is the Chief Executive Officer of Cargill,
    Incorporated. Our second witness is Mr. Tim Schellpeper, the
    Chief Executive Officer of JBS USA Holdings, Incorporated. Our
    third witness is Mr. Tim Klein, the Chief Executive Officer of
    National Beef Packing Company, LLC. And our fourth and final
    witness today is Mr. Donnie King, the Chief Executive Officer
    of Tyson Foods.
        And first, what I want to do is to ask our witnesses to
    please raise your right hand and please jointly state your name
    for the record.
        Mr. MacLennan. David MacLennan.
        The Chairman. Oh, you may need to unmute.
        Mr. MacLennan. I am unmuted.
        The Chairman. All right.
        Mr. MacLennan. Can you hear me?
        The Chairman. Yes, I can. And you are?
        Mr. MacLennan. I am David MacLennan of Cargill.
        The Chairman. Okay.
        All right. Thank you. Mr. Schellpeper? You might want to
    unmute. Please state your name.
        Mr. Schellpeper. Tim Schellpeper.
        The Chairman. Thank you. This was very important, this
    hearing. Our final witness is Mr. Donnie King. Please state
    your name, the chief executive officer of Tyson.
        Mr. King. Donnie King.
        The Chairman. Great. It is important to have your names
    stated because we will now swear you in. Again, will all
    witnesses please raise your right hand?
        Now, do you solemnly swear that this testimony you are
    about to give today before this Committee in the matters under
    consideration is the truth, the whole truth, and nothing but
    the truth?
        Mr. MacLennan. Yes.
        Mr. Schellpeper. Yes.
        Mr. Klein. Yes.
        Mr. King. Yes.
        The Chairman. Thank you very much. I want to, first of all,
    express my deep appreciation for the CEOs to join us today
    because we cannot come together with solutions to deal with
    this important issue without the input and the discussion with
    the Chief Executive Officers. And so I want to thank you for
    taking the time to come and help us solve the issues that will
    be presented here today.
        And so with that, let's get right to it. Mr. MacLennan, we
    will start with you. Please begin when you are ready.

             TESTIMONY OF DAVID W. MacLENNAN, BOARD CHAIR,
    PRESIDENT, AND CHIEF EXECUTIVE OFFICER, CARGILL, INC., WAYZATA,
                                   MN

        Mr. MacLennan. Thank you, Chairman Scott, Ranking Member
    Thompson, and Members of the Committee, and thank you all for
    inviting me here today to discuss the food system, the shared
    challenges we face to ensure that food is produced and
    delivered safely, responsibly, and reliably in the United
    States, as well as around the world.
        The food system has been remarkably resilient through the
    challenges of the last 2 years. We've faced an ongoing
    pandemic, extreme weather conditions, and global disruptions.
    Still, food shortages have been rare, and we've maintained good
    supplies due to the essential work of those in the sector.
        My name is Dave MacLennan, and I am the CEO of Cargill.
    Cargill is 155,000 people working across the globe to nourish
    the world in a safe, responsible, and sustainable way. Our
    operations are broad. We bring together people, ideas, and
    resources to deliver products, technology, and ways of
    operating that build successful businesses in communities. We
    produce a range of edible oils used in restaurant and home
    cooking, as well as ingredients for food and beverage
    companies. We provide biobased solutions across industries,
    including construction materials, paints, and beauty products.
    We support better animal health and nutrition with feed and
    premix options. We help farmers finance their operations,
    manage risk, and improve their soil. And we process beef,
    turkey, value-added meats, and egg products for retail, food
    service, and processing customers. We also innovate by
    producing alternative proteins, including plant-based proteins.
        Today, I am here to talk about North American protein, one
    of Cargill's many businesses. It is headquartered in Wichita,
    Kansas, and it employs more than 28,000 people in 19 states. We
    operate facilities, distribution centers, feed mills, and
    hatcheries in rural communities across the U.S.
        The jobs that Cargill employees do every day in these
    facilities put protein on the family table for millions of
    Americans. We recognize their contributions with competitive
    compensation and benefits like onsite medical care, nearby
    wellness clinics, and housing support. We increased base pay
    significantly over the past 2 years to recognize the critical
    role that they play during COVID and as frontline workers.
        We acknowledge that the rising price of many goods,
    including food, poses significant challenges for consumers
    worldwide. The price for meat is not immune to the global
    factors that are causing inflation. Supply and demand, labor
    constraints, transportation challenges, and rising feed costs
    add even greater pressure, and it all leads to increased prices
    at retail.
        Meatpacking is a complex and cyclical business. The size
    and scale of our operations provides the agility to help
    mitigate volatility and ensure that food is efficiently brought
    from farm to table. We are providing a consistent food supply
    and strengthening the resilience of the food system to mitigate
    disruptions. We are actively hiring to reduce labor shortages,
    increasing wages, and benefits for employees and investing in
    our plants so that they are run as efficiently and as safely as
    possible.
        We welcome competition to the industry and support the
    dynamics of a free market. We believe in price transparency and
    fair, open markets. In our North American protein business, for
    example, Cargill consistently purchases \1/3\ of our cattle on
    a cash basis. We are also committed to empowering and improving
    the livelihoods of the people who grow and raise our food. Our
    partnerships with farmers and ranchers are critical in
    delivering quality, affordable protein to groceries and
    consumers across the U.S. We know how hard and cyclical the
    cattle industry is. It is critical to all of us that ranchers
    sustain their operations and navigate market volatility.
        Mr. Chairman and Ranking Member Thompson, we appreciate the
    work you and the Members of this Committee do to support
    America's farmers and ranchers. Cargill is a proud American
    company founded in 1865 in the farming community of Conover,
    Iowa, with the goal of providing markets for farmers. And from
    that day on we've known that if producers aren't successful,
    our company won't be. Thank you for the opportunity to address
    the Members of this Committee, and I look forward to answering
    your questions.
        [The prepared testimony of Mr. MacLennan follows:]

     Prepared Testimony of David W. MacLennan, Board Chair, President, and
              Chief Executive Officer, Cargill, Inc., Wayzata, MN
        Chairman Scott, Ranking Member Thompson, Members of the Committee:

        Thank you for inviting me here today to discuss the food system and
    the shared challenges we face to ensure food is produced and delivered
    safely, responsibly and reliably in the United States and around the
    world.
        The food system has been remarkably resilient through the
    challenges of the last 2 years. We've faced an ongoing pandemic,
    extreme weather conditions and global disruptions. Still, food
    shortages have been rare and we have maintained good supplies due to
    the essential work of those in the sector.
        My name is Dave MacLennan and I am the CEO of Cargill.
        Cargill is 155,000 people working across the globe to nourish the
    world in a safe, responsible and sustainable way.
        Our operations are broad. We bring together people, ideas and
    resources to deliver products, technology and ways of operating that
    build successful businesses and communities.
        We produce a range of edible oils used in restaurants and home
    cooking, as well as ingredients for food and beverage manufacturers and
    food service companies.
        We provide biobased solutions across industries, including
    construction materials, paints and beauty products.
        We support better animal health and nutrition with feed and premix
    options.
        We help farmers finance their operations, manage risk and improve
    their soil.
        And we process beef, turkey, value-added meats and egg products for
    retail, food service and processing customers. We also innovate by
    producing alternative proteins, including plant-based.
        My understanding is that today's hearing is focused on North
    America protein, one of Cargill's many businesses. Cargill Meat
    Solutions Corporation is headquartered in Wichita, Kansas, and employs
    more than 28,000 people in 19 states. It operates facilities,
    distribution centers, feed mills and hatcheries in rural communities
    across the U.S.
        The jobs Cargill employees do every day in these facilities put
    protein on the table for millions of Americans. We recognize their
    contributions with competitive compensation and benefits like onsite
    medical care, nearby wellness clinics and housing support. We increased
    base pay significantly over the past 2 years to recognize the critical
    role they play as frontline workers.
        We acknowledge that the rising cost of most goods--including food--
    poses significant challenges for consumers worldwide. The price for
    meat is not immune to the global factors impacting inflation. Supply
    and demand, labor constraints, transportation challenges and rising
    feed costs add even greater pressure on supply chains and are resulting
    in increased prices at retail.
        Meatpacking is a complex and cyclical business. The size and scale
    of our operations provides the agility to help mitigate volatility and
    ensure food is efficiently brought from farm to table.
        We are providing a consistent food supply and strengthening the
    resilience of the food system to mitigate disruptions. We are actively
    hiring to reduce labor shortages, increasing wages and benefits for
    employees and investing in our plants so that they are run as
    efficiently and as safely as possible.
        We also welcome competition to the industry and support the
    dynamics of a free market.
        We believe in price transparency and fair, open markets. In our
    North America protein business, for example, Cargill consistently
    purchases a third of our cattle on a cash basis.
        We also are committed to empowering and improving the livelihoods
    of the people who grow and raise our food. Our partnerships with
    farmers and ranchers are critical in delivering quality, affordable
    protein to groceries and consumers across the U.S.
        We know how hard and cyclical the cattle industry is. It is
    critical to all of us that ranchers sustain their operations and
    withstand market volatility.
        Mr. Chairman and Ranking Member Thompson, we appreciate the work
    you and the Members of this Committee do to support America's farmers
    and ranchers. Cargill was started in 1865 in the farming community of
    Conover, Iowa, with the goal of providing markets for farmers. From
    that day on, we've known that if producers aren't successful, our
    company won't be.
        Thank you for the opportunity to address the Members of this
    Committee. I look forward to answering your questions.

        The Chairman. Thank you, Mr. MacLennan.
        And now Mr. Schellpeper, please begin when you are ready.

     TESTIMONY OF TIMOTHY O. SCHELLPEPER, CHIEF EXECUTIVE OFFICER,
                   JBS USA FOOD COMPANY, GREELEY, CO

        Mr. Schellpeper. Good afternoon, Chairman Scott, Ranking
    Member Thompson, and Members of the Committee. Thank you for
    having me. My name is Tim Schellpeper. I've been part of the
    U.S. beef, food, and agriculture industry for more than 35
    years, dating back to my first job out of college in 1987. I
    joined JBS in 2017, and I became CEO of JBS USA this past
    January.
        I'm also a proud fourth-generation farmer. My wife of 31
    years and I operate the farm that I grew up on, which my great-
    grandfather originally settled in Nebraska in 1887. Our land
    sits in the heart of cattle country surrounded by farms and
    feedlots, many of which supply cattle to JBS. I am both a
    friend and a customer to many of my neighbors.
        JBS USA [holds a majority interest in] Pilgrim's Pride, the
    second-largest poultry producer in the United States. We employ
    67,000 team members, mostly unionized across the country, and
    we contribute millions of dollars each day to local economies
    through purchases of livestock, poultry, and plant supplies.
        At JBS we strive to create a better future. Our success has
    allowed us to strengthen many small towns and give back to our
    rural communities. We are investing $100 million to support
    local projects through our Hometown Strong Program. We are
    building new recreation centers, improving access to affordable
    housing, and refurbishing schools and parks. We care about our
    team members and their families. We offer full benefits and
    recently dedicated more than $150 million in annualized wage
    increases to our employees in our beef division alone. Our
    average facility wages are nearly $24 per hour with starting
    wages at or above $20 per hour. We've increased wages by more
    than 40 percent since 2017 and on average our wages are 25 to
    50 percent higher than many local businesses. We provide up-
    front free community college tuition for our team members and
    their dependents with the goal for our program to become the
    largest privately funded free community college initiative in
    America.
        JBS is dedicated to improving the sustainability of our
    operations. We've committed to achieve net-zero greenhouse gas
    emissions by 2040 and will invest $1 billion to reduce
    emissions from our facilities. By 2030 we will invest $100
    million in on-farm research to help producers reduce their
    emissions. In recent months we've contributed $1.3 million in
    climate change research projects in partnerships with NGOs and
    universities, including a $700,000 contribution to the
    University of Nebraska-Lincoln to help build a new Feedlot
    Innovation Center.
        Now, I understand that one of the topics that this
    Committee would like to address today is the pricing in the
    cattle and beef industries. Historically, cattle were sold in
    lots, and every animal on the lot received the same average
    price. To achieve a better return on their investment,
    cattlemen created alternative marketing arrangements, or AMAs,
    with processors. AMAs allowed producers to realize premium
    prices for their investments in genetics, animal health,
    management, and marketing. They also help ensure consistent
    supply of quality cattle, which result in a consistent supply
    of high-quality beef for consumers.
        For our part, JBS purchases from cattle feeders and
    producers of all sizes in cash markets, auction barns, video
    auctions, and under AMAs. We are active in the cash market
    every day, and we will compete for quality cattle in the market
    wherever and however producers wish to sell them.
        As for the prices paid by consumers, inflation is a
    significant concern across the entire U.S. economy. The prices
    for beef are no exception. It is important to note, however,
    that we do not--at JBS we do not control retail prices for
    beef. We instead sell our products to wholesale groceries--
    wholesale prices to grocery stores, food service operators, and
    other intermediaries, and those prices have decreased this past
    year.
        Nonetheless, despite increases in the cost of labor,
    transportation materials since the beginning of the pandemic,
    as well as increased costs, our facilities have largely
    returned to pre-pandemic processing levels. This has created
    higher returns for producers and lower wholesale beef prices as
    cattle supply and processing demand come closer in balance.
        JBS is committed to supporting innovation, transparency,
    and enhancing incentives to keep the U.S. cattle industry
    competitive for all participants. We will continue to invest in
    our people, our facilities, and our communities to help ensure
    a sustainable, affordable, and resilient beef supply. Thank you
    for the opportunity to speak with you, and I look forward to
    your questions.
        [The prepared testimony of Mr. Schellpeper follows:]

    Prepared Testimony of Timothy O. Schellpeper, Chief Executive Officer,
                       JBS USA Food Company, Greeley, CO
    Introduction
        Good afternoon, Chairman Scott, Ranking Member Thompson, and
    Members of the Committee. Thank you for having me.
        My name is Tim Schellpeper. I have been part of the U.S. food and
    agriculture industry for more than 35 years, dating back to my first
    job out of college in 1987. I joined JBS in 2017, and I became CEO of
    JBS USA this past January.
        I am a proud fourth generation farmer. My wife of 31 years and I
    operate the farm I grew up on, which my great-grandfather originally
    settled in Nebraska in 1887. Our land sits in the heart of cattle
    country, surrounded by farms and feedlots, many of which supply cattle
    to JBS. I am both a friend and customer to many of my neighbors.
    JBS USA Food Company
        JBS USA produces beef and pork, and we hold a majority interest in
    Pilgrim's Pride, the second largest poultry producer in the U.S. We
    employ more than 67,000 team members across the country and contribute
    millions of dollars each day to local economies through purchases of
    livestock, poultry, and plant supplies.
        At JBS, we strive to create a better future. Our success has
    allowed us to strengthen many small towns and give back to our rural
    communities. We are investing $100 million to support local projects
    through our Hometown Strong program--building new recreation centers,
    improving access to affordable housing, and refurbishing schools and
    parks.
        We care about our team members and their families. We recently
    dedicated more than $150 million in annualized wage increases to
    employees in our beef division alone. Our average beef facility wages
    are nearly $24 per hour, with starting wages at or above $20 per hour.
    We've increased wages by more than 40% since 2017 and, on average, our
    wages are 25-50% higher than other local businesses. We provide up-
    front, free community college tuition for our team members and their
    dependents, with a goal for our program to become the largest,
    privately-funded, free community college initiative in rural America.
        JBS is dedicated to improving the sustainability of our operations.
    We've committed to achieve net-zero greenhouse gas emissions by 2040,
    and will invest $1 billion to reduce emissions in our facilities. By
    2030, we will invest $100 million in on-farm research to help producers
    reduce their emissions. In recent months, we've contributed $1.3
    million to climate change research projects in partnership with NGOs
    and universities, including a $700,000 contribution to the University
    of Nebraska-Lincoln to help build a new Feedlot Innovation Center.
    Cattle Industry
        I understand that one of the topics the Committee would like to
    address today is pricing in the cattle and beef industries.
    Historically, cattle were sold in lots and every animal in the lot
    received the same average price. To get a better return on their
    investments, cattlemen created alternative marketing arrangements, or
    `AMAs,' with processors. AMAs allow producers to realize premium prices
    for their investments in genetics, animal health, management and
    marketing. They also help ensure a consistent supply of high-quality
    cattle, which results in a consistent supply of high-quality beef for
    consumers.
        For our part, JBS purchases cattle from cattle feeders and
    producers of all sizes, in cash markets, auction barns, video auctions,
    and under AMAs. JBS is active in the cash cattle market every day, and
    we will compete for quality cattle in the market wherever and however
    producers wish to sell them.
    Inflation
        As for the prices paid by consumers, inflation is a significant
    concern across the entire U.S. economy. The prices for beef are no
    exception. It is important to note, however, that we at JBS do not
    control the retail prices that consumers pay for beef. We instead sell
    our products at wholesale prices to grocery stores, food service
    operators and other intermediaries, and those prices have decreased
    since last year.
        Nonetheless, despite increases in the cost of labor,
    transportation, and materials since the beginning of the pandemic, as
    well as recent increases in costs, our facilities have largely returned
    to pre-pandemic processing levels. This has created higher returns for
    producers and lower wholesale beef prices, as cattle supply and
    processing demand come closer into balance.
    Conclusion
        JBS is committed to supporting innovation, transparency, and
    enhancing incentives to keep the U.S. cattle industry competitive for
    all participants. We will continue to invest in our people, our
    facilities, and our communities to help ensure a sustainable,
    affordable and resilient food supply.
        Thank you for the opportunity to speak with you today, and I look
    forward to your questions.

        The Chairman. Thank you, Mr. Schellpeper. And now Mr.
    Klein, please begin when you are ready.

              TESTIMONY OF TIM KLEIN, PRESIDENT AND CHIEF
     EXECUTIVE OFFICER, NATIONAL BEEF PACKING COMPANY, LLC, KANSAS
                                CITY, MO

        Mr. Klein. Chairman Scott, Ranking Member Thompson, and
    Members of the Committee, I'm the CEO and one of the owners of
    National Beef. We are the fourth-largest packer with a market
    share of 14 percent. I'm happy to be here today to answer your
    questions and tell you about our company. I believe our story
    is a great example of what the current Administration and
    others are encouraging to create additional competition in the
    beef packing industry.
        First, I would like to provide a background of myself. I
    grew up in northwest Iowa and worked with hogs and cattle
    before going to college. I started my career in the industry in
    1980. In 1992 I had the opportunity to team up with others to
    buy a small, outdated plant in Dodge City, Kansas, that
    accounted for one percent of the industry capacity. The plant
    was going to be shut down. We knew that to succeed in a highly
    competitive, low-margin business we had to develop a business
    model different from that of our larger competitors. Our vision
    was to create a unique alliance with cattle producers and link
    them with our customers who wanted a consistent supply of high-
    quality beef.
        At the time, cattle were bought and sold in the cash market
    and brought the same price regardless of quality. There was no
    economic incentive for cattle producers to invest in genetics
    or to improve their feeding regimen to enhance the taste and
    tenderness of the beef. We developed a pricing grid that paid
    premiums to cattle producers who could deliver a higher quality
    animal than what we could buy in the cash market. Our business
    model worked. Although we were a smaller company with higher
    operating costs, we could compete effectively with the larger
    packers.
        In 1997 we were approached by U.S. Premium, a group that
    today represents a network of 2,400 cattle ranchers, farmers,
    and feedlot owners across 38 states. Their vision was aligned
    with ours, and they became a partner in the ownership of
    National Beef. Over time, using cattle performance, data
    provided by us, their members improved the quality of the
    cattle they produced. Today, U.S. Premium beef provides us with
    over one million head of cattle per year, putting a premium on
    those cattle, and also sharing in the profits of National Beef.
        The beef industry in the United States consists of four
    segments, the cow-calf ranchers, the backgrounders, the
    feedlots, and the packers. Profitability in each segment varies
    based on the timing of the cattle cycle and each segment's
    unique supply and demand dynamics.
        The cattle industry is a commodity business in a free
    market system. Our objective is no different than that of the
    other segments. We strive to maximize our profits within the
    constraints of a competitive marketplace.
        For more than 30 years, cattle supplies in the U.S. have
    been declining. Beef packing capacity has also been declining,
    although at a slower rate. As a result of overcapacity, beef
    packer profits have historically averaged only 2 for every
    dollar in revenue. The imbalance became most severe in 2014 and
    2015 when cattle supplies declined to the lowest level in 60
    years. Cattle prices rose to record levels, and industry
    capacity utilization dropped almost 80 percent. In the case of
    National Beef, we experienced record losses.
        In 2016, cattle supplies began increasing cyclically, and
    by 2019, capacity utilization had risen to 95 percent, a level
    of efficiency not seen in this industry for decades. Profits
    also increased, just as the laws of supply and demand would
    predict. In the summer of 2019, a fire at a large beef plant
    temporarily reduced industry capacity. Then in the spring of
    2020, COVID-related disruptions further reduced capacity by as
    much as 50 percent for several weeks. These events resulted in
    a backlog of almost one million head of cattle that were
    carried forward to the second half of 2020 and most of 2021.
    The excess supply has allowed National Beef to operate at 100
    percent of capacity for the last 2 years.
        On the demand side, COVID caused a change in consumer
    dining habits. Consumers made a choice of what protein they buy
    and what they were willing to pay for it. As they transitioned
    to eating more at home, their desire for beef increased and
    prices increased. When restaurants reopened in 2021, additional
    demand from food service buyers increased as they replenished
    their beef inventories, further adding upward price pressure.
    The combination of excess cattle supplies and unprecedented
    demand for beef resulted in record profits in 2020 and 2021.
        Those dynamics are now changing, just as they have in
    previous cattle cycles. USDA data indicates that fed cattle
    supplies are peaking and will continue to decline over the next
    several years. There have also been indications of additional
    capacity being built, including our announcement of a new beef
    plant in Iowa. History teaches us that as cattle supplies
    decline cyclically and new capacity comes online, there will be
    a shift in profits to the cattle production segments of the
    industry.
        Today, U.S. beef enjoys a reputation as the highest-quality
    beef in the world. Demand continues to grow both in the U.S.
    and globally. The opportunity for profit across all segments
    has never been better. Thank you for inviting me today, and I
    look forward to your questions.
        [The prepared testimony of Mr. Klein follows:]

    Prepared Testimony of Tim Klein, President and Chief Executive Officer,
              National Beef Packing Company, LLC, Kansas City, MO
        Chairman Scott, Ranking Member Thompson, and Members of the
    Committee, thank you for inviting me to join the discussion today. I
    have been working in the beef packing industry since 1980. I was one of
    the founding partners of National Beef in 1992 and have been Chief
    Executive Officer since 2009. As CEO, I am actively engaged in the day-
    to-day management of National Beef and lead a team of industry veterans
    that procure more than 3.5 million head of fed cattle and produce and
    sell more than 4.5 billion pounds of beef and beef byproducts annually.
        The U.S. beef industry enjoys the reputation of producing the
    highest quality beef in the world and demand for U.S. beef continues to
    grow both domestically and across the globe.
        Profitability in the beef industry is cyclical and highly dependent
    upon the cattle cycle and the resulting availability of fed cattle. For
    the reasons described below, in recent years National Beef has
    experienced exceptional financial results. We are pleased with our
    success and look forward to future opportunities to grow and improve
    our business. Our financial success directly benefits our employees,
    cattle suppliers, vendors, and the communities where we operate.
    National Beef Background
        National Beef was founded in 1992 by three partners, including me.
    Our vision was to develop a niche by creating a unique alliance with
    cattle producers and linking them with beef customers to provide a
    consistent supply of the highest quality beef available. Until that
    time, most cattle were traded in the cash market and brought the same
    price, regardless of quality. There was no clear economic incentive for
    cattle producers to invest in genetics or to change their feeding
    regimen to improve the taste and tenderness of beef. To compete against
    larger beef packers, we aligned our beef packing, marketing, sales, and
    distribution expertise with progressive cattle producers who were
    interested in earning a premium price for high quality cattle. Our
    strategy has proven successful. National Beef has grown from a small
    single-shift plant harvesting 1,500 cattle per day, which accounted for
    less than 1% of the total U.S. industry slaughter in 1992, to a
    diversified beef processing company with more than 9,500 employees. We
    process more than 13,000 head per workday in three plants, accounting
    for approximately 14% of the U.S. fed cattle market. We also operate
    further processing plants, a leather tannery, and a refrigerated and
    livestock trucking fleet. Our facilities are located in Kansas, Iowa,
    Missouri, Pennsylvania, Georgia, Ohio, and Texas.
        The ownership group of National Beef includes me, U.S. Premium
    Beef, LLC and Marfrig Global Foods, SA, a publicly traded company.
        U.S. Premium Beef, LLC (USPB) became our partner in the ownership
    of National Beef in 1997. Its membership includes more than 2,400
    cattle ranchers, farmers, and feedlot owners across 38 states.
        Over time, using data provided by us and our customers, USPB
    members have steadily improved the quality of their cattle. Today, USPB
    members provide National Beef with over one million head per year of
    the highest quality cattle in the U.S., earning a premium for those
    cattle and sharing in the profits of National Beef.
        Since USPB partnered with National Beef in 1997, we have paid more
    than $1.6 billion in profit distributions and $650 million in cattle-
    quality premiums to USPB and its cattle producer members.
    Beef Industry Segments
        The infographic below shows that the cattle and beef production
    industry begins with the cow-calf sector. This is where key decisions
    regarding herd size expansion or contraction, quality genetics, and
    animal health are made by hundreds of thousands of individual farmers
    and ranchers. According to USDA data, in 2021 there were approximately
    30.1 million beef cows in the U.S. held in more than 700,000 herds; the
    average size of a cow herd was about 43 cows.
    Figure 1: The Beef and Cattle Industry from Animal Breeding to
            Consumption
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: GAO analysis of U.S. Department of Agriculture and
            industry information. D GAO-18-296.

        After calves are weaned from the cow, they are typically sold to a
    cattle producer that grows the calves on pasture or other high-roughage
    feeds before selling them to a feedyard where they are fed a high-
    energy diet for approximately 180 days. When the cattle are finished
    and ready for slaughter, the feedyard sells the fed cattle to a packer.
    Cattle often change ownership multiple times throughout the process.
    Except for the cow-calf producer, all parts of the production chain
    derive their profitability from the margin difference between the
    buying cost and the selling price less the cost to produce.
        As shown in the following chart, the profitability of each part of
    the cattle and beef production chain fluctuates cyclically. As one
    considers the relationship between cattle prices, beef prices and
    relative profitability it is important to note that the supply and
    demand dynamics are different for each segment of the industry. While
    the key raw material for the beef packing segment, fed cattle are not
    the only input--labor, packaging, transportation, technology,
    regulatory compliance, capital, and risk are all required to convert
    fed cattle into beef and beef byproducts products.
    Historical Margins per Head by Sector
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: Sterling Marketing, Inc.

        Each head of cattle processed in our plants yields over 100
    different beef cuts and beef byproducts. Wholesale prices fluctuate
    daily based on each product's unique supply and demand dynamic and move
    independently of each other. Each day, beef packers are required to
    report selling prices to the USDA for many beef and beef byproduct
    items. In turn, the USDA reports aggregated pricing data daily.
        The prices that consumers pay for beef items at the retail level
    are determined by the retailer, not by the National Beef. Retail prices
    tend to be less volatile than wholesale prices. As shown in the
    following chart, most of the total retail value of beef flows to the
    cattle production and retail sectors, in contrast to the packing sector
    which gleans a significantly smaller percentage of the total value.
    Share of Consumer Beef Dollar
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA ERS.
    Beef Cattle Cycle
        Beef cattle production is a cyclical business similar to other
    boom-and-bust production agricultural enterprises. The number of beef
    cows tends to increase when there is ample pasture availability and
    good profitability and tends to decline when profits lessen or when
    drought leads to less abundance of pasture and roughage feeds.
        As shown in the chart below, the cattle cycle tends to run about 10
    to 12 years from peak to peak and trough to trough. While this periodic
    cycle has been persistent for more than a generation, each cycle high
    has been lower than the previous cycle's high. This shows that the U.S.
    cattle herd has been declining for many years. The decline in cattle
    production and historically low profitability in the beef packing
    segment explains why there has been no meaningful amount of new beef
    packing capacity added to the industry for many years.
    U.S. Cattle Inventory
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Peak inventories from the current cattle cycle are in, and
            declining supplies will be a key factor in driving higher
            prices for calves, feeder cattle and fed cattle over the next 2
            to 3 years.
              Source: Sterling Marketing, Inc.

        Due to reproductive biology and production constraints, the
    availability of fed cattle harvested and processed into beef lags the
    beef cow cycle by about 3 to 4 years. Therefore, the peak in cow herd
    numbers that occurred in 2017 was expected to result in a peak in fed
    cattle numbers in 2020-21. The subsequent decline in beef cow numbers
    that began in 2018 and is continuing at an accelerating pace today will
    result in fewer fed cattle being available for harvest for the next
    several years until the cow-calf segment halts liquidation and begins
    rebuilding the herd.
    Beef Packing Segment Profitability
        The U.S. beef packing industry has at least 30 participants
    operating more than 50 cattle slaughter and processing facilities. This
    number does not include the many very small ``locker plants'' operating
    under state inspection. As the fourth largest participant, National
    Beef operates approximately 14% of the total fed cattle slaughter
    capacity.
        In 1998, the five largest beef packers accounted for 86% of fed
    cattle slaughter capacity compared to 84% today. Thus, any discussion
    about beef packer concentration and its impact on prices or
    profitability should be framed by the fact that the beef packing
    industry has been operating at about the same degree of concentration
    for more than 20 years. As shown in the below table, during this
    period, beef packing profits have varied based on the cattle cycle and
    have averaged 2% of revenue. All else being equal, when more fed cattle
    are available for harvest, National Beef's profits tend to be higher;
    when fewer cattle are available, our profits tend to be lower.
    Beef Packing Indicative Profit Margin vs. S&P 500 Profit Margin
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: NBP management estimate of industry average beef
            packing net income margin versus net income margin of S&P 500
            companies; based on internal and publicly available
            information.

        As described above, the U.S. cattle inventory has been trending
    lower for more than 40 years. Beef packing capacity has also been
    declining, although at a slower rate. For many years, industry capacity
    has exceeded the number of cattle available for slaughter. As a result
    of this excess capacity and the overall decline in the cattle
    inventory, the packing segment has been a historically low-margin
    business, typically earning about 2 for every dollar of revenue
    generated. The imbalance in processing capacity versus cattle
    availability became particularly severe in 2014 and 2015 when fed
    cattle supplies dropped to the lowest level in 60 years--even lower
    than expected due to back-to-back widespread droughts that impacted the
    key cattle growing areas of the United States. Fed cattle and calf
    prices rose to record levels, and capacity utilization in the beef
    packing industry dropped to nearly 80%. Several poorly located and
    inefficient plants were closed. In the case of National Beef, we
    experienced record losses and closed our Brawley, California plant.
    Since 2016, fed cattle supplies have increased sharply while processing
    capacity in the industry increased only slightly. At the same time,
    customer demand for beef has been improving, both in the U.S. and in
    key export markets. By early 2019, capacity utilization had increased
    to more than 95%, an efficiency level not seen in the beef packing
    industry for decades. As cattle supply and beef demand increased,
    National Beef's profits increased accordingly, just as the laws of
    supply and demand would predict.
    Fed Cattle Availability vs. Industry-wide Weekly Capacity
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: NBP estimate based on estimated 6 day week capacity;
            adjusted for disruptions and inefficiencies related to 2019
            fire and COVID-19 pandemic.

        The demand for fed cattle and the supply of beef was abruptly
    disrupted in August 2019 when one of the nation's largest beef
    slaughter and processing facilities, accounting for approximately 5% of
    total industry capacity, suffered a major fire that resulted in that
    plant going offline until early 2020.
        Because of the fire, there was an immediate reduction in demand for
    fed cattle, but the available supply of cattle did not change. As would
    be predicted by a simple supply/demand equation, this resulted in a
    significant drop in fed cattle prices. At the same time, the supply of
    beef immediately declined while the short-term demand for beef
    increased as wholesale buyers scrambled to secure their product needs.
    This resulted in a significant increase in beef prices. Lower cattle
    prices and higher beef prices led to a temporary upward spike in
    National Beef's profits.
        The coronavirus pandemic in March 2020 further disrupted the supply
    and demand balance for fed cattle and beef. But instead of just one
    plant, the entire industry that was impacted. In April and May 2020
    many beef packing plants were closed or running at severely reduced
    capacity due to workforce absenteeism. The supply and demand dynamics
    were much the same as with the 2019 fire, but the overall impact was
    significantly greater and lasted longer.
        As a result of coronavirus-related reductions to the labor force,
    industry capacity was significantly reduced, thereby lowering the
    demand for fed cattle, resulting in lower cattle prices. At the same
    time, overall consumer demand for beef increased--while restaurant
    demand declined, retail grocery demand surged and prices for typical
    retail cuts like ground beef and roasts reached record highs as
    consumers increased their at-home dining.
        The production cutbacks resulted in a backlog of approximately one
    million head of fed cattle. These extra cattle negatively impacted
    cattle prices in 2020 and for much of 2021 before being cleared from
    the supply pipeline late last year.
    Beef Quality
        It is important to understand the basics of beef quality because it
    is fundamental to why National Beef has been successful and why
    Alternative Marketing Agreements--often called ``grids''--have been so
    important to the product quality improvements made by the U.S. beef
    industry over the past 15+ years.
        National Beef introduced grids in the 1990s. Before that time, fed
    cattle were bought using pricing methods whereby fed cattle purchased
    on a given date, regardless of quality, were obtained at the same
    approximate price. This method of selling cattle provided no economic
    incentive for a cow-calf producer to invest in improved genetics or for
    a feedyard operator to invest in a more robust feeding regimen that
    could be expected to increase the percentage of cattle that would grade
    Choice or Prime. Thus, beef quality was stagnant, contributing to a
    decline in consumer demand for beef.
        The amount of marbling (intramuscular fat) in beef is the primary
    determinant of taste and tenderness. USDA graders inspect each carcass
    and assign a quality grade based on the amount of marbling visible in
    the meat.
        Increased marbling leads to higher quality grades, improved taste
    and tenderness, and higher product value. The highest USDA grade is
    USDA Prime, followed by USDA Choice, then USDA Select. Cattle carcasses
    that grade Prime and Choice have a higher value and command premium
    prices from packer buyers versus those carcasses that grade Select.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Beef quality is driven by genetic choices made at the cow-calf
    level and feeding choices made throughout the life cycle of the animal.
    Certain beef breeds, such as Angus, tend to have higher marbling than
    other breeds, and the decision to feed a steer on a corn-based high-
    energy diet will produce beef with more marbling than from a similar
    steer fed a low-energy grass-fed diet. Different cultures prefer
    different degrees of marbling--the dominant preference in the U.S. and
    its key export markets is for a grain-finished high Choice or Prime
    graded product.
        National Beef's strategy was, and still is, to provide economic
    incentives to cattle producers to invest in genetics, feed programs and
    other tools to increase the quality of their cattle. Our grids provide
    that incentive. Cattle producers who choose to sell their cattle to
    National Beef on a quality grid earn premium prices for their cattle
    that meet the quality specifications aligned with consumer preferences
    for premium beef. This quality-grid approach has become widespread
    across the industry. It has enabled professional, motivated cattle
    producers to create value and improve their profitability by earning
    higher than average prices when selling their cattle.
        The chart below shows that quality incentives have also resulted in
    the average percentage of beef carcasses grading Prime or Choice
    increasing from 55% to 85% over the past 20 years. This dramatic
    improvement in quality has enabled a resurgence in beef demand in the
    U.S. and in our key export markets. Using current USDA-reported price
    data, this increase in grade is worth approximately $1.4 billion in
    additional value to the U.S. beef industry each year.
    USDA Choice & Higher Quality Grade %--Steers & Heifers
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA.
    Summary
        The U.S. beef packing industry is considered by many to be
    concentrated. This concentration is partly due to the historic low
    profitability that has forced weaker, inefficient participants out of
    business, and has discouraged new entrants. It is also a byproduct of
    the scale that results in significant efficiencies in slaughtering,
    processing, and marketing globally, the beef and beef byproducts that
    come from the more than 25 million head of fed cattle that American
    ranchers and farmers produce for slaughter each year. At National Beef,
    our unique business model and our scale has enabled us to access the
    capital necessary to invest in the people, equipment, and expertise
    needed to successfully navigate the intense requirements of our cattle
    suppliers, customers, and regulators.
        Notwithstanding this concentration, beef packing remains a highly
    competitive business--every day National Beef seeks to outmaneuver its
    competitors to buy the best cattle, hire the best employees, and
    satisfy the most desirable customers. Our historically narrow profit
    margins are a testament to the highly competitive nature of the beef
    packing industry.
        National Beef has benefited from increased profitability in recent
    years. This increased profitability has been driven by the cattle cycle
    and the continued growth and improvement in our operations. In the two
    most recent years, our increased profitability was due, in part, to
    powerful and unexpected external disruptions to the supply and demand
    of fed cattle and the distinctly separate supply and demand dynamics
    for many beef and beef byproducts. A significant portion of our profits
    is being reinvested in expanding our beef processing capacity, which
    will benefit the entire industry going forward.
        I appreciate the effort to understand the reasons for the recent
    increase in beef packing profitability and I respect the different
    points of view on this topic. The increase, however, should be viewed
    in the context of the history and the future of the cattle and beef
    industry.
        Since 2016, we have been in an increasingly favorable part of the
    cattle cycle which was coming to a peak around 2020. Then, just as our
    margins were nearing cycle highs, the industry was impacted by the
    August 2019 fire and the 2020 coronavirus pandemic--both of which
    created supply/demand dynamics that favorably impacted and extended the
    peak in our profitability.
        USDA data shows that fed cattle supplies have peaked and will
    continue to decline over the next several years. The cattle cycle has
    turned in favor of the cattle production sectors. Fed cattle prices are
    15% higher than 1 year ago while wholesale boxed beef prices are 5%
    lower. We expect cattle prices to trend higher, beef prices to moderate
    and return to a more normal seasonal trend, and National Beef's profit
    margins to compress.
        We also believe that because of the improved quality of U.S. beef
    cattle and the growth in demand for U.S. beef and beef byproducts,
    profits across all segments of the industry will settle into a higher
    range than in previous cycles.
        While National Beef's expected profits are not as attractive as
    those available in many other industries, they are sufficient to entice
    us to invest in additional new capacity. Last year, we announced the
    construction of a new beef packing and processing facility in Tama,
    Iowa. That project is underway with an expected completion date in
    2025. Once operational, this new facility will have the capacity to
    harvest 2,500 head per day and will replace the much smaller, older
    facility that we currently operate in Iowa.
        In addition to our new Iowa plant, several other groups have
    announced plans to build additional capacity. We believe this is an
    encouraging sign for the future of the U.S. beef industry.

        The Chairman. Thank you, Mr. Klein. And now Mr. King,
    please begin when you are ready. Mr. King, you may need to
    unmute. Mr. King?
        Mr. King. Can you hear me, Chairman Scott?
        The Chairman. Yes, we can hear you now, loud and clear.
    Welcome.
        Mr. King. My apologies, Chairman Scott, and to the
    Committee.
        The Chairman. No problem.

    TESTIMONY OF DONNIE KING, CHIEF EXECUTIVE OFFICER, TYSON FOODS,
                             SPRINGDALE, AR

        Mr. King. Chairman Scott, Ranking Member Thompson, Members
    of the House Agriculture Committee, I do appreciate this
    opportunity to discuss the economics of our business. My name
    is Donnie King, and I've been a Tyson team member for almost 40
    years. I started in Pine Bluff, Arkansas, as an hourly team
    member on the production floor and now proudly serve as
    President and Chief Executive Officer.
        In our business, unprecedented market shocks have created
    an extraordinary strain across our operations and the global
    supply chain. This has reduced our ability to produce beef at
    sufficient quantities to meet record-high consumer demand.
        Starting in early 2020, the pandemic impacted our ability
    to operate production facilities at full capacity. This was due
    in part to protocols we put in place to keep team members safe.
    We required our team members to stay home with pay if they were
    sick, tested positive, or were close contacts. We also had team
    members who stayed home to take care of their children and
    loved ones. In our beef business, these factors made it
    difficult to process all the cattle available on the market.
    This drove down the demand and prices for live cattle. At the
    same time, demand for beef skyrocketed as restaurants closed
    and Americans started cooking more meals at home. Simply put,
    production could not meet the consistently strong demand.
        Economists have agreed with this assessment, which
    underscores that the market, not Tyson, sets the price for
    cattle and beef. When a product is in oversupply in this case
    live cattle, the law of supply and demand drives down the
    prices for that product. And when a product is in strong
    demand, in this case beef, the same law of supply and demand
    drives up prices for that product. Today, the situation is
    deepened by geopolitical issues which are creating shortages of
    essential inputs such as grain. This results in higher costs,
    which is reflected in the prices American families pay at the
    grocery store.
        Some incorrectly suggest that the rise in beef prices is
    due to the consolidation of the beef industry, but the data
    doesn't support this claim. The concentration of the industry
    for commercial cattle among the four processors here today is
    69 percent and has been virtually unchanged over the past 30
    years. And in most of those 30 years the profit margins of
    ranchers and cattle producers have been much higher than the
    low single-digit margins we made as beef processors. In fact,
    in several years ranchers made a historic profit on live cattle
    while Tyson either lost money or barely broke even. This, too,
    is the market at work.
        It is important to note that Tyson returns are not solely
    the result of prices customers pay. Other factors contribute,
    including the mix of products we sell, the cost associated with
    regulations, operating more sustainably, and our efforts to
    compete for labor.
        Today, Americans are demanding higher quality and variety,
    as well as convenience, and our customers are willing to pay
    for these across the food chain, benefiting both cattle
    producers and beef processors. We're also working hard to
    become a more efficient business by investing in automation and
    innovation. This not only results in a safer workplace but also
    drives down operational costs, which in turn allows us to keep
    costs down for our customers and further invest in our team
    members and our business.
        In places like Bowling Green, Kentucky; Macon, Georgia; and
    Humboldt, Tennessee, we're increasing production capacity and
    creating thousands of new jobs. Today, these jobs pay an
    average of $24 an hour, including full retirement and medical
    benefits, or approximately $50,000 a year. Today, Tyson Foods
    operates in communities spanning 30 states. In these
    communities we invest more than $15 billion every year with
    over 11,000 independent farmers and ranchers who supply us with
    the cattle, pigs, chickens, and turkeys that we need. I want to
    say to them and all who work so hard to keep food on America's
    table, thank you.
        For many, including myself, Tyson has provided more than
    just a paycheck. Our company helps its team members and their
    families achieve their own dreams by giving them access to
    opportunity. I started at Tyson nearly 4 decades ago because I
    wanted a job. I stayed because of the company we are, the
    values we hold, and the important work we are privileged to do.
        Again, I appreciate this opportunity, and I welcome your
    questions.
        [The prepared testimony of Mr. King follows:]

       Prepared Testimony of Donnie King, Chief Executive Officer, Tyson
                             Foods, Springdale, AR
        Chairman Scott, Ranking Member Thompson, Members of the House
    Agriculture Committee, I appreciate this opportunity to discuss the
    economics of our business with you today. My name is Donnie King, and I
    serve as Tyson Foods' President and Chief Executive Officer.
    Tyson Foods is an American company providing opportunities across our
            country, including in rural communities
        Tyson Foods was founded nearly a century ago, during the Great
    Depression, in Springdale, Arkansas, by John W. Tyson. It is an
    American success story: a company started by a young man looking to
    provide for his family, with a single truck and a plan--to get food to
    where people needed it. At the time, this meant transporting food from
    Arkansas to places like St. Louis and Chicago. Today, as a fourth-
    generation family business, Tyson continues to provide food where
    people need it, here at home and in many other communities around the
    world, while also providing jobs and opportunities to nearly 140,000
    Tyson team members.
        Tyson's home is still Springdale, but our team members live and
    work all across America. With facilities in 30 states, Tyson produces
    quality food in places like San Lorenzo, California; Joslin, Illinois;
    Storm Lake, Iowa; Forest, Mississippi; Amherst, Ohio; and Pasco,
    Washington. Tyson's economic impact in the communities we operate is
    more than $27 billion annually, including $638 million in Georgia, $455
    million in North Carolina, and $167 million in Virginia. And every
    year, we invest more than $15 billion with more than 11,000 independent
    producers who supply us with live cattle, pigs, chickens, and turkeys--
    many of whom have supplied Tyson for multiple generations.
        In the United States, our team members come from diverse
    backgrounds, many different countries, and speak more than 50
    languages. We are an integral part of the communities where we live and
    work, and Tyson provides opportunities to our team members so they can
    better access the promise of America.
        At an average compensation of $24 per hour, including medical,
    retirement, and other benefits, or what amounts to an average of
    $50,000 per year in total compensation, Tyson provides our team members
    with not only a good job, but a career. In fact, that's how I started
    at Tyson--as an hourly team member on the production floor at our Pine
    Bluff, Arkansas, chicken plant.
        For many of our team members, Tyson represents an opportunity to
    not only earn a good living, but to do so while attaining practical
    life skills, high school equivalency, English as a second language
    education, financial and digital literacy, and other career development
    training through Tyson's on-site education programs, Upward Academy and
    Upward Pathways. For others, Tyson gives team members and their
    families a path to achieving their own American dream, with Tyson
    paying for team members' citizenship fees and providing legal and other
    support to those who take citizenship classes. We also provide a second
    chance to those who need it, with rehabilitation programs that support
    team members as they overcome substance abuse or reenter society after
    incarceration. There are so many inspiring stories at Tyson, but not
    all of them told because it's just who we are as a company.
        Because Tyson is part of the communities where we live and work--
    our charitable impact focuses on the places that we call home. From
    anti-hunger drives, to disaster relief efforts, to community
    fundraising, to support for public schools. Last year alone, Tyson and
    our team members donated 64 million meals to help those in need, and we
    will continue to provide such community support this year and in the
    future.
        I want to thank our many communities who support our business, and
    I want to thank the 11,000 independent ranchers, farmers, and growers
    who have been incredible partners, especially during these critical
    times. And most of all, I want to thank our team members for the work
    they do for this country every day. We are a diverse team of dedicated
    people working together to overcome difficult challenges, including
    sometimes personal ones, as we do our best to keep food on the tables
    of our own families, our neighbors' families, and all the families in
    the communities we serve across the nation and the world.
    Basic market forces set prices
        Although my testimony will focus on Tyson's beef business,
    inflation is not limited to beef nor is it limited to Tyson. Across all
    of Tyson's businesses, we are seeing significant increases to our input
    costs. So too are other manufacturers--from other food companies to
    manufacturers of appliance, furniture, automobile, and building
    materials, to name a few.\1\
    ---------------------------------------------------------------------------
        \1\ See, e.g., ``Supply Chain, Rising Raw Material Costs and
    Workforce Shortages Top Concerns for Manufacturers'' March 17, 2022,
    National Association of Manufacturers. available at: https://
    www.nam.org/supply-chain-rising-raw-material-costs-and-workforce-
    shortages-top-concerns-for-manufacturers-17080/.
    ---------------------------------------------------------------------------
        It's also important to note that Tyson does not set the prices for
    either cattle that we buy or beef that our customers purchase. These
    prices are set by straightforward market forces, namely available
    supply and consumer demand. These market forces mean that there are
    times when the commodity business cycle favors one party over another.
    For example, in 2015, these market forces worked against us when our
    beef business lost $66 million because the supply of live cattle was at
    its lowest. At the same time, cattle producers and feeders were making
    record margins. In fact, the beef and cattle markets are some of the
    most transparent in the world. For over 2 decades Tyson and other
    producers have been required by law to electronically report to the
    USDA, twice per day, the prices we pay for all cattle and all prices at
    which we sell our beef. This mandatory price reporting--industry-wide
    pricing data--is publicly available at the USDA website.
        Recently, the business cycle for beef has experienced an extreme
    swing between the price of live cattle and the price of finished beef
    due to the confluence of a number of unforeseeable factors that
    constrained the supply of beef while at the same time increasing its
    demand. Chief among these were the unprecedented shocks caused by and
    which continue to be caused by the COVID-19 pandemic.
        When the COVID-19 pandemic led states and municipalities to enact
    shelter-in-place orders and require businesses to close, Tyson remained
    operational as part of the nation's critical infrastructure to ensure
    continued availability of food. We went to extraordinary lengths to
    implement promptly protocols to keep our team members protected against
    the virus. We installed barriers, implemented physical distancing,
    monitored temperatures, provided personal protective equipment,
    initiated more frequent deep cleaning of our facilities, held mass
    testing events--and later, vaccination events. All of these and other
    necessary actions required us to slow or idle our operations.
        We also required team members who felt sick or were displaying
    symptoms of COVID-19 to stay home, with pay. Likewise, we required team
    members who tested positive for COVID-19, including those who were
    asymptomatic and identified through our testing programs, to stay home,
    with pay. Other employees remained home for a number of other reasons,
    including to care for children due to school and daycare facility
    closures.
        The collective effect of these factors led to an extremely
    constrained pool of labor available to operate our facilities at full
    capacity. Simply put, we just didn't have enough people to fully staff
    our plants. This lack of available labor resulted in too many live
    animals ready for processing and too few facilities staffed to properly
    process those animals. This sudden and swift rise in oversupply of
    cattle led to a corresponding sharp and swift drop in the market price
    for them.
        While COVID-19 significantly impacted numerous industries, the
    impact on the cattle industry was pronounced for a number of reasons.
    First, the cattle industry is the least agile of the three major
    proteins because it takes years to raise cattle for harvest, as
    compared to weeks for chickens and months for pigs. Second, cattle are
    expensive to feed and have a limited age and weight range for
    processing due to the impact larger, heavier animals have on
    transportation logistics, team member safety, plant equipment and
    customer specifications. Third, these market shocks occurred when the
    supply of live cattle was at its peak. When the pandemic began, there
    were six million more head of cattle on the market than there were at
    the bottom of the cycle in 2014. Basic economics tells us that when
    there is an unexpected and significant oversupply of live cattle, the
    price of those cattle should fall, which is precisely what happened.
    And, as the markets work through the impacts of COVID-19, we are
    already seeing live cattle prices rising to more normalized pre-
    pandemic levels.
        At the same time cattle prices were falling, the price for finished
    beef--the beef that consumers buy at grocery stores--was rising, driven
    by skyrocketing consumer demand due to the uncertainty caused by the
    pandemic as well as shelter-in-place and restaurant closure orders,
    which meant that people were overwhelmingly cooking meals at home.
    These factors were not unique to Tyson or its beef business. Processing
    plants across the nation continued to manage without available labor
    and were either idled or running at severely reduced capacities,
    meaning that production of chicken, turkey, pork, and beef could not
    keep pace with overwhelming consumer demand. Demand for beef and other
    animal protein was rising while supplies were falling. Again, basic
    economics holds that when demand is high and supply is low, prices will
    rise, which is precisely what they did.
        The situation has been deepened by geopolitical issues, which are
    exacerbating the access to and shortages of essential inputs and
    ingredients such as grain and cooking oil, resulting in higher costs.
    To put it in perspective, each head of cattle consumes about 7,000
    pounds of grain feed in the 7 months before processing. Today, the cost
    of gain has increased 75%, from $0.80 per pound to over $1.40 per
    pound. This dramatic rise in input costs is reflected in the prices
    American families pay at the grocery store.
    Recent price shifts have nothing to do with industry consolidation
        Concentration in the beef processing industry has remained constant
    during the last 30 years. Over that time, data shows that ranchers
    more-often-than-not achieve higher profit margins than beef processors.
    And in most of those thirty years, the profit margins of ranchers and
    cattle producers have been much higher than the low, single-digit
    margins we made as beef processors. In fact, in several years, ranchers
    made historic profits on live cattle while beef processors either lost
    money or barely broke even, as is illustrated in the chart below. This
    too, is the market at work.
    Historical Margins per Head by Sector versus Packer Four Firm
            Concentration Ratio
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Packers and Stockyards Division (concentration).
            Sterling Marketing (margin.)
    Tyson produces quality food at market prices
        Despite the market shocks brought by COVID-19 and global unrest,
    America's food system remains among the world's safest, most resilient
    and affordable.
        According to the USDA, the ``share of disposable personal income
    spent on total food has trended downward since 1960 . . . .'' \2\ As
    illustrated in the chart below and noted by the USDA, ``[i]n 2020, U.S.
    consumers spent an average of 8.6 percent of their disposable personal
    income on food.'' \3\ Twenty years prior, that number was nearly 12%.
    ---------------------------------------------------------------------------
        \2\ https://www.ers.usda.gov/data-products/ag-and-food-statistics-
    charting-the-essentials/food-prices-and-spending/ (last visited July
    26, 2021).
        \3\ Id.
    ---------------------------------------------------------------------------
    [Historical] Share of Disposable Personal Income Spent on Food in the
            United States, 1960-2020
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA ERS, Food Expenditure Series.

        Today, in part because of continuous improvement in how we operate
    our business, beef is more affordable, available, and accessible for
    more Americans than ever. And, with advancements in how we source
    cattle and improvements in modern cattle production, the beef we
    produce today is consistently higher quality. For example, choice and
    prime beef grades have increased from 60 percent in 2000 to 85 percent
    in 2020. Today, Americans are demanding higher-quality, convenience and
    variety--all of which customers are willing to pay for across the food
    chain, benefiting both cattle producers and beef processors. There is
    also a growing demand for higher-valued products across the world,
    including specialty products which are in far less demand in the United
    States, like organ meats. Such demand raises the value of the whole
    animal, which benefits ranchers, feeders, and producers.
        Tyson's returns are also strengthened by our efforts to become a
    more agile and efficient company through innovation and automation.
    This means that we are able to run our business more safely and at a
    lower cost, with higher capacity utilization. These savings will help
    to keep costs to consumers lower, enable us to pay our team members
    more, and allow us to further reinvest in our business.
    Economists and government regulators agree: American businesses are not
            to blame for inflation
        Today, as the Committee knows well, prices are up for nearly every
    product Americans buy, as inflation rates climb to the highest level in
    generations. As of this testimony, gas is up 25%; labor costs are up
    20%; and the agricultural commodities we require to operate are up
    across the board. Since March 2020, the cost of corn is up 127%,
    soybeans are up 90%, and soybean meal is up 54%. Year over year, soy
    crush plant margins are up 168% with key fertilizers like nitrogen,
    potassium and phosphorus going up between 115% to 246% in that
    timeframe.\4\ Freight transportation costs are likewise rising, with
    international shipping container rates up 68% and diesel fuel up 104%
    year over year.
    ---------------------------------------------------------------------------
        \4\ Agrus, Goldman Sachs Global Investment Research as of 3/31/
    2022.
    ---------------------------------------------------------------------------
        Experts, policymakers, and government regulators understand that
    the cause of the current inflationary environment is some combination
    of constrained supply, high consumer demand, and continued unforeseen
    disruptions to the global supply chains caused by COVID-19 and
    exacerbated by geopolitical unrest.
        In February 2022, the U.S. Department of Justice recognized that
    ``[e]conomies across the globe have faced significant challenges caused
    by supply chain disruptions resulting from the COVID-19 global
    pandemic'' and that ``[t]ransportation constraints, disruptions to
    routine business operations and difficulty in obtaining raw materials
    have all led to increased costs of production and shipment, which in
    turn have resulted in higher prices for consumers'' in a variety of
    industries, including agriculture.\5\ To state the obvious, these
    rising input costs are not set by Tyson.
    ---------------------------------------------------------------------------
        \5\ Press Release, U.S. Department of Justice (Feb. 17, 2022).
    ---------------------------------------------------------------------------
        Lawrence Summers, the former Treasury Secretary, observed that
    ``[r]ising demand, with capacity and labor constraints, are fully
    sufficient to account for what we observe in meatpacking.'' \6\ Earlier
    this year, the U.S. Chamber of Commerce similarly found that ``[l]ike
    so many other products, the factors driving meat prices higher include
    increased demand, COVID-related supply chain disruptions, and increased
    input costs, especially higher energy and labor costs.'' \7\
    ``Consumers are buying beef,'' said David Anderson, a livestock
    economist at Texas A&M University.\8\ ``What we're seeing with prices,
    I would argue as an economist, that's exactly what we should see given
    this bottleneck.'' \9\
    ---------------------------------------------------------------------------
        \6\ Lawrence H. Summers, former U.S. Treasury Secretary, Twitter
    (Dec. 26, 2021); see also Washington Post Editorial Board Opinion (Jan.
    10, 2022) (``Inflation, which was relatively low for years, did not
    suddenly rise in recent months because businesses decided now was the
    ideal time to squeeze their customers. What actually happened is that
    demand soared for many products as the economy recovered. Often, there
    were not enough products to meet it, thanks to supply chain hiccups and
    labor shortages, so prices went up.''); Wall Street Journal Editorial
    Board Opinion (Jan. 7, 2022) (``Like so much else . . . meat prices
    have soared amid surging demand, rising production costs, and
    constrained supply.'').
        \7\ U.S. Chamber of Commerce News Release (Jan. 3, 2022).
        \8\ Reuters, ``Analysis: High U.S. meat prices: packer profiteering
    or capacity crunch?'' (Jan. 19, 2022).
        \9\ Id.
    ---------------------------------------------------------------------------
        Economists recently commissioned by the USDA to study the issues
    surrounding fed cattle pricing agree, stating in their report:
    ``Fundamentally, the recent market disruptions were the result of low
    demand for live cattle, some high demand for beef products, and tight
    supplies of beef, all resulting from limited live cattle processing
    capacity.'' \10\
    ---------------------------------------------------------------------------
        \10\ Texas A&M University Agricultural and Food Policy Center
    (AFPC), The U.S. Beef Supply Chain: Issues and Challenges, at 163
    (2021). In August of 2020, the House Committee on Agriculture asked the
    USDA to commission a study to look into the issues surrounding fed
    cattle pricing. The USDA partnered with the AFPC at Texas A&M and the
    cited book is the culmination of that work. That said, the authors note
    that the book should not be construed any official USDA or U.S.
    Government determination or policy.
    ---------------------------------------------------------------------------
    Tyson continues to invest in America
        The returns we make allow us to invest in our team members and
    business. For example, during the pandemic we implemented $500 million
    in wage increases and bonuses for our hourly team members. We expanded
    our childcare programs, recently breaking ground on a new onsite
    childcare facility in Tennessee. We have opened free health clinics on
    or near a number of our processing facilities where access to medical
    care is challenging. And, most recently, we announced the expansion of
    educational opportunities from technical skills to upper-level degrees
    that will be offered to our team members for free.
        We also invest back in our business, including product and process
    innovation and opening new facilities to increase capacity, meet
    consumer demand and stay competitive with the rest of the world. For
    example, since 2019 Tyson has opened several new processing plants,
    including beef, chicken and pork further processing facilities,
    distribution centers, feed mills, and hatcheries. We have also
    increased capacity in a number of our facilities by adding additional
    production lines. Each of these facilities means more demand for
    farmers' and ranchers' products and more job opportunities for
    Americans.
        Notably, during the pandemic, Tyson began operations at its new
    $425 million, 370,000 square foot poultry complex in Humboldt,
    Tennessee, which is expected to employ 1,500 team members by 2023. In
    August 2021, we announced a $300 million investment to build a new
    325,000\2\ fully-cooked chicken plant in Danville, Virginia. This new
    facility is expected to create nearly 400 jobs when production begins
    in spring 2023. Also in 2021, Tyson opened two new facilities to
    support growth in case ready beef and pork products in Eagle Mountain,
    Utah, and Columbia, South Carolina. These facilities are expected to
    add approximately 270 million pounds per year of additional capacity.
    And we recently broke ground on a new $355 million bacon plant in
    Bowling Green, Kentucky, which is expected to employ 450 people and
    meet the growing demand for Tyson's products.
        These investments are good for our company and the country,
    providing additional jobs and opportunities for those in the
    communities where our facilities are located and adding additional
    capacity and resiliency to the country's food supply chain.
    Conclusion
        As I said earlier, I started at Tyson, nearly 4 decades ago,
    because I wanted a job. I stayed because of the company we are, the
    values we hold and the important work we are privileged to do.
        Our company was founded by a man who found a better way to feed
    people. Today, all 140,000 Tyson team members honor that legacy by
    continuing to find better ways to feed America and the world. What we
    do is critical to this nation's food security, and I invite all Members
    of the Committee to visit us, anytime, so you can see for yourself why
    we are so proud of the company we work for.
        I appreciate this opportunity to share our perspective.

        The Chairman. Thank you very much, Mr. King. And thank all
    four of you for your excellent testimonies.
        And now at this time we will go right into our questions.
    Members will be recognized for questions in order of seniority,
    alternating between Majority and Minority. And you will be
    recognized for 5 minutes each in order to allow us to get in as
    many questions as possible. And once again, please, please keep
    your microphones muted until you are recognized in order to
    minimize noise. And now I will start the questions.
        And this is such an urgent hearing, as we just previously
    heard, the real challenges that our ranchers are facing. I
    don't know if you all as the CEOs were watching, but it was
    very impactful and effective. And our ranchers and those who
    form the first phase of our food supply line, our beef supply
    line are facing critical issues.
        And I appreciate deeply you CEOs coming and participating
    because we will not be able to find the right solution to help
    this first part of the supply chain, which you critically need
    because without the meat, there are no meatpackers.
        With that, I want to start with recognizing the three major
    components of our hearing. First, our consumers; second, our
    ranchers; and third, our packers. And we are going to be
    examining questions about supply, about price, about
    affordability, and also about whether our ranchers, who produce
    the cattle, can afford to farm to stay in business. As we heard
    from the panel today, the pressures are so great that there
    have been efforts of suicide. When that happens, you know we
    have to move to correct this imbalance.
        First, let me just say a few words about our first part,
    consumers. Right now, the consumers' cost for beef is $7 per
    pound right now at the grocery store. The price of beef has
    climbed 18 percent so far in this year, making it very hard for
    parents to afford beef for their children, for their families.
        Next, the ranchers. Our ranchers, our precious ranchers,
    our Committee heard earlier today from some of our nation's
    ranchers who, while putting in their heart and soul--I grew up
    on a farm. Farming is heart and soul year after year, and
    nowhere is that more expressive than with the raising of cattle
    from the calves spending time in all manner of weather, taking
    care of them, free from disease so that they can make it for
    the 4 or 5 years it takes to get them to you, our that beef
    packers.
        And yet while our grocery bills and our ranchers are being
    forced to sell their cattle at a loss, our four meatpacking
    companies are making record profits. In fact, your companies
    reported over $15 billion in profits in this last year alone.
    And I don't argue with the ability to earn profits. I am a
    businessman myself. That is why you are in business.
        The third component of this equation is about the four
    packers. Now, Mr. King, in your testimony you discuss the labor
    shortages caused by COVID-19, which resulted in a reduction of
    facility capacity and an oversupply of cattle, which caused the
    swift drop in market price that you paid for cattle. So my
    question to you, Mr. King, is it correct then to say that labor
    shortages caused by COVID-19 were responsible for the prices in
    the beef and cattle markets and your record profits? Mr. King?
    Is it correct then to say that labor shortages caused by COVID-
    19 were responsible for the prices in the beef and cattle
    markets and also responsible for your record profits?
        Mr. King. Chairman Scott, I hope you can hear me at this
    point.
        The Chairman. Yes, I can.
        Mr. King. So thank you for that question, and I'm sorry for
    the technical difficulties that we continue to have. But let
    me--what I testified in my opening statement I stand by. The
    unforeseen shocks of the pandemic that we saw was--you know, it
    was a significant issue for us. It was--and for all industry.
    Many businesses closed or idled or reduced capacity, and many
    sheltered in place, stay at home. As was testified by one of my
    competitors earlier, we were also at the top of the cattle
    cycle, and my memory is that we had about six million head more
    cattle at the top of the cycle when the pandemic hit----
        The Chairman. Mr. King, I want to get to the crux of the
    matter here. But these factors that you have given, they really
    don't tell the full truth here because from my own research
    your profits are largely determined by what is called the meat
    margin. And the meat margin is the difference between the
    prices your four packing companies pay for cattle and then the
    prices that you charge for beef.
        Now, I would like to display a chart if we can look at the
    board there. This chart is based upon USDA data that shows that
    your meat margin has been raising steadily since 2015. Twenty-
    fifteen, Mr. King, is 5 years before the pandemic began in 2020
    and well before the supply chain disruption. In 2015, the year
    your meat margins started to soar, allegations were made
    against you that your four companies entered into an agreement
    to reduce supply and push profits up. And I think we all know
    that he who controls supply, controls the price. So let me ask
    you to respond to that.
        [The chart referred to is located on p. 135.]
        Mr. King. Chairman Scott, thank you for the question. There
    are a number of things if I could unpack that for you. From
    2015 until the pandemic hit, in 2015 we were coming off the
    trough of the most recent bottom of the cycle where herd
    liquidation and drought in 2013 created that situation. So the
    supply of cattle were very tight. So you're starting to see
    herd rebuild, and you're starting to see capacity utilization
    go up in plants. And at the same time, the quality of beef
    expected by consumers continued to change as well.
        The Chairman. Allow me because I wanted to get to the
    point. My time is sort of running down. And I wanted to ask
    before my time gets down. I want to ask each of you so we can
    get 100 percent clear on this issue. This is a primary issue
    here that we need to clear up, and that is this. Is there or
    was there ever an agreement between your four companies to
    cooperate together on issues impacting supply or pricing? And I
    need a yes or no. And also let me remind you that you are
    testifying under oath. I need to know if there ever was an
    agreement with you to set this up. Because the chart clearly
    states that it was 2015 and there was an abrupt, immediate
    charge up. And when you look at this chart, it explains why
    questions are being raised. How can this jettison up? And it
    started well before the COVID-19 of which you say caused the
    problem or caused the record amount of profits. So I want to
    get the yes or no and whether or not you all had agreement on
    pricing.
        Mr. Klein. No.
        Mr. MacLennan. No.
        Mr. Schellpeper. No, not that I am aware of.
        Mr. King. No.
        The Chairman. All right. Each of you have said that--no.
    And you all deny that you acted improperly or illegally, but
    none of you has been able to explain this meat margin chart and
    why your shares kept rising since 2015.
        Now, it is very important that we get a correct and honest
    answer here because this is the crux of the issue. And let me
    tell you, this can't possibly happen in a competitive market. I
    have studied antitrust behavior at the Wharton School of
    Finance at the University of Pennsylvania, so I can tell you
    that this is exactly the type of activity that has caused many
    others on both sides of the aisle to raise these questions. And
    so I wanted to get that out of the way and make sure that you
    have answered it under oath to answer those allegations.
        So with that, I will now yield to the Ranking Member for
    questions--or the gentleman from Arkansas, Mr. Crawford.
        Mr. Crawford. Thank you, Mr. Chairman.
        The Chairman. You are now recognized----
        Mr. Crawford. Will I be allotted 10 minutes for my
    questioning? Just curious.
        The Chairman. Yes, you may.
        Mr. Crawford. Ten minutes?
        The Chairman. Yes.
        Mr. Crawford. Ten, all right, thank you.
        I will start with Mr. King. Concentration in the meat
    industry has stayed relatively constant for more than 25 years,
    and over that period, meat prices have moved up and they have
    moved down. Despite that fact, the Biden Administration has
    been falsely blaming packers for recent skyrocketing inflation.
    Even Larry Summers, the Secretary of the Treasury for President
    Clinton and the Director of the National Economic Council for
    President Obama, recently tweeted, ``Rising demand with
    capacity and labor constraints are fully sufficient to account
    for what we observe in meatpacking, the Administration claims
    notwithstanding,'' end quote. Mr. King, your thoughts on that
    statement?
        Mr. King. Thank you, Congressman, a great question. Very
    simply, experts, policymakers, government regulators agree. The
    combination of supply, consumer demand, pandemic disruptions
    and geopolitical unrest is reason enough for the inflation. And
    you referenced Larry Summers, former Treasury Secretary, but we
    also have the testimony of U.S. Chamber of Commerce, we have
    David Anderson, a livestock economist at Texas A&M University.
    They all agree that what we're seeing from the sudden shocks to
    the economy is expected.
        Mr. Crawford. Thank you, Mr. King. I appreciate your
    insights there. I want to switch gears just a little bit,
    direct this question to Mr. David MacLennan, Cargill CEO. Do
    you believe it is okay to discriminate against an individual--
    based upon their race, color, creed, or national origin?
        Mr. MacLennan. No.
        Mr. Crawford. You don't? I have in my possession some
    communication from Cargill that indicates otherwise. It says,
    ``Working together with Cargill has developed a supply chain to
    better connect Black cotton producers with key markets and
    suppliers. This initiative was borne out of comments we
    gathered in listening sessions with Black producers and
    supports ongoing work around Black farmer equity. Through this
    program, we're able to pay participating farmers a premium with
    no additional discounts for quality. We moved cotton from the
    farm to our customers who are key suppliers for Target. It has
    been a successful program, but we continue to scale.'' Now, how
    do you square that with your position that you don't
    discriminate based on an individual's race, color, creed,
    national origin?
        Mr. MacLennan. Congressman, you're referring to our Black
    Farmer Equity Initiative, something that Cargill is very proud
    of. As you likely know, less than roughly \1/2\ percent of
    farmers in this country are Black, and so as part of our
    diversity-equity-inclusion efforts, we're supporters of our
    Black Farmer Equity Initiative----
        Mr. Crawford. Are you including Hispanic farmers, are you
    including Asian American farmers or just targeting Black
    farmers in this case? Are you including other commodities? You
    had a laundry list of commodities that you process that you
    mentioned in your testimony. Are all of those going to be paid
    premiums as well, and are all minority farmers going to be
    included or just Black farmers? Are we also including women
    farmers?
        Mr. MacLennan. Well, it depends on the country. If you're
    talking about in the United States, we certainly will consider
    other focuses like the Black Farmer Equity Initiative, again,
    something we're proud of and, I would add, that it is something
    that our customer Target has asked for and that their consumers
    are asking for in terms of more diversity in their supply
    chains. And with such an underrepresented minority such as
    Black Americans being involved in farming, we feel this is the
    right thing to do.
        Mr. Crawford. What about underrepresented minorities, for
    example, Hispanic farmers or women farmers? Has there been any
    desire from, say, companies like Target to improve outcomes for
    other minority farmers?
        Mr. MacLennan. Over half of the world's farmers are women,
    so if you're referring to the United States, we certainly will
    consider----
        Mr. Crawford. What does this policy extend to? Is it
    African American farmers? Is this Black American farmers that
    you are extending this policy to? So in that case, what is the
    ratio of women to men farmers? What is the ratio of Hispanic to
    non-Hispanic farmers? What is the ratio of Asian American
    farmers to non-Asian American farmers? Are we really going
    after diversity and equity or are we going after one specific
    demographic or does this include everybody?
        Mr. MacLennan. At this point, it's one specific
    demographic. It's less than 1 year old, and it is part of our
    DEI focus. So to expand it to other ethnic or gender-based
    groups, certainly that's something that we'll consider. I don't
    have the statistics----
        Mr. Crawford. Well, I have another concern in this
    statement that says that you are not making any discounts for
    quality, so that is almost an incentive to produce lower
    quality. And then further on you say you plan to scale that
    program. Can you elaborate on that, how you are going to not
    pay a discount or deduct a discount for lower quality, you are
    paying a premium to the market, and then you plan to scale
    this. Do you not think that is going to have some impact on the
    market?
        Mr. MacLennan. I think the integrity of the farmers that we
    deal with will show that they'll not only produce equal or
    better quality from what they have or what the market is
    producing, so I have confidence in the farmers that we're
    dealing with that quality will not suffer.
        Mr. Crawford. Thank you, Mr. Chairman. My time has expired.
    I have used my 5 minutes.
        The Chairman. The gentlewoman from North Carolina, Ms.
    Adams, who is also the Vice Chair of the Committee on
    Agriculture is recognized for 5 minutes.
        Ms. Adams. Thank you, Chairman Scott and Ranking Member
    Thompson, and thank you as well. And to the witnesses, thank
    you for being here.
        I do want to ask the witnesses about your workforce, the
    people who work in your plants to provide food for America and
    the world. I understand that there are worker shortages that
    are exacerbating production, and it is one part of the puzzle
    that needs to be addressed. As you may know, I am Chair of the
    House Education and Labor Workforce Protection Subcommittee,
    and so as we continue to navigate this pandemic, I want to know
    what specifically each of you are doing to protect the workers
    who work on your assembly lines. So can you tell the Committee,
    again, and if you could be specific, I would appreciate that,
    what benefits are available to these workers, and were they
    enhanced during COVID and are they still enhanced, and you can
    talk about the healthcare, 401(k) plans, paid time off, et
    cetera. So, Mr. MacLennan, let's start with you.
        Mr. MacLennan. Hi, Representative Adams. As I mentioned in
    my opening statement, we have significantly expanded the
    benefits that we paid to our line workers. The food supply of
    this country would not have survived if it weren't for the
    workers in our plants throughout the country. We have enhanced
    our 401(k) benefits. We have enhanced our healthcare benefits,
    and we were one of the first companies to take decisive action
    when COVID broke out in early 2020 to make sure that--to move
    quickly to close down facilities if we had to or put in
    protective measures, for example, plastic screens between
    workers on the line or even plastic screens at the lunch
    tables, which was a place prior to COVID that was very social
    for our workers.
        And I would also quote Marc Perrone, who is the President
    of the UFCW, and he testified in front of the House Committee
    on Oversight and Reform in 2020. And he said some responsible
    employers like Cargill have done what is right. It's one of our
    core values, and we are committed to the workers in our plants
    not only in the meat industry in the U.S. but around the world.
        Ms. Adams. Okay. Can we move on to Mr. Schellpeper?
        Mr. Schellpeper. Yes, thank you, Congresswoman, for the
    question. So I'm very proud of our workforce because we went
    through that very difficult time. And we had three goals at
    JBS. First and foremost was protect our workforce. Second, was
    to recognize our role in the nation's food supply, and third
    was to maintain employment and benefits for all of our
    employees.
        We put through several measures that--to keep our workforce
    safe, beginning with screening at our plants, dividers in our
    workstations, air filtration systems, upgraded air filtration
    systems that we put inside of the common areas of our plants,
    cafeterias, and locker rooms if you will. We had--also had
    bonuses that we paid out to our team members that were not tied
    to attendance. And then just last year we put through two
    sizable wage increases for our employees, and we believe that
    we are in a leading position on wages for our workers.
        Ms. Adams. Great. Yes, I would like to ask Mr. Klein and
    Mr. King as well, and I don't want my time to run out, so if we
    can move on, I would appreciate that. And I apologize. So, Mr.
    Klein, what about you?
        Mr. Klein. Yes. We instituted several measures the same as
    others have done. We put workplace partitions in our production
    floor and in our breakrooms. We instituted screening for
    employees coming into the plant. We also provided testing
    facilities at all our locations so that employees could be
    tested. The results of that were the positive rate among our
    employees 18 and over was almost half of what it was in the
    communities where our plants are, so we feel like we've been
    very effective----
        Ms. Adams. Great. Thank you. Mr. King, can you tell me a
    little bit about what you have been doing?
        Mr. King. Congresswoman, in terms of our team members,
    their safety, their health, and their families are our highest
    priority, has always been highest priority. We have 140,000 of
    them across Tyson, and we--my colleagues here have talked a lot
    about all of the things and measures and protocols. In fact, my
    testimony earlier talked about the fact that capacity
    utilization was negatively impacted because of the protocols we
    put in place, barriers, social distancing, temperature
    checking, testing, and then most recently the vaccine mandate
    that we put in place.
        But in addition to that, we realized that team members can
    work wherever they want to work, and we have to give them a
    reason to work for Tyson. And over the last year we've been
    working to that end. We've done pay increases as well. We are
    $24 an hour, which is about $50,000 a year, which is very
    similar to that of a college graduate of $55,000 a year. We
    think we provide good jobs, and we've recently announced some
    of the things we're doing around immigration and paying for
    legal fees and trying to help those get legal status and try to
    help with life skills for team members, things like English and
    math and how to do a family budget----
        The Chairman. Mr. Klein, the gentlelady's time has expired.
    We want to get as many members in as possible.
        So now I recognize the gentleman from Tennessee, Mr.
    DesJarlais, for 5 minutes.
        Mr. DesJarlais. Thank you, Chairman Scott. And thank you to
    our witnesses for appearing today.
        The cow-calf producers in my district are frustrated from
    astronomically rising input costs to labor shortage to supply-
    chain constraints and an Administration that seems more focused
    on climate change and increasing overburdensome regulations.
    Our cattle ranchers and farmers are hurting. Family farmers are
    shuttering across the country as they face diminishing margins
    in an already difficult economy. While cattle markets are
    increasingly complex and incredibly complex, I don't need to
    tell you all that any disruptions at the packing sector impact
    cattle prices. We have seen price disparities between boxed
    beef and live cattle facing several black swan events. And
    while I believe there are many factors at play here, including
    record levels of inflation that this Administration is doing
    nothing about, I do want to discuss cattle markets.
        After conferring with Tennessee Cattlemen and Charles Hord,
    we want to know what steps have you taken as an industry to
    minimize the impact of market disruptions, whether those be
    from fires, pandemic like COVID-19, which at its peak took
    roughly 40 percent of the processing capacity offline, or other
    unforeseen factors that impact cattle producers and
    profitability. And I will open that any of you who would like
    to comment.
        Mr. Klein. Thank you for the question. In terms of the
    steps that we've taken--well, first of all, with the fire in
    the Holcomb plant, the rest of the industry made up a lot of
    that lost production by running extra hours, Saturday hours
    when normally we would have given our employees time off. That
    was a big factor.
        In terms of the pandemic, there was not a lot we could do.
    We ran as many cattle as we could. We shut down one of our
    plants for 2 weeks during that time period and opened it back
    as soon as we were able to. But our other plants in Kansas, we
    had weeks where we were running 50 percent of capacity and
    contemplated shutting down one shift. So when we have these
    events, there's not the ability to completely mitigate it. And
    it happened across the whole industry.
        Mr. DesJarlais. And things like this will happen again, and
    so I guess what are we doing to mitigate that in the future?
    Would anyone else likes to comment?
        Mr. King. Congressman, Donnie King with Tyson Foods. As a
    company, we have often--annually do risk assessments where we
    assess what risk we face and what are those mitigation steps. I
    got to tell you, in conjunction with our board and leadership
    team, we did not anticipate the pandemic, so there have been a
    number of key learnings from that. It's an opportunity to go
    and to get better but--and we have, but we're assessing this
    and future risk similar to this--these black swan events to try
    to protect our company.
        Mr. DesJarlais. We are hearing suggestions from the
    producers on our first panel, but I would like to hear from you
    all now. What steps do all think can be taken to ensure
    profitability for all sectors of the cattle industry, including
    cow-calf producers?
        Mr. Klein. Thank you for the question. I'd like to answer
    that. I believe we have to look at the situation today in the
    context of history. And if you go back before 2016, the packing
    segment was the smallest profit margin of any segment of the
    industry mainly because of overcapacity in the industry. In
    2016 forward, capacity had already been taken out. We saw a
    dramatic increase in the supply of cattle. As a result of that,
    margin structure shifted to our segment. But historically, it
    was--resided--the cow-calf producers had the biggest share of
    the profit pie so to speak prior to 2016.
        Mr. DesJarlais. Okay. Because I have just got 50 seconds,
    Mr. Klein, I want to ask you one more question. Some of the
    folks continually are pushing for an increase in diversified
    slaughter capacity across the country. They're also pushing for
    government-mandated levels of cash trades by packers. Your
    testimony mentions the importance of alternative marketing
    agreements and allowing your company to grow and compete with
    the largest packers. Do you think the AMA will be vital to new
    slaughter facilities coming online across the country?
        Mr. Klein. I think for a new facility to survive, they've
    got to offer something different. And one of those attributes
    is quality. The demand for quality beef is very high, and AMAs
    are a very important piece of that.
        In terms of the cash market question, more cash trade today
    will not help the producer. Today, many of the cattle that are
    brought in on AMAs or other agreements are because the producer
    wants a guaranteed home for their cattle.
        Mr. DesJarlais. Okay. My time has expired. I yield back,
    Mr. Chairman.
        The Chairman. Thank you. The gentleman from California, Mr.
    Khanna, is recognized for 5 minutes.
        Mr. Khanna. Thank you, Mr. Chairman.
        I wanted to start briefly by going over Mr. Crawford's
    exchange with Mr. MacLennan. I was a little bit surprised that
    he was criticizing you, Mr. MacLennan, for having a program to
    seek Black farmers. As you know in the 1920s, 14 percent of
    farmers in this country were Black. That is almost down to one
    percent today. And there is a simple reason why that is the
    case is because the United States Department of Agriculture
    discriminated against Black farmers. Mr. MacLennan, can you
    explain to this Committee the history in this country with
    Black farmers and why it is perfectly appropriate for your
    company to be working with Black farmers, given that history?
        Mr. MacLennan. Well, Representative, you cited I think the
    most powerful components of that story of Black farmers of this
    country over the last 100 years from 14 percent to it's less
    than one percent. And I think we're all very well-versed in the
    aspects of history and the aspects of our culture, which have
    contributed to various aspects of the farming industry. But our
    belief and our commitment to diversity, equity, and inclusion
    is not just within the walls of our company but it is also in
    our supply chains. And, as I said to the Representative who
    posed the question originally, this is what our customers want.
    We believe this is what our consumers want, and basically, it's
    the right thing to do to support the Black farmer community,
    which has shrunk dramatically over that period of time, and to
    give them support so that they can grow their ranks and frankly
    provide more jobs within that--within the farming community,
    not to mention the Black farming community.
        Mr. Khanna. Well, Mr. MacLennan, we may have our
    disagreements on some of the issues here, but I want to applaud
    you for that and applaud your commitment to that. I think that
    is the right thing to do as Americans. And I for one am glad
    that you are doing that.
        Mr. MacLennan. Thank you.
        Mr. Khanna. I want to turn to the issue of intimidation by
    meatpackers towards producers. Senator Fischer entered a letter
    into the record just yesterday from Nebraska Cattlemen saying,
    quote, ``None of our producer members were encouraged to
    testify or willing to put themselves out front for fear of
    possible retribution by other market participants.'' I assume
    all of you, all the CEOs I am hoping will commit today to
    encourage producers to openly share their stories about
    industry and meat production in general without any fear of
    retaliation. It can be a simple yes or no. Mr. MacLennan, we
    can start with you. Would you commit to that?
        Mr. MacLennan. Yes. I can't imagine anything that would
    happen that would discourage the exchange of information.
        Mr. Khanna. Go to the other--could the other CEOs just go--
    --
        Mr. Schellpeper. Yes, of course.
        Mr. Khanna. Anyone----
        Mr. King. Absolutely.
        Mr. Khanna. I appreciate that.
        Mr. Klein. Yes.
        Mr. Khanna. The one other issue I want to get to, as you
    know, a lot of livestock producers are working under contracts.
    The grower takes on a lot of the environmental liability for
    the operation. However, many of your companies are actually
    dictating or working with the producers on how to grow the
    animal, how to feed them. And right now, the farmer basically
    gets all the risk for the environmental permits and the
    companies don't. One way forward could be if each of your
    companies would support legislation requiring co-permitting
    with these producers or farmers on a contract. Would you be
    open to a co-permitting framework. Mr. Klein?
        Mr. Klein. Thank you for the question. First of all, we
    don't deal directly with the cow-calf segment of the industry
    and there where the permits are important. We are two steps
    away from that. So in terms of your question whether we would
    support it, I'd need to know more about it to understand it
    better.
        Mr. Khanna. Anyone else want to jump in and possibly
    supporting co-permitting?
        Mr. King. I would echo what Mr. Klein had to say and that
    we'd need to know more about it, but we tend to buy a large
    percentage of our cattle through feeders as well.
        Mr. Khanna. Well, I would appreciate if we can consider
    something like that. I think it would go a long way in helping
    farmers. Thank you, Mr. Chairman.
        The Chairman. Thank you, Mr. Khanna, and I just want to say
    I agree with you in complementing Cargill for their help of
    Black farmers. Thank you for that.
        Now, the gentlelady from Missouri, Mrs. Hartzler, is
    recognized for 5 minutes.
        Mrs. Hartzler. Thank you, Mr. Chairman, and thank you all
    for being here, a very, very important topic.
        In the last panel we heard testimony that \1/2\ million
    ranchers have gone out of business over the last few years,
    that is an average of 17,000 cattle operations a year, 40
    cattle operations every day. So I would like to hear your
    thoughts really on what is your vision for the cattle industry
    in the years to come? Many of the other segments for the
    agriculture have gone to vertical integration with poultry
    operations, pork operations where some of you own the whole
    thing, you own the animals from the beginning till slaughter.
    Is that what you envision eventually is going to happen in the
    cattle market? Or what would you like to see as far as the
    cattle industry looking like 10, 15 years from now? So since
    Mr. Klein is the only one here in person, maybe we could start
    with you.
        Mr. Klein. Thank you for the question. I believe that the
    future of the beef industry is--it's very important that all
    segments work together. The cattle numbers, ranches have
    dropped, cattle numbers have dropped since 1980, but it was
    really as a result of reduction in demand for beef across the
    globe due to health issues at the time and also ranchers'
    decisions to repurpose land. At the same time, we saw an
    improvement in the efficiency at the ranches, being able to put
    more pounds on cattle than ever before.
        So as I look forward, I believe that we're on the right
    track in terms of creating a quality product that is demanded
    across the globe. The profit opportunity today in--across all
    segments is greater than it's ever been, and that's because of
    the quality of beef we have in the system and the demand growth
    that we've seen as--particularly in the last 2 years.
        Mrs. Hartzler. So you believe the current model of cow-calf
    operations owned by individual family farmers will continue 10,
    15 years from now, and that is what you would like to see?
        Mr. Klein. Yes, the average herd size today is 43 head
    ranch size, so it's very small, and they're not going to make a
    living on just that, so they've got to do something else. But
    it's a very nonintegrated industry, and I believe it's going to
    stay that way. I don't see packers owning ranches, so I think
    what--the model that's in place today is a good model. The
    profits will shift back and forth. In 2014 and 2015, all the
    profits went to the cow-calf segment and we were losing money.
    So these are the cycles that we deal with every day.
        Mrs. Hartzler. Mr. Schellpeper, what are your thoughts
    about the vision for the future?
        Mr. Schellpeper. Again, thank you, Congresswoman. This is a
    cyclical business, and we're coming now into a cycle where
    perhaps profitability will switch in the chain. Our model at
    JBS is we buy not from the ranchers but we buy from the cattle
    feeders and we buy the cattle how they want to sell them,
    whether that's on a cash market, whether that's on an AMA,
    whatever that might look like. We will follow their lead in
    those discussions.
        Relative to JBS owning ranches, particularly towards your
    question, no, I don't anticipate that happening in the future.
        Mrs. Hartzler. I would like to hear from the others but I
    want to move to the second part of my question. What can you do
    to help producers stay profitable? Or do you believe it is
    hands off, the market will just work its way out and you have
    no role in that? So I guess we will go to Mr. MacLennan.
        Mr. MacLennan. Yes, thanks, Congresswoman. We will continue
    to provide markets for the ranchers to sell their cattle. I do
    believe that the markets, as several witnesses from the last
    panel as well as this panel have testified, that the
    cyclicality of this industry is starting to turn. One of the
    witnesses from the prior panel talked about an 8 to 10 year
    cycle, and we are starting to see that the market--the supply
    and demand components and the prices in the cattle market are
    starting to change.
        We can't survive as an industry--this country can't feed
    itself without the small family ranchers and farms that we
    depend on. Cargill was--is a family-owned company founded in
    1865, so we need family farmers and family ranchers in the
    industry, and we consider them our partners.
        Mrs. Hartzler. Thank you very much. My time is out, but I
    appreciate what you do and hope that we will be able to keep
    the cattlemen viable for years to come. Thank you. I yield
    back.
        The Chairman. Thank you. And now the gentleman from
    California, Mr. Panetta, is now recognized for 5 minutes.
        Mr. Panetta. Great, thank you, Mr. Chairman, and thanks to
    our witnesses for participating in this hearing today and
    appreciate your testimony and information that you are
    providing.
        I hail from the Central Coast of California. We don't have
    that many cattle, we don't have that much pork, we don't have
    that many chickens, but I can tell you we have a lot of
    specialty crops. And I think you know as well as I do that our
    issues are still similar. And one of the most pressing issues
    that I think we have is the labor or I should say the lack of
    labor. And so I would like to kind of start off by focusing on
    that.
        And, Mr. King, I will go ahead and start with you.
    Obviously, we have heard a lot about labor availability
    problems in packing plants even before COVID hit. How did labor
    availability affect you during the last 2 years, and what is
    your labor situation today? And I think I have my
    recommendations as to what Congress can do or what this
    Administration could do. What do you think we can do here in
    Washington, D.C., to alleviate packing plant labor shortages?
        Mr. King. Thank you, Congressman, and there--you know, to
    be honest with you, there's not a lot more important than being
    able to attract and retain great talent. And so we talk about
    that so much here at Tyson. We realize today that those who
    choose to work for us have options. They can work just about
    anywhere they want to work today and make a life. And so what
    we have made a concerted effort to do is to give them a reason
    to work for us through pay and benefits, if they are--you know,
    we've got people from 160 different countries speaking 50+
    languages across our company, and so we do things like teach
    basic life skills. But we recently announced investing in
    education from life skills all the way to upper-level degrees
    in college where we would pay that. And, we've also done that
    in conjunction with historically Black colleges and
    universities as well.
        So we're proud of that and investing in it, but very
    simply, what we have to do is to create a more attractive place
    to work. And we recently invested in and broke ground on our
    newest childcare facilities in Humboldt, Tennessee. I was there
    with the Governor of Tennessee when we did that. And team
    members in some subsets are telling us that's critical to be
    able to get them back in the workplace. So we're investing in
    that, and it's a great--to your question, it is a great example
    of the private- and public-sector working together to solve a
    problem, and so we're piloting that. We're expecting really
    great things from that, but that's just one of the tools that
    we're using to try to create a better place to work.
        We're also doing things like creating flexible work
    schedules for team members so that we can find when they want
    to work, what works around their life and everybody's in
    different stages of life and so we try to accommodate those. To
    be real candid, we've had to become far more flexible than at
    any other time in my near 40 years in the business, and just
    the diversity of the workforce that we have, I mean, we're
    proud of that and we're proud of what that brings to the whole
    Tyson team.
        And so a lot of good is coming out of the last couple of
    years. We're better--we are a better company as a result of
    that. It's been extremely challenging, but we--we'll be better
    going forward from having gone through this and having to deal
    with these issues.
        Mr. Panetta. Understandable. I want to hit one more area,
    and that is obviously supply chain issues especially with your
    exports. And how have they been impacted due to the delays that
    I think all of our industries have experienced? And obviously,
    you are familiar with the Ocean Shipping Reform Act (H.R.
    4996). That is something you would support, I imagine?
        Mr. King. Congressman, yes, we do support that, and I would
    just thank those on this Committee and Members for supporting
    that. That was extremely helpful and timely. It was a large
    issue. But to your prior question around exports, in the
    Shanghai Port today we are seeing ships back up. And if I get
    into the details behind that from what I'm--from our team on
    the ground, it has less to do with the ability to unload a ship
    but has more to do with the ability to get trucks that can
    move--get in country with those goods and services.
        And so how has it impacted us specifically? We've had to
    sell products into other markets for a period of time so--until
    that cleans up, until the lockdown is over, until those
    problems are solved.
        Mr. Panetta. Great. I am out of time. Thank you. Thanks to
    all of you. I yield back, Mr. Chairman. Thank you.
        The Chairman. Thank you. And now I recognize the gentleman
    from California, Mr. LaMalfa.
        Mr. LaMalfa. Thank you, Mr. Chairman. I want to go to Mr.
    MacLennan. I was out of the Committee for a while, so pardon me
    if this has been done, but I want to emphasize ranchers and
    being able to continue to operate. I mean, that is just the
    plus or minus question these days is like are they even going
    to be around much longer with the cost of everything, cost of
    energy being up and down, the ability to deliver their stock to
    farther and farther distances with consolidation.
        So earlier, we had producers speak that didn't seem to
    believe that the business was going to work to help to sustain
    the growers much longer, withstand market volatility, et
    cetera. So you, Mr. MacLennan, or others on the panel, I would
    love to hear what your thoughts are on how the growers are
    actually going to be able to sustain--and I don't want to hear,
    oh, it is just cyclical because this is the worst cycle maybe
    ever right now with what they are facing and all the things are
    lined up against them politically and costs. So how are you
    going to have any growers left after another couple of years?
        Mr. MacLennan. Yes.
        Mr. LaMalfa. We faced drought in the West, feed prices,
    lack of feed, whatever. Please.
        Mr. MacLennan. Yes, Congressman LaMalfa, I mentioned and
    perhaps you were out of the room, but this industry and--can't
    survive without the ranchers and farmers supporting it. And the
    American food supply has proven to be--system has proven to be
    incredibly resilient, as we saw in the last 2\1/2\ years. But I
    think some of it is the cyclicality, which you alluded to, and
    one of the witnesses at this morning's panel alluded to the
    fact that the cycle is almost predictably 8 to 10 years and
    that we are at the--almost exactly at 10 years and we are
    seeing evidence that economics are starting to shift. And we
    saw economics in the inverse relationship in 2013 and 2014.
        I think innovation is another theme in terms of creating
    efficient feed solutions for our ranchers and for our cow-calf
    producers to help them increase yields, but we all have a
    vested interest in the beef supply chain to ensure----
        Mr. LaMalfa. I am sorry. My time is limited because it is
    existential for them right now. There are many that are not
    going to--we are talking about five generation ranches and such
    that they are up against the edge on this. So I want to know
    what is the processing side of the industry going to do to help
    them be there because we know if they are not growing, then you
    don't have anything to process. As a farmer myself, I get that
    the processors always have to have something to run through,
    yet we are always the ones that get paid last at the farm gate.
    So what is the plan that is going to--you know, you say
    innovation. Well, that is down the road. I am talking right
    now. These guys are going to be gone soon with everything they
    are facing. What are we doing right now?
        Mr. MacLennan. I think we are continuing to provide markets
    for their products. We are continuing to--I think innovation
    isn't down the road. I think it's here. And as I said in my
    opening statement, we are anywhere from 30 to 35 percent buyers
    in the cash markets, which I know is something that many people
    have been speaking about.
        Mr. LaMalfa. Others on the panel?
        Mr. Klein. Yes, let me comment on that. The cow-calf
    segment--again, we don't deal directly with them, but they are
    a vital part of the whole system and they have to be healthy.
    They do have the opportunity to retain ownership of that calf
    all the way through the system, all the way through processing
    and onto the customer. So that opportunity exists today.
        As I said earlier, the profit through--across all segments
    has never been higher. It's at least $300 or $400 a head higher
    than it was even 5 years ago. And I--as we go forward as a
    profit shift back to the production segments, the cow-calf
    segment is going to benefit from that certainly.
        Mr. LaMalfa. The profit is not there this year. There are
    auctions fixing to happen for a lot of our longtime ranching
    families. So what do you say about this year?
        Mr. Klein. 2022 cattle prices are going up, which means
    calf prices will go up. So the cow-calf producer will get more
    for his product going forward than he has in the last few
    years.
        Mr. LaMalfa. All right. Is Mr. Schellpeper still online
    here?
        Mr. Schellpeper. Yes, I am. Congressman, to answer your
    question, thank you, the best thing that we can do is to run
    our plants at capacity or add capacity. And at JBS we are
    adding capacity to our Grand Island, Nebraska, plant. We're
    also adding capacity to our Omaha, Nebraska, plant. And we've
    have taken some very aggressive steps that I can walk you and
    the group through at some point in time of what we have done to
    staff our facilities.
        Mr. LaMalfa. How about the distance involved for--you know,
    Nebraska is a long way from many, many ranchers. How are we
    doing that? We need to close that transportation gap, anybody?
        Mr. Schellpeper. Well, Congressman, I'll speak for JBS. We
    operate plants from Arizona all the way through to
    Pennsylvania, so we believe that we have opportunities directly
    to our plants, but we are in several hundred sale barns every
    single year buying cattle.
        Mr. LaMalfa. Okay, thank you. Mr. Chairman, I will yield
    back. I appreciate it.
        The Chairman. Thank you. And now I recognize our Ranking
    Member, the gentleman from Pennsylvania, Mr. Thompson.
        Mr. Thompson. Mr. Chairman, thank you so much. Gentlemen,
    thank you all for being here and your testimony on this second
    panel.
        Mr. Klein, as your testimony points out, fed cattle are not
    the only input for the beef packing industry. Labor, packaging,
    transportation, regulatory compliance, and capital are all
    necessary parts of the process as well. Can you talk us through
    which of those inputs are currently having the biggest impact
    on your bottom line and the ultimate price of beef?
        Mr. Klein. Transportation costs have gone up 40 percent in
    the last year. Labor costs have gone up 30 percent in the last
    year. That's $82 a head that we've got to pass through to the
    consumer or back to the price of cattle that we pay for cattle.
    Those are the two single biggest cost components that we have
    and the most that affect our business and has the biggest
    impact today.
        Mr. Thompson. Well, thank you. Any of the--Mr. Schellpeper,
    Mr. King, Mr. MacLennan, would any of you care to weigh in with
    your thoughts on that?
        Mr. Schellpeper. For JBS, transportation has been a
    significant cost increase as well. I will leave it at that,
    Congressman.
        Mr. King. Congressman, in terms of Tyson, virtually
    everything in the supply chain has increased. We've seen
    inflation like we've not seen in generations. And--but if I
    look at specifically grain, for example, corn is up 127
    percent, soybeans are up 90 percent, diesel is up 104 percent,
    and even shipping containers are up 68 percent. So there's a
    lot there that have gone up, and I can list more, but it might
    be easier to give you a list of things that haven't gone up.
        Mr. Thompson. Yes, unfortunately, I would agree with you.
    That would be a shorter list.
        Frankly, I am very concerned with the Biden
    Administration's regulatory agenda from bowing down to unions
    on time-tested lines speed regulations to rushing ahead with
    decades-old packers and stockyards regulations that have been
    misleadingly touted as the solution to everything from volatile
    prices to industry consolidation. I am particularly concerned
    that this heavy-handed regulatory approach may discourage the
    development and use of innovative industry solutions that could
    unlock not only price efficiencies but a number of other
    benefits related to food safety, the climate, employee
    wellness, even animal welfare.
        To any of the panelists who are willing to engage, how
    important is innovation to keeping your companies competitive,
    and are you concerned with our current regulatory trajectory
    and how that may negatively impact the ability to innovate?
        Mr. King. Congressman, I would--I will start and try to
    make a few comments around that. Innovation and supply chain is
    going to be critical going forward, and a number of people this
    morning testified that on their farm or ranch it's not their--
    it's not the same as it was for their dad or their granddad or
    those who started it.
        And I think we have to start with the consumer and work our
    way back through the supply chain. Those consumer preferences
    are changing almost daily. If you look at the data like choice
    and prime grades are--you know, 20 years ago were like 65
    percent and today they're 85 percent. And that's because
    consumers are demanding a better quality beef and a better
    eating experience. And you're going to see that with other
    attributes like natural and even sustainability. And as you
    well know, an area for innovation could be around greenhouse
    gas emissions, particularly as it relates to cattle and having
    incentives there to have innovation and to do things
    differently and to make a difference. We as packers and
    ultimately for the consumer need to find ways to incent
    ranchers and producers to be able to do the things necessary to
    provide that end product as desired by the consumer.
        Mr. Thompson. Anyone else in terms of your ability to
    innovate under the current regulatory trajectory?
        Mr. Klein. Let me make a comment on that. Regulation, if
    it's done right is good. It's good for everybody. But there are
    some regulations that have unintended consequences, and those
    are the ones that I think we have to be careful of and
    understand. We spend about $20 million year on regulatory
    issues, not a big amount but it's significant. We certainly
    don't want to see that get out of hand.
        Mr. Thompson. Very good. Thank you, Mr. Chairman.
        The Chairman. And now I recognize the gentleman from
    California, Mr. Costa, who is also the Chairman of the
    Subcommittee on Livestock and Foreign Agriculture, is
    recognized for 5 minutes.
        Mr. Costa. Thank you very much again, Mr. Chairman. And I
    think today's hearing certainly has provided a lot of insight
    as to, as you noted, the potential legislation that we're
    looking at and concerns that people have about impacts of
    prices and the supply chain. I think we all recognize that with
    this COVID, this horrific COVID and the closure of schools and
    restaurants, we took a very complicated, complex food supply
    chain and we really turned it upside down and in ways that we
    could not have anticipated 2\1/2\ years ago.
        Mr. King, in your testimony when COVID hit in March 2020
    the industry was almost closed overnight. I learned in the pork
    industry that 70 percent of bacon and pork bellies are consumed
    in restaurants and we had to do euthanasia in that part of the
    protein industry. I have heard that food service accounts for
    roughly 50 percent of the beef sales. How did the shift from
    food service to retail impact your business?
        Mr. King. Congressman, great question. One of the
    advantages to having scale is having the ability to move across
    all points of distribution or channels. And we were able to do
    that fairly quickly. For example, move from lay-flat bacon that
    is often used at--by food service operators to more of a stack
    pack or an L-board or tux-type product in bacon. So we were
    able to really quickly adjust our production capabilities to be
    able to address this--you know, this sudden shift from a--in
    our markets about 50 percent retail and food service to almost
    100 percent retail almost overnight. So it was--it took a great
    deal of effort by the team, but we were able to do that in
    fairly quick order.
        Mr. Costa. Yes, I think for a number of the CEOs that have
    testified here, there has been a bit talked about the workers
    who are essential workers, as we know, and whether it is any
    strain of agriculture, farmworkers or workers in processing
    facilities, they are essential workers. With the impact of the
    vaccine, what attempt has been made to really try to protect
    their health and safety as it relates to--and of course we are
    still trying to gear back up in terms of the employment issue.
    Mr. Klein, would you care to comment?
        Mr. Klein. Yes. We continue to make every effort possible
    to keep our employees safe when they come into our facilities
    starting with screening and testing when they come in. We've
    maintained the workplace partitions both in our production
    floors and in the break rooms. So as we look at it today, our
    employees are safer than they've ever been inside of our
    facilities.
        Mr. Costa. Do any of the other witnesses care to comment?
        Mr. Schellpeper. Yes, on behalf of JBS, we had so many
    interventions in place in our plants back then but really
    starting about a year ago we really started to pivot towards
    vaccination. And we've made a lot of effort inside of all of
    our facilities, including closing down facilities for
    vaccination days----
        Mr. Costa. Well, and that is very important to make that
    available not only to the workers but to their families as
    well. We have had some instances--we have a Cargill plant in
    Fresno, and of course we have other facilities in the area
    where they have made that available for their employees and I
    think that is very important.
        Mr. Costa. Mr. Stockton on the previous panel testified
    that he has not really seen real enforcement in the Stockyards
    and Packers Act since the 1980s, and I'm wondering--and cites
    that as part of the reason in the price disparity between the
    cow-calf operator and the prices that American consumers are
    seeing in the grocery store. I know there are a lot of factors
    that impact the prices of protein when you go from the calf-cow
    operation or the dairy operation to the ultimate purchaser of
    that product that puts food on America's dinner table every
    night, and we know that that is a national security issue. I am
    wondering if any of you would care to comment on those factors,
    on the impacts of these cost increases.
        Mr. King. Well, I would--Congressman, I would just simply
    say that, as I testified earlier, virtually every input in the
    supply chain has gone up. And typically when you see a minor
    increase, companies tend to absorb that, but the rate of
    inflation and costs have gone up so dramatically that some of
    that had to be ultimately passed on to the consumer. And we've
    done that as well. But, this beef business is a cyclical
    business, and while we've seen the trough, I think it was like
    June of 2020 in terms of the price of fed cattle, if you look
    at it today, it's about $145 and based on futures will continue
    to move up, as Mr. Klein commented earlier.
        I agree with that assessment, and this 10 year cattle cycle
    that was testified about earlier, I would certainly expect,
    while everyone is making more money in the supply chain, I
    would expect that to flip some to the feeder and----
        Mr. Costa. Well, my time has expired, but if you could give
    the Committee a breakdown of those input costs so we can better
    understand it, I think that would be helpful. Thank you, Mr.
    Chairman.
        [The information referred to is located on p. 150.]
        The Chairman. The gentleman from Georgia, Mr. Allen, is now
    recognized for 5 minutes.
        Mr. Allen. Thank you, Mr. Chairman. And I want to thank all
    of our CEOs for being here today and participating in this
    hearing. Obviously, what we are talking about is--well, let me
    tell you what I am hearing about it my district. It is the
    price of food, the price of gas, I mean, everything. And of
    course, I understand that certainly when you have a war on
    fossil fuels and you decrease your supply and demand is still
    there, the price is going up, and that drives everything else,
    which has put us in a terrible predicament all across
    agriculture and everything and really all the essentials that
    we require in this country.
        And of course we are zeroing in here on, okay, what is
    actually driving it as far as meat pricing and availability?
    And of course we have factors like the drought, we have factors
    like, the big word up here is equity where we are paying more
    to certain farmers for different products than we are paying
    other farmers, and, boy, that is dangerous. And so, what has
    that got to do with pricing and that sort of thing?
        So I am going to start here, Mr. Klein, with you. The
    Administration has tied inflation to a lack of competition. And
    in his State of the Union address, President Biden implied that
    concentration in the meatpacking industry is the reason for
    higher prices at retail. Now, I don't agree with that, maybe
    some, but I don't agree with his statement there. Do you agree
    with the President, and please explain and others on the panel
    please feel free to weigh in as far as what you think about the
    President's statement there, what is actually driving prices.
        Mr. Klein. Thank you for the question. I believe that the
    prices of beef today at the retail or at the restaurant level
    are dictated by--in the retail by the retailer itself. They set
    the price for beef. We don't set the price. We set the
    wholesale price. And we react to supply and demand.
        The beef industry is the most purest form of capitalism in
    this country, I believe. Every day we're negotiating prices. As
    demand goes up, price goes up. If demand goes down, price goes
    down. And what's happened in our industry if you look back 30
    years, the concentration has remained the same, and the packer
    margins were very, very slim. So it's not concentration that's
    causing the high price of beef. It's demand for beef and then
    the inflationary factors of all of our input costs have gone up
    and we've got to pass that along.
        Mr. Allen. Okay. Anyone else care to weigh in on that?
    Okay.
        Mr. Klein, your testimony pointed out the current beef
    processing industry consolidation levels are actually slightly
    lower today than they were back in 1998 and that overall levels
    of consolidation have been relatively steady for decades. If
    that is the case, why do you think there is suddenly such a
    fixation on consolidation levels by this Administration?
        Mr. Klein. If we go back to COVID time period, we weren't
    talking about inflation in general, but what we did see because
    of the cutbacks in our industry, prices rose dramatically and
    the consumers were paying more for beef. So it made the
    headlines from that point forward. As we go forward and
    inflation became an even bigger factor, beef is part of that as
    well.
        Mr. Allen. So--and again, if you look at history, for
    example, obviously when there is a drought supply immediately
    increases but then it drops off. I mean, it is a fluctuating
    business. So we had to end up--you know, a lot more meatpackers
    back in--well, when I grew up we had one in our town and we
    took the cow in and that is how we ate. But the bottom line is,
    I mean, what happened in this industry? I mean, was it the
    government? And obviously, the regulatory environment has
    increased, correct?
        Mr. Klein. Yes.
        Mr. Allen. Inspections and that sort of thing. What can
    this government do to return competition in your industry?
        Mr. Klein. First of all, the reason that there's not as
    much competition today is because the industry was forced to
    become much more efficient. The plants today are the most
    efficient plants in the world. They're processing 5,000 or
    6,000 head of cattle per day in each of these facilities. The
    cost is lower. We've got a single shift plant in Iowa. Our
    costs in that plant are $120 a head higher than they are at our
    big plants. So if you have many, many small plants with that
    kind of a penalty, cost penalty, that has to get passed along
    to the consumer or passed back to the feeder.
        Mr. Allen. Yes. All right. Well, thank you, Mr. Klein. Mr.
    Chairman, I yield back.
        The Chairman. Thank you. And now the gentlewoman from Iowa,
    Mrs. Axne, is now recognized for 5 minutes.
        Mrs. Axne. Thank you, Chairman Scott, and thank you to our
    witnesses for being here on this really important topic.
        You all hold tremendous power in the cattle industry,
    together accounting for over 80 percent of the market. And as
    your market share has risen over the last 50 years going from
    25 percent in 1977--that is back when my grandparents had a
    farm and I remember the cattle on my grandparents' farm--you
    now have over 80 percent of the market share. My grandfather no
    longer has a farm. It is not in our family. The industry has
    also seen a lot of disturbing trends in addition to farmers
    leaving. Since 1980, roughly 17,000 cattle producers have gone
    out of business every year, every year. Producers were
    receiving 60 of every dollar spent by consumers on beef, now
    that is under 40. So now our producers are getting 30 for
    every dollar spent for their beef.
        And over the last 20 years cattle traded on a cash market
    has decreased from more than \1/2\ to only 20 percent of the
    overall market. I am not seeing any good numbers here. And this
    consolidation has led to many of the major packing facilities
    closing in rural communities, costing us jobs and economic
    opportunity while exposing the entire industry to more risk
    caused by market disruption.
        Today, consumers are literally paying more for their beef,
    producers are receiving less for their cattle, and yet your
    four companies' net incomes have reached record highs. And it
    is not just because of the recent spike in costs for inputs. I
    will recognize that. But let's go back decades of how we have
    seen our rural communities be impacted by this consolidation.
    So this is simply not sustainable for producers or consumers.
    And I have heard from far too many in Iowa who are worried
    about their ability just to stay in operation to be able to
    pass it down to the next generation. And these are family
    farmers that I grew up with. And just like their parents did
    before them, I want to make sure that they have that
    opportunity. So something has to change.
        And my first question, Mr. Schellpeper, can you respond to
    these trends? And are you worried about the fact that we are
    literally losing 17,000 cattle producers every single year?
        Mr. Schellpeper. Thank you, Congresswoman. I believe that
    we operate in an extremely competitive market both on the buy
    side and then on the sell side, right? At JBS we participate
    relative to cattle procurement in the markets how producers
    will buy the cattle how producers want us to buy them, again,
    whether that's on a cash basis, whether that's on a video
    auction, whether that's on a--on some type of AMA.
        In your home State of Iowa, we are participating in
    numerous sale barns. We have 14 sale barns I believe in the
    State of Iowa. We have company employees participating in those
    sales. There's numerous other ones that we have some type of a
    [inaudible] type of a buyer in those sale barns. So the best
    thing we can do is to continue to be active in this cash
    market, and we are active in it every single day, and that's
    how--what we're doing to try to support these producers.
        Mrs. Axne. Well, I appreciate those efforts, and I would
    like to see those actually increase because the number is still
    correct. We have 17,000 cattle producers leaving the market
    every single year, so you have to be doing more when you are
    controlling 80 percent of the market. You have an opportunity
    to start leveling the playing field here and making things
    right by us Iowa farmers in Iowa.
        So I just want to move on now though. I know we saw supply
    chain disruptions across the economy over the last couple of
    years, we mentioned that, and prices went up during that
    period. However, producers didn't get the benefits of those
    higher prices. Why are cattle producers struggling to get by
    when beef prices are high and your companies are making record
    profits?
        Mr. Schellpeper. Is that for me, Congresswoman?
        Mrs. Axne. Yes.
        Mr. Schellpeper. Okay. Excuse me. So, again, we talked
    before about this being a cyclical business, and we are now at
    the point in time where cattle markets are starting to turn. In
    fact, if you look at USDA what we call the five area cattle
    market, what it averaged for the first quarter of this year is
    actually the third-highest quarterly average price that we've
    seen in the last 13 years other than those 2 record years I
    believe it was of 2014 and 2015. So again, we talk about a
    cyclical business here. I believe we're on the backside of the
    cycle and things are starting to turn.
        Mrs. Axne. Well, that is great. Just let me rephrase that.
    What can you do differently to help level the playing field so
    that all cattle producers can have an opportunity for more
    income, not just the ones you are currently working with?
        Mr. Schellpeper. The best thing that we can do, again, is
    to increase our capacity, which we're doing, running our
    plants. And again, as I've said before, we're very active in
    the cash market. Additionally, we have numerous cattle barns
    across the country, employees and type of order buyers active
    in the cash market. We have a cash bid every single day.
        Mrs. Axne. Well, I will look to see how much you are doing,
    and I appreciate you being here for this important
    conversation. My time is up. Thank you.
        The Chairman. I now recognize the gentleman from Ohio, Mr.
    Balderson, for 5 minutes.
        Mr. Balderson. Thank you, Mr. Chairman, and thank you,
    first of all, to the panel that is here today.
        As you know, cattle markets are some of the most complex in
    the world, and there are a lot of factors that go into the
    price of beef, some of which you all have mentioned in your
    testimonies. A major factor is the historic levels of inflation
    and rising costs that we have seen over the past year. Can you
    explain the impact that these inflationary pressures are having
    on your businesses and how it is impacting the price of cattle
    and beef? And everyone from the panel can jump in and answer
    that if you would like, please.
        Mr. Klein. Thank you for the question. I'll comment on that
    first. As I said earlier, the biggest impact we've seen in the
    last year has been transportation costs and labor costs. That's
    about $80 a head, which is a significant jump. That means that
    cattle prices either got to go down by that much or consumer
    prices have to go up, wholesale prices, in order for us to
    maintain the same profit margin.
        The biggest single factor we're dealing with right now is
    where we're at in the cattle cycle. There is simply more cattle
    available every week than there is demand and capacity to
    process those cattle.
        Mr. Balderson. Would anybody else like to jump in? All
    good? Okay. My next question is for Mr. King.
        Mr. King, you mentioned in your testimony that beef and
    cattle markets are some of the most transparent in the world,
    and you go on to mention that packers are required by law to
    share market information with USDA twice a day. Can anyone or
    can you and anyone on this panel elaborate on what information
    you are required to share and what USDA does with this
    information?
        Mr. King. Thank you, Congressman. Very specifically, we
    report the price that we pay for cattle and what we sell beef
    for twice a day. You can go to the USDA website and AMS and you
    can find that for a particular day, week, month, or any period
    of time in which you would select.
        Mr. Balderson. Okay. To follow up with that, to your
    knowledge, are you aware of any other industries that are
    subject to this kind of reporting and scrutiny?
        Mr. King. Congressman, not to my knowledge. Very well could
    be, but not to my knowledge.
        Mr. Balderson. All right. Thank you very much. I appreciate
    that. My last question is for Mr. Klein. Mr. Klein, many
    economists would argue that the volatility in the cattle and
    beef sector can be explained by supply and demand dynamics. My
    first question would be do you agree with that?
        Mr. Klein. Yes, I agree with that.
        Mr. Balderson. Please explain your answer.
        Mr. Klein. As I said earlier, this is a--the purest
    capitalist--capitalism in our industry of any industry. We
    negotiate prices hour by hour with the products we sell and
    with the cattle we buy. So whenever we have disruptions in the
    system like a fire, like COVID, it's going to result in a
    pretty dramatic adjustment in volatility in the price of the
    products that we buy and sell. And that has been the single
    biggest factor. But this is a very dynamic industry operating
    in a free market system, and volatility is part of the
    business, always has been.
        Mr. Balderson. Mr. Klein, thank you very much for your
    answer. Mr. Chairman, I yield back my remaining time. Thank you
    very much, everyone.
        The Chairman. Thank you. And now the gentleman from Iowa,
    Mr. Feenstra, is recognized for 5 minutes.
        Mr. Feenstra. Thank you, Chairman Scott. And I want to
    thank the packers for participating today. And I always want to
    remind everyone that putting protein on the table starts with
    the family producer, and it's the process where it all starts
    is on the family farm. So I have a question for each one of you
    hopefully. I will start with Mr. King.
        Mr. King, I have been told that the four largest
    meatpackers agreed to provide information to the cattlemen's
    organization for a producer-led initiative to achieve 75
    percent of negotiated trade needed for robust price discovery
    in each reporting region. The feeders made the effort to meet
    this voluntary threshold, but the initiative failed to due to
    lack of packer participation. Could you explain why this
    failed?
        Mr. King. Congressman, I'm not familiar with that. I would
    be happy to get the necessary information and get it to you and
    to this Committee.
        [The information referred to is located on p. 153.]
        Mr. Feenstra. Okay, thank you. If some packers are allowed
    to not participate in the cash markets, would they not be able
    to manipulate the regional supply of cattle by simply shifting
    their captive supply from one region to the next? And the
    reason I bring this up is there was a study done by my
    university, Iowa State University, that notes this practice.
    Are you aware of this practice, Mr. King?
        Mr. King. Congressman, I'm not aware of it. I am certainly
    willing to go explore it and understand and try to understand
    what you're speaking of.
        Mr. Feenstra. Okay. Mr. MacLennan, in my eyes here is this
    fundamental problem. Here you have the big four packers that
    control the large packer capacity, up to maybe 80, 85 percent.
    You are able to determine how many animals are harvested and
    how much meat is offered. The market share lets you control the
    price through contracts, managing the amount being slaughtered
    through line speeds, and control the supply of livestock. So my
    question is how do we get to transparency when some of these
    things are happening? And this is--you know, I would like you
    to look--you know, what are your thoughts on this?
        Mr. MacLennan. Well, Representative Feenstra, number one
    is, as I've stated, Cargill purchases between 30 and 35 percent
    of our cattle in the cash markets. Number two is our job is to
    provide a market for the ranchers who are bringing their cattle
    to market. So to the extent that we have constrained capacity
    because of labor issues or because of--you know, whether we
    closed down because of COVID, then there would be a backlog in
    the supply chain. But our job is to be there every day for the
    ranchers for a place for them to bring their cattle----
        Mr. Feenstra. Thank you. Thank you. I fully understand what
    you are saying. I will contest that there is a control on the
    markets through line speeds and the amount being slaughtered
    that can manipulate the markets.
        Mr. Schellpeper, the Iowa and Minnesota region has the
    highest quality of grade cattle in the U.S. I am not sure if
    you knew that, but since we are told the AMAs drive quality,
    can you explain how cattle producers in Iowa and Minnesota are
    able to raise some of the best cattle in the nation without
    AMAs?
        Mr. Schellpeper. Thank you, Congressman. And I would agree,
    there are some very good quality cattle in Iowa, and we buy
    them. We take them to several different plants. Relative to how
    they do that, frankly, I'm not a cattle feeder, Congressman. I
    would defer to someone in the--in Iowa that could probably be
    better prepared to answer that question that I can.
        Mr. Feenstra. Sure. So here is a question. There is a lot
    of alternative marketing agreements that reward quantity over
    quality, and some studies indicate that around 25 percent had
    nothing to do with the quality and that these are traded at a
    premium only because they have made a deal to guarantee supply
    for the packer. This data is obviously hard to come by, but you
    think about turn-in cattle--I am not sure if you know what that
    is--but how does this relate to price discovery, Mr.
    Schellpeper, if you can talk about that a little bit?
        Mr. Schellpeper. Sure. Congressman, we're involved with
    price discovery. We are in the cash market every day. We are
    active participants. Especially in your home State of Iowa we
    are active participants in the cash market. So that's the best
    way that I can answer that relative to AMAs, but we are very,
    very active in the cash market.
        Mr. Feenstra. So doesn't the link between the AMAs and the
    cash market give the packers an incentive to lower the cash
    market price as doing so would lower the base price for all
    cattle committed to that packer under that AMA? Would that be a
    fair statement?
        Mr. Schellpeper. Well, I think it's important to note that
    even an AMA is a negotiation, what the--what that base is,
    what--any premiums or discounts. It's all a negotiation.
        Mr. Feenstra. Okay. I am out of time. I thank you and I
    yield back.
        The Chairman. Thank you. And now the gentleman from
    Alabama, Mr. Moore, is recognized for 5 minutes.
        Mr. Moore. Thank you, Mr. Chairman. And I want to thank all
    the panelists for participating today.
        Mr. Klein, this is a question for you. You mentioned
    regulatory compliance as an input cost. Can you briefly walk us
    through the regulatory regimes that your business is subject
    to? Are there current regulatory and legislative proposals that
    you worry will significantly increase your regulatory burden?
    And others on the panel, you all feel free to participate.
        Mr. Klein. The single biggest areas where we're regulated
    are inspection, grading, and environmental. And for the most
    part those regulations are good regulations. It keeps our
    products safe going to the consumers. As we look at what's
    coming down the road, some of the proposals, legislation and
    regulation, although the intent is good, the outcome may not be
    desirable, particularly for the producer segment.
        Mr. Moore. Would any others like to answer, any input on
    what regulatory concerns you have, going forward, something we
    might head off and make it a little bit less burdensome for the
    industry?
        Mr. King. Congressman, there's just a couple of things. I
    mean, there are number of things that we do support, for
    example, reasonable and thoughtful policy where costs and
    impact are considered. We support that. We support incentives
    around innovation. We support policy that would help team
    members around things like education and childcare, for
    example. We support transparency, for example, the Contract
    Library that we've seen. Ranchers would need to understand the
    proper confidentiality and so forth.
        But the things that we're not for is when we add regulation
    on top of regulation and it's duplicative. And, for example,
    the Fischer-Grassley bill as it relates to a special
    investigator, we believe that USDA and Department of Justice
    already have this power to do that and they are engaged in
    this. And I think one of the panelists from the earlier session
    today talked about that, that the framework is already there,
    so if there are bad actors in here, then we need to enforce the
    regulations that we already have.
        Mr. Moore. And, Mr. King, and by the way, I am an ag
    science guy and have a poultry background. I understand you
    started off on the floor yourself back in the day.
        Mr. King. Yes, sir, Congressman, I did.
        Mr. Moore. Very good. Anybody else? I know Ronald Reagan
    always said the government's idea on the economy is when it's
    moving, we tax it. If it keeps moving, you regulate it. If it
    fails, you subsidize it. And so often I worry about taxes and
    regulations. Any other input on that? If not, I could yield
    back, Mr. Chairman.
        Okay. I will yield back. Thank you, Mr. Chairman.
        The Chairman. Yes, now I recognize the gentlewoman from
    Virginia, Ms. Spanberger. She is also the Chair of the
    Subcommittee on Conservation and Forestry. You are recognized
    for 5 minutes.
        Ms. Spanberger. Thank you, Mr. Chairman. And thank you to
    the Ranking Member as well. I want to thank the witnesses for
    being here to lend your perspective.
        A few months ago I was proud to host USDA leaders in Orange
    County, Virginia, to meet with the Virginia Cattlemen's
    Association and Virginia cattle producers, folks I represent
    who are a vital and integral part of our community. And I know
    that many cattle producers in our district have been in the
    cattle industry for generations, and they are proud to share
    the lessons and the expertise that their families have
    developed over decades. They have shared how the industry has
    changed and frankly how anti-competitive practices by other
    entities in the supply chain, specifically larger packers, have
    stacked the hand against cattle producers and consumers,
    particularly smaller family farms like those that I represent
    in Virginia. Producers feel that as they work sunup to sundown,
    consumers feel this at the grocery store and it is glaringly
    obvious in the data.
        So I want to just talk about the data. We know that the
    cattle producers share of retail value for beef has decreased
    from 51.5 percent in 2015 to 36.8 percent in 2021. Right, that
    is just a couple years difference. And at the same time JBS,
    your beef division, saw a record net revenue of 101 percent on
    the previous year. Meat prices are up 13 percent for consumers
    over last year with families struggling to afford a nutritious
    diet and at the same time Tyson saw double-digit increases in
    profits and sales in the last quarter. Since 1980, 40 percent
    of cattle producers have gone out of business, and at the same
    time, Cargill has reported its biggest profit in its 156 year
    history and National Beef's parent company profits more than
    doubled in the third quarter of 2021.
        And I want to mention that Mr. Coy Young, who testified in
    the first portion of today's hearing, spoke about the family
    farmers that are going out of business, 40.27 family cattle
    farms per day call it quits, and farmers contemplate taking
    their lives because the generations of work that went into
    creating their family farms are slipping out of their fingers.
        And so I want to talk about what it means for these family
    farmers. The Packers and Stockyards Act, it exists to prevent
    undue preferences and advantages for any particular person. We
    also know that there are financing arrangements and
    alternatives marketing arrangements, AMAs, that so many of my
    colleagues have asked about that packers have with feedlots
    that allow for substantial control over the supply of live
    cattle.
        So, Mr. MacLennan, you mentioned in your opening testimony
    that Cargill does finance producer inputs, and I would open the
    question to anyone else who might want to address it. But, Mr.
    MacLennan, beginning with you, does your company help finance
    any producer inputs such as feed, pen space, or other inputs as
    part of AMAs or otherwise?
        Mr. MacLennan. As part of--Congresswoman, as part of the
    AMAs directly, no, and I would add that the AMAs and our cash
    market participation, which is very strong, over 30 percent,
    are--and it's been referenced several times that these are what
    the producers want to achieve. But in terms of farmer financing
    or farmer education relative to regenerative agriculture, we've
    got something called beef up sustainability to educate farmers
    and to provide financing alternatives. But so--yes is my answer
    to your question that we can't be successful without them.
        Ms. Spanberger. And so these financing agreements, is it
    your assessment that they do follow the spirit and the intent
    of the Packers and Stockyards Act, specifically a law that
    exists to prevent undue preference and advantage?
        Mr. MacLennan. I'm--we abide by the law, so if it's
    embedded in the Packers and Stockyards Act, then we will follow
    that law. Whether they are embedded in specific AMAs, I don't
    have access to that information right now, but we certainly can
    follow up.
        Ms. Spanberger. Well, and certainly when it comes to
    acknowledging, understanding, and abiding the law, I think it
    is certainly past time for the Federal Government to look
    carefully at the anticompetitive behaviors that really are
    driving the stunning statistics that I mentioned. That is why I
    introduced the Meat and Poultry Special Investigators Act (H.R.
    4103) that was referenced earlier, alongside Congresswoman
    Miller-Meeks with our Senate companion sponsored by Senators
    Tester and Rounds. This legislation would create an office at
    USDA titled the Office of Special Investigator for Competition
    Matters. And to just counter the point that one of our
    witnesses made earlier, the purpose here is to ensure that the
    folks who know this industry, USDA, that they are the ones
    leading the investigations into what is happening. I appreciate
    the comments related to it is taken care of, it is within the
    Department of Justice, but indeed that is just not good enough
    to look out for the needs for the farmers and producers back
    home in Virginia.
        Thank you very much, Mr. Chairman. I yield back.
        The Chairman. The gentleman from Kansas, Mr. Mann, is
    recognized for 5 minutes.
        Mr. Mann. Well, thank you, Mr. Chairman. And similar
    comments and remarks as we get started here and questions to
    what I asked our previous panel. First off, on behalf of the
    farmers, ranchers, and agriculture producers in the First
    District of Kansas, thank you for participating in today's full
    Committee hearing regarding beef markets.
        This issue is especially near and dear to me since both
    sides of my family have farmed and fed cattle in western Kansas
    for more than 120 years. I cut my teeth growing up on a
    preconditioning feedyard, a couple thousand head in Gove
    County, spent thousands of hours riding pens and doctoring sick
    calves.
        The Big First ranks number one in the country for the value
    of sales of cattle and calves at more than $9 billion every
    year. There are more than 4.4 million cattle and calves raised
    in my district and significant packing capacity with more than
    20 percent of the nation's beef slaughter capacity. We see the
    entire supply chain in the Big First from cow-calf producers to
    cattle feeders to packers. More broadly, the beef sector
    supports grain producers, manufacturers, veterinarians, and
    many other small businesses that populate rural towns across
    Kansas and the country.
        In a competitive cattle market, it is vital for producers
    to be able to differentiate their product to eventually suit
    the taste of the consumer. As seen by the growing demand for
    beef both here in the U.S. and around the world, selective
    breeding and nutrition that have increased quality bring
    opportunities for producers to negotiate a premium price for
    their cattle. These contracts allow feeders to benefit from
    making a value-added investment and provide some certainty in a
    volatile market.
        Across the country, cattle producers continue to face
    challenging market dynamics, including historically wide gaps
    between wholesale beef prices and fed cattle prices, packing
    capacity and regulation, and more. I have talked to hundreds of
    cattle producers in Kansas, ranging from small cow-calf
    operations to some of the country's largest feedyards.
    Overwhelmingly, I have heard that we need to increase price
    discovery in the cash market, make sure the producers benefit
    when they provide a superior product, refuse to let the
    government interfere in the free market, and acknowledge
    regional differences.
        There is currently discussion in Washington around the
    Federal Government mandating a certain percentage of cash or
    spot transactions between the feeder and the packer, limiting
    the number of allowable alternative marketing agreements. AMAs
    are popular across the Big First and are used by many because
    they cut costs, increase efficiencies, and reward producers for
    a higher quality of product.
        A few questions here for you, Mr. Klein. Do you feel that
    legislation proposed to limit the use of AMAs would negatively
    impact the beef market? And what do you anticipate would be the
    impact to the beef quality in this country?
        Mr. Klein. The biggest impact would be to the quality. The
    quality would definitely go down if we were paying the same
    price for cattle and not able to offer a premium for better
    cattle. So certainly, that would impact that.
        The other impact, cash trade versus AMAs, most of the AMAs
    that we have, and others are the same that we know about, the
    producer wants that ability to offer product cattle to us to
    get a premium for those cattle, and to have a guaranteed
    shackle space for the cattle, especially in the South where
    there's--they operate like hotels. Cattle move in and cattle
    move out every week. They have to have a home for those cattle.
    We design our AMAs so that--the type of cattle that we need and
    that we can grow our business with.
        In the current environment, the current part of the cattle
    cycle, more cash trade would not be to the producers' benefit
    simply because there would be too many cash trade--there's more
    cattle available today than we have ability to process.
        Mr. Mann. So you think more cash would actually reduce the
    price that most producers are receiving for their cattle today?
        Mr. Klein. Right. That's what I believe, yes.
        Mr. Mann. Could you, Mr. Klein, then, kind of with that--
    briefly just talk us through the recent fed cattle and beef
    price trends and any predictions moving forward?
        Mr. Klein. Yes.
        Mr. Mann. I know you addressed it in your testimony if you
    would be willing to kind of give us a picture or a snapshot of
    April 2022 kind of where we are at in the cycle and what you
    anticipate occurring.
        Mr. Klein. Yes, well, cattle prices today are up 45 percent
    from where they were in the depth of COVID. Beef prices are
    down about 60 percent from the same time period. So we had that
    anomaly during COVID that drove this, but the biggest factor we
    have today is oversupply of cattle relative to industry
    capacity. But that's changing, and we're already seeing a
    change. As we look forward from here, we're going to see cattle
    prices go up and we're going to see the beef profit for packers
    go down. The profit is going to shift back to the cattle
    production segments.
        Mr. Mann. And as you see the market, when do you anticipate
    that begins to occur?
        Mr. Klein. The peak is occurring as we speak. It would have
    already occurred--the peak would have occurred in 2020 had it
    not been for the backlog of cattle that were not processed
    during COVID.
        Mr. Mann. Great. I see my time has expired. I thank you,
    Mr. Chairman. With that, I yield back.
        The Chairman. The gentlelady from Florida, Mrs. Cammack, is
    recognized for 5 minutes.
        Mrs. Cammack. Well, thank you, Mr. Chairman, Ranking Member
    Thompson. I have been waiting for 16 months for a real hearing
    on production agriculture, so please forgive the fact that I
    have a lot to say.
        Now, we spoke to this on the previous panel, and I would
    just like to reiterate, I echo the views of my district's
    livestock producers, as well as the views of those on this
    Committee that believe in equal opportunity, not equal outcome.
    This Administration has dismissed the most basic principles of
    economics and instead has chosen to demonize our nation's
    packers, which in my opinion is a low, lazy, and simple
    narrative.
        I am personally appalled that in the midst of a myriad of
    crises, be it the skyrocketing cost of inputs, something that
    has continually been ignored by this Administration and this
    Committee for that matter, or the sting of historic inflation,
    also conveniently ignored or blamed on the previous
    Administration, or the geopolitical uncertainty, and let us not
    forget the labor crisis that we are experiencing. Just take
    your pick. Instead, the Majority here at one of the most
    important committees in the U.S. House of Representatives and,
    by extension, this Administration has chosen political theater
    over a meaningful discussion and solutions to major issues
    pressing our livestock industry.
        I heard many years ago that anger without action is nothing
    more than political theater. Well, here we are with a long list
    of complaints from a Majority and Administration about an
    industry that they themselves helped decimate. Overregulation,
    paying people to stay home and not work, withholding
    permitting, forced unionization, I could go on and on. The
    irony is not lost on me, nor my constituents and producers back
    home, that the Majority here today is essentially scolding
    themselves.
        I am starting to suspect quite honestly that the reason
    that the Majority deliberately chose not to have an economist
    testify before us here today because, God forbid, we actually
    contemplate the realities of supply and demand and other basic
    economic forces that could lead us astray from this political
    theater production that we have going here.
        And, I am deeply concerned by the Majority's complete
    disregard of the data and upholding sensationalized claims to
    push a political narrative. Just earlier in this hearing we saw
    meat market data from 2015 to 2020, but 2010 to 2015 was
    missing. I wonder why. Hmm. Maybe it was because this data
    showed that really the facts don't fit the political narrative
    and instead illustrated the cyclical realities of the livestock
    industry.
        As someone who grew up in the cattle industry on a small
    cow-calf operation and also happens to have a minor in
    economics, I can tell you that there is a litany of issues that
    producers face, many of them out of their control and due to an
    overreaching government. Quite frankly, sometimes speaking with
    my midsize processors and cow-calf producers, I think that USDA
    is doing more to try to justify their existence rather than
    help the industry.
        Take for example this new grant money that the USDA is so
    proud of that is supposed help build small- and midsize
    processing plants. At any plant handling between 525 head a
    week, the cost of construction alone is upwards of $35 million.
    And that is in a good economy. That does not figure in the
    operational costs and the compliance costs, also conveniently
    omitted from the conversation here today. In short for the
    layperson, the government here is promising ponies and they are
    delivering us stick horses. That is what is happening here.
        For all the attempts today to make the livestock industry
    the scapegoat for all of Biden's failed policies, let the
    record reflect that a few on this Committee are at the table
    with real solutions. Recognizing that the livestock industry is
    much like any other commodity market and by very nature
    cyclical, sometimes the price in store does not reflect the
    price on the hoof and vice versa. Anyone in this industry, like
    myself, knows that, but for those in the back, I am going to
    kick it to Mr. Klein.
        Mr. Klein, regarding our processors large and small, we
    have heard from a host of economists in front of other
    committees that the volatility in the cattle and beef sector
    are explainable by supply-and-demand dynamics, along with an
    overly aggressive regulatory environment. Do you agree with
    that?
        Mr. Klein. Yes, I agree.
        Mrs. Cammack. And, Mr. King, you have mentioned the
    constrained labor pool at the height of the pandemic. To what
    degree have those shortages been resolved?
        Mr. King. Congresswoman, we are largely staffed at this
    point. We still deal with a great deal of absenteeism.
        Mrs. Cammack. But during the pandemic, Mr. King, can you
    explain the labor pool situation at the height of the pandemic?
        Mr. King. Absolutely. We were constrained. For example, we
    would be operating--if the plant was operating at all, we'd be
    operating 30, 40 percent in the earliest of days. And, just a
    year ago we were no better than 75 or 80 percent of capacity.
        Mrs. Cammack. I think my point here has been made. With
    that, Mr. Chairman, I yield back.
        The Chairman. The gentleman from North Carolina, Mr.
    Rouzer, is recognized for 5 minutes.
        Mr. Rouzer. Well, thank you, Mr. Chairman. And I have a
    gazillion thoughts on my mind so let me try to narrow this down
    a little bit.
        First, I want to mention--I have a small processor in my
    district. Their business took off during the pandemic. They
    used Facebook, social media platforms. People like the fact
    that they can get their protein locally. Their biggest problem
    in expansion is dealing with the rules and regulations. And it
    strikes me that--and this is across all industries--the more
    rules and regulation you have, the greater the cost, the
    greater the cost, the greater the drive for efficiency partly,
    and therefore, the greater the natural occurrence of
    concentration.
        So if you want to add all these new rules and regulations,
    new GIPSA rules, well, for example, which I want to focus on
    one in a minute, you are just adding that much more cost, that
    much more uncertainty, which really a lot of what is proposed
    actually goes against what is trying to be achieved.
        In June of 2021, USDA issued its spring regulatory agenda
    that included three proposed rules surrounding the PSA. The
    proposed rule clarification of scope of the Packers and
    Stockyards Act looks to address the harm to competition
    standard under PSA. And although we have not seen the text of
    the proposed rule, it is generally accepted it is probably
    going to be pretty similar if not exact to the 2016 rule posted
    a month prior to the end of the Obama Administration.
        Can you all speak to--any of the panelists or all--if
    finalized in similar fashion, the economic impact of that
    proposed GIPSA rule pertaining to the harm to competition
    standard? Anyone want to comment on that?
        Well, hearing none, Mr. Chairman, I have a letter I want to
    make sure is submitted for the record, and this is switching
    topics slightly. This is a letter addressed to Senator Schumer
    signed by a number of organizations that I would say are pretty
    anti-agriculture, including one that was a witness on the
    previous panel. And I hate I didn't get the opportunity to
    bring this up then, but I had to leave to meet some other
    commitments, the Northern Plains Resource Council. And this is
    an organization that is listed with other groups that have
    specifically said in referring to concentrated animal feeding
    operations that they are, quote, ``a tool of environmental
    racism and injustice.''
        I think we are at a point where we need to focus on
    production agriculture, what is good for the whole, what is
    good for the country. The longer you pick at a scab, it never
    heals. We need to pull together and look forward and work
    together. Packers need producers. Producers need packers. We
    need each other. And I want to highlight and submit this letter
    for the record just so everybody knows who is aligned with who.
        The Chairman. Without objection.
        [The letter referred to is located on p. 144.]
        Mr. Rouzer. Thank you, Mr. Chairman.
        In my final minute here I would like to give the heads of
    these companies the opportunity to share any comments that they
    might have as it relates to regulation and then the evolution
    of things in this industry because there are cycles. And we
    don't need to be antagonizing each other. We need to be working
    together and coming together with new solutions for all of
    agriculture.
        I will turn it over to the panel. I have 30 seconds left.
        Mr. Klein. Yes, this--thank you for the question. What I'd
    like to say is that our industry has been vilified for many
    years. As long as I've been in this business, the packer has
    always been the bad guy. Yet if you look at the history, our
    profit margins have been razor thin. And up until the last few
    years, that was the case. You put more cost on the system
    through regulation at any level, it just means our costs go up,
    the cost to the consumer goes up, or the price we pay for
    cattle goes down.
        Mr. Rouzer. Thank you, Mr. Chairman. I yield back.
        The Chairman. The gentleman from South Dakota, Mr. Johnson,
    is recognized for 5 minutes.
        Mr. Johnson. Thanks, Mr. Chairman. And, too often it seems
    like Congressional attention is drawn to the brightest light, I
    suppose like moths to the flame, and so it wasn't that
    surprising that in April 2020 when cattle prices bottomed out
    and when people couldn't get the steak they wanted at their
    meat counter, then, lo and behold, all of a sudden, everybody,
    including the city folk, had their attention on this space.
    They began to understand the weaknesses in the supply chain. I
    think they began to appreciate the deficiencies in the cattle
    market.
        At that time, Members across this body understood that this
    stuff matters. And in that environment we were able to get real
    progress done on my Cattle Contract Library and on the
    Spanberger-Johnson Butcher Block Act. But this stuff matters,
    Mr. Chairman, all the time. As you so often say, we cannot do
    without food. And that means we can't let attention just drift
    away because we have had a bit of a rally on the fed cattle
    prices. We can't afford to let our attention drift away just
    because we are between black swan events.
        In an earlier panel today we talked a lot about marketplace
    concentration, we talked about efficiency, efficiency,
    efficiency, and we talked about a chokepoint at a particular
    part of the supply chain. That is the meat processing part of
    the supply chain, the part that our witnesses today in this
    panel can speak to.
        And as I think about that, we talk a lot about the big
    four, and that is appropriate. But I think we also want to talk
    about the big 30 or the big 12. What do I mean by that? Well,
    between 85 and 90 percent of the beef processing in this
    country is done at just 30 plants, just 30 physical locations.
    And in fact 12 plants do more than half of all the beef
    processing. To me, that seems like a lot of vulnerability. That
    seems like a lot of eggs in a very small number of baskets.
    Because when black swan events happen, whether they are
    cybersecurity or they are the Holcomb fire or they are COVID,
    we know that when those black swan events attack that
    chokepoint, that hurts producers, that hurts consumers. We know
    another black swan event is coming, whatever it is. I don't
    know what it is and I don't know when it is going to be, but we
    know it is coming.
        And so I am going to tell you what I think, gentlemen, and
    you can tell me what you think. I think that this drive for
    efficiency has left our country with too little slack, with too
    little cushion. I think this tightness leaves us exposed to
    unforeseen disruptions, and that creates a lot of risk, a lot
    of vulnerability to the American cattle producers. So my
    questions, and we can start with Mr. Schellpeper from JBS;
    first, am I wrong about that vulnerability about that risk? And
    second, if unfortunately I am right, what do we do about it?
        Mr. Schellpeper. Thank you, Congressman. I'll speak to JBS.
    So we operate nine plants across the United States. We operate
    some very large plants, we operate some very large plants. We
    operate plants in very different parts of the country with a
    network of buyers to buy those cattle and a distribution
    network that frankly is very robust. So from my perspective--
    and I can only speak for the JBS business--I think our model
    offers a degree of resiliency already.
        Mr. Johnson. And I don't know--and listen, I am not
    insinuating that all of the cost of additional cushion within
    the system should be borne by any particular set of
    shareholders, but it seems to me that when we say that one
    company or the marketplace has enough cushion that you think
    you are diverse enough, I mean, we just don't see that, right,
    sir? I mean, when we have one issue attack one plant, don't we
    see a massive price swing to both the producers and the
    consumers? What am I getting wrong here?
        Mr. Schellpeper. Well, from a market standpoint, what's
    happened over the last couple years is well-documented. And
    again, I go back to--as we went through COVID, we had a number
    of goals at our company, and one of them was recognizing and
    taking on the responsibility of our role in the food supply.
    And that doesn't end with COVID, that--we carry that forward
    with us every single day. And so whether that's things we
    should be doing inside of our facilities, whether that's other
    risk mitigation strategies that we should have, we continually
    work on those even today.
        Mr. Johnson. Well, thank you, sir. Mr. Chairman, I would
    just close by noting this. I mean, I don't think everything is
    okay. I do think we have a vulnerability in the American food
    supply system that I know we can work in a bipartisan way to
    address. But the big 12, the big 30, the big four, this is a
    problem for the availability and security of American food.
    Thank you.
        The Chairman. Point well-spoken, Mr. Johnson.
        And now the gentleman from Georgia, Mr. Austin Scott, is
    recognized for 5 minutes.
        Mr. Austin Scott of Georgia. Thank you, Chairman Scott.
    And, Mr. MacLennan, I know my colleague Rick Crawford spoke
    with you a little bit about this, but I have a couple of
    questions I would like to follow up with. Do you pay a
    different price in cattle markets based on the race of the
    farmer?
        Mr. MacLennan. No.
        Mr. Austin Scott of Georgia. Mr. MacLennan?
        Mr. MacLennan. Did you--I'm sorry, can you hear me,
    Representative Scott?
        Mr. Austin Scott of Georgia. Yes, sir. Do you pay a
    different price in the cattle market based on the race of the
    farmer?
        Mr. MacLennan. Yes. I'm sorry, I answered but you must not
    have my microphone. Anyway, no.
        Mr. Austin Scott of Georgia. Okay. Do you pay a different
    price in cotton markets based on the race of the farmer?
        Mr. MacLennan. Yes.
        Mr. Austin Scott of Georgia. Do you pay a different price
    in corn markets based on the race of the farmer?
        Mr. MacLennan. No.
        Mr. Austin Scott of Georgia. Wheat markets?
        Mr. MacLennan. No.
        Mr. Austin Scott of Georgia. Any market other than cotton
    do you pay a different price based on the race of the farmer
    for the commodity?
        Mr. MacLennan. As of today, no, but I would expect that
    we'll expand our Black Farmer Equity Initiative to other
    commodities.
        Mr. Austin Scott of Georgia. Okay. Well, I don't mind
    telling you, I hope you get sued over that. I think that is
    illegal and unconstitutional. But since you have referred to it
    as Black farmer equity, I want to ask you this. The definition
    under USDA of socially disadvantaged farmers is Black or
    African American farmers, as well as American Indian or Alaska
    Native, Hispanic or Latino, Asian and Pacific Islanders, and
    women. Now, one of the definitions excludes women, but how did
    you determine to discriminate against the other classes who are
    defined as socially disadvantaged farmers by the USDA?
        Mr. MacLennan. As I mentioned, this is a new program for
    us, and we have several DEI programs and initiatives. We are
    also members of----
        Mr. Austin Scott of Georgia. Sir, how did you determine to
    discriminate against Hispanic farmers and pay African American
    farmers more than you pay Hispanic farmers or your
    discrimination against Asian farmers and pay them less than you
    pay African American farmers for the same product?
        Mr. MacLennan. We've chosen to----
        Mr. Austin Scott of Georgia. How did you determine which
    races to discriminate against?
        Mr. MacLennan. We've chosen to begin our program with Black
    farmers who are significantly underrepresented. And I believe
    that we will expand our program to include other ethnic groups.
        Mr. Austin Scott of Georgia. Do you intend to include women
    in that?
        Mr. MacLennan. Yes.
        Mr. Austin Scott of Georgia. Women of all races?
        Mr. MacLennan. Yes.
        Mr. Austin Scott of Georgia. So you will include White
    women in it then?
        Mr. MacLennan. Yes.
        Mr. Austin Scott of Georgia. What about White men?
        Mr. MacLennan. It--I don't think White men are
    underrepresented in the farming industry today.
        Mr. Austin Scott of Georgia. So you are going to pay--by
    definition, you are engaging in racism and discrimination, and
    you are going to pay White men less than you are going to pay
    everybody else?
        Mr. MacLennan. I believe we are engaging----
        Mr. Austin Scott of Georgia. That is your testimony?
        Mr. MacLennan. I believe we're engaging in support of a
    historically underrepresented component of our farm community.
    Less than one percent, roughly \1/2\ percent of the farming
    community in the United States are Black Americans, and so for
    us----
        Mr. Austin Scott of Georgia. Mr. MacLennan----
        Mr. MacLennan. I'm sorry.
        Mr. Austin Scott of Georgia. Mr. MacLennan, if you were
    doing something for beginning, young, and small where it did
    not discriminate against race, you would see me going thumbs up
    and absolutely and we need to help the beginning, young, and
    small farmers. But to differentiate based on the color of the
    farmer's skin, so you are going to give a multimillionaire who
    is not White more than you will pay a 21 year old who is just
    getting started farmer that is White. I mean, if you want to go
    for beginning, young, and small and how we help beginning young
    and small farmers, I am all for you, but discriminating and
    paying somebody more because of the color of their skin or
    paying somebody less because of the color of their skin, that
    is inherently un-American. And so I am disappointed in you. I
    am disappointed in your company. I am disappointed in Target
    specifically because I believe that they are the ones that have
    driven this initiative.
        And so let me ask you this. Mr. Klein, do you differentiate
    in price, that you pay based on the color of the farmer?
        Mr. Klein. No, we do not.
        Mr. Austin Scott of Georgia. Does anybody else who is
    testifying differentiate in price based on the color of the
    farmer?
        Mr. Schellpeper. No, we do not.
        Mr. Austin Scott of Georgia. Well, I----
        Mr. King. No.
        Mr. Austin Scott of Georgia. I appreciate you not
    discriminating for or against people based on the color of
    their skin with regard to the products that you purchase from
    them.
        With that, Mr. Chairman, I yield the remainder of my time.
        The Chairman. The gentlelady from Louisiana, Ms. Letlow, is
    now recognized for 5 minutes.
        Ms. Letlow. Thank you, Chairman Scott, and thank you to all
    the witnesses before us on both panels for participating on
    this important discussion here today.
        Like many of my colleagues have stressed before me, greater
    transparency and competitiveness in cattle markets are the
    concerns I hear most from our farmers back in my district.
    Farmers are the backbone of rural America and the economic
    driver of our local communities. Without them and the hope of
    future generations to follow them, our nation will no longer be
    the global leader in the food supply chain.
        Mr. Schellpeper, your testimony mentions that the packing
    facility does not set the price of retail beef paid by
    consumers. Can you or anyone else on the panel walk us through
    how the products from your facility makes its way to customers
    at the restaurant and retail level, the changes that occur to
    that product, and the various pricing determinations made along
    the way?
        Mr. Schellpeper. Thank you, Congresswoman. So the market
    that we participate in as a packer is what we call the
    wholesale market. And that's the price discovery if you will,
    the market that we report our mandatory price reporting to the
    USDA. That's the price we work out with our customers
    obviously. When a product leaves our plants, this is where our
    industry becomes very, very complex. A product can go to a lot
    of different places, sometimes directly to a retail or food-
    service distribution center, sometimes it could go to another
    processing place or it could go to a cold storage. Each one of
    those steps that would be incremental will add a certain amount
    of cost, perhaps adds a certain amount of value. But, again, a
    very complex industry. No--there's not a one-size-fits-all
    here.
        Ms. Letlow. Okay. Mr. King, your testimony mentions that
    geopolitical issues are compounding other challenges the
    industry is facing. Obviously, the war in Ukraine is top of the
    mind for all of us, so I am curious, how is that conflict
    affecting your operations, and are there other geopolitical
    issues this Committee should be mindful of? And anyone on the
    panel is welcome to answer.
        Mr. King. Thank you, Congresswoman. The war in Ukraine is
    obviously a big piece of that, from a grain standpoint, from a
    cooking oil standpoint, and the price associated with that.
    It's a large market in terms of producing wheat, and there will
    be--the plantings in both Ukraine and Russia have been slowed
    or maybe not happen at all this year. So that would be the
    largest.
        But second, what we see with respect to the COVID lockdown
    in China and the inability to unload ships and have trucks and
    transportation to move inland in China, that would be another
    example of that.
        Ms. Letlow. Thank you. Anyone else?
        Thank you, Mr. Chairman. I yield back the remainder of my
    time.
        The Chairman. The gentleman from Texas, Mr. Cloud, is now
    recognized for 5 minutes. Mr. Cloud?
        Mr. Cloud. Thank you, Mr. Chairman. I have a question
    really to all the CEOs who are here and so you can all pick who
    you would want. But basically when I talk to people back home,
    there is certainly concern about the pricing and how it has
    developed over some time. It seems to be like there is an issue
    with competition when it comes to--what is your capacity, I
    guess, right now, when it comes to being able to produce more
    or less?
        Mr. Klein. Thank you for the question. I'll start that
    discussion. We are operating today at 100 percent of capacity.
    All three of our facilities are operating as much as we can
    possibly go through. And that is going to continue until the
    cattle supply drops where there are not enough cattle available
    to operate at 100 percent capacity.
        Mr. Cloud. It is my understanding that is pretty systemic
    of where the industry is that right now. Would you all agree?
        Mr. King. Congressman, we are not at 100 percent capacity.
    We're better than we've been--we're back to pre-pandemic
    levels, but I would tell you that we are in the 90 percent
    range at Tyson.
        Mr. Cloud. Okay. When we are talking about capacity, what
    would be the limits that are keeping you from expanding more
    and creating more capacity? Are we talking cost of equipment,
    supply-chain issues, is it people? When you are making that
    evaluation, what are you looking at?
        Mr. King. I think it--for us, it is a couple of things. One
    is people, and then the skill level associated with those
    people. We had a number of people leave the workforce, and so
    the training, skilling, and up-skilling of those team members
    is a component. But also just getting up line speeds back and
    get this engine running at full speed is a challenge with the
    inexperience level we have within our workforce. We're seeing
    the light at the end of the tunnel, and we're encouraged by
    that, but we still have some work to do to get all the way
    right.
        Mr. Cloud. Anyone else like to speak to that?
        Mr. Schellpeper. Congressman, we are back to near capacity
    levels at JBS, and again, as I mentioned earlier, we're
    expanding our capacity as well.
        Mr. Cloud. Okay. It would seem to me like one of the
    biggest issues that when I am hearing when I am talking to
    people in the ag community is they are concerned that there
    might be a lack of competition that is leading to increased
    prices. And so I guess my question is it seems like if there is
    a bottleneck in the supply-chain issue right now, it is at the
    packers in a sense. And my questions are just what could be
    done to create a more competitive environment? What can we do
    to increase capacity? What could we do to where feedlots are
    more of a bargaining for price and those kind of things? Of
    course, anytime we are looking at these sort of issues, the
    preference should be to find ways to let the market work and
    incentivize the market to work as opposed to coming in with a
    price-fixing scheme or those kind of things. And so my question
    is really what would be your suggestions along those lines?
        Mr. King. Congressman, I would suggest that if you think
    about the food supply, and protein in particular, I would tell
    you it's the most affordable, most resilient, and accessible in
    the world. And so I would tell you it's good. In our particular
    case just getting all the way back to full speed will be
    helpful, but because of some of the things, whether it be with
    AMAs or just a better grading piece of meat, U.S. grain-fed
    beef is the most desired in the world, and so the demand for
    that is incredibly strong. I see that doing nothing but getting
    stronger. So competition is great. Being able--and finding ways
    to service the existing customers and those who will be new
    into the marketplace is going to be a challenge for us at
    Tyson, and it's one that we're embracing. But the good news is
    the demand for beef, high-quality U.S. grain-fed beef has never
    been stronger, has never been a greater opportunity.
        Mr. Cloud. Okay. Well, thank you, and thank you, Mr.
    Chairman. I yield back.
        The Chairman. And thank you. And now we are at the part of
    this hearing where the Ranking Member and I would like to give
    some closing remarks, and then I would like to thank you, each
    of our CEOs. So we will start with you, Ranking Member, then
    myself, and then the thank yous.
        Mr. Thompson. Well, thank you, Mr. Chairman. And thank you,
    witnesses, for bearing with us as we talk about these complex
    issues today. The last thing we need as we sort through these
    complexities and related proposals are baseless and
    sensationalized claims. So I hope that the facts, the science,
    and that level heads will prevail as we move forward. So thank
    you all for helping to bring that to the table today, and, Mr.
    Chairman, I yield back.
        The Chairman. Thank you so much. Well, I can't thank you
    enough for this hearing. It is very important. And it was very
    important to have the CEOs here because we need your help. We
    are faced with a very serious problem and a very serious threat
    to our food security. And this is why I wanted to make sure
    that we had the CEOs here. We cannot go and solve this problem
    without it.
        We have an equation here where we are having the
    meatpackers, who are making soaring profits, in the middle of
    this supply chain, but we are having at the beginning of it our
    farmers and ranchers, and you heard the statistics, 17,000
    cattle ranchers getting out of the business every year, as Ms.
    Spanberger pointed out. Our Committee is having to deal with
    this, and we need your help. And this has been a plaintive plea
    because of the role in the decision-making capacity.
        As I outlined earlier in my remarks, the solution to this
    problem rests with three components that we have to solve,
    first of all, the high prices that our consumers are now paying
    for the beef, and then the decreasing share of profit that our
    ranchers are having. And, as you noted from just the agonizing
    testimony, several have raised the issue of committing suicide.
    So we have to solve this problem.
        And the hearing also had to have--and this is the reason I
    wanted the CEOs to make sure they were here. These accusations
    of antitrust behavior, of over-competition, you know what they
    are. It was very important to have the CEOs here to go on the
    record that they have not had the agreements. However, we put
    the chart up to show that this escalation of your huge profits
    started well before COVID-19, in 2015. This is why it was
    important for you all to be here.
        Now the question is, going forward, what is the solution
    that will lower prices for the consumers and once again allow
    our cattle ranchers to earn a fair return? We have to do that.
    The CEOs, I am asking us to be partners with our Committee as
    we put together this bipartisan piece of legislation to address
    this issue.
        And I also am very appreciative of President Biden and our
    American Rescue Plan (Pub. L. 117-92). They have started some
    of the progress. They included $1 billion in funding to support
    new independent meat processors. That is an important step. But
    we have to do more.
        And, as I said, as Chairman of the House Agriculture
    Committee, I am working now on bipartisan legislation to
    correct these market imbalances, reduce the over-concentration
    of consolidation and anti-competitive market behavior, and
    determine where there is any antitrust behavior. It is very
    important to help you all erase this blot off your record. You
    said it is not true. We need to make sure that we have the
    public's confidence that it is not true so that we can also do
    that other thing, make sure our families can go to their
    grocery store and not see their prices of meat go up 18 percent
    in a year. So that is why we want to thank you for that.
        Now, here is what we need to do. I believe, first, we need
    to go through a thorough investigation of the meatpacking
    industry's practice with your cooperation. There have been
    efforts on both sides of the political spectrum to call for
    this inquiry. You heard the comments on both sides of the
    Committee about this question. We have to make sure it is
    answered.
        My friend from Georgia, our former Agriculture Secretary,
    Sonny Perdue, a good friend, he was Chairman of the Senate and
    I was Chairman of our Senate Rules Committee for 10 years in
    Georgia. He started the first investigation with the Justice
    Department into anti-competitive practices. So this is not a
    Democratic or Republican. We are all working on this together.
        There has also been 11 Democratic and Republican State
    Attorneys General have requested an investigation from the
    Justice Department into anticompetitive practices. That is why
    it is important that I had you all here because this reaches
    right into your area of executive policy decisions. We had
    Republican Senators who have also written letters asking the
    Justice Department to investigate allegations of price-fixing
    with our meatpackers. This is what is on the table before us,
    not just you. We have to respond to it in Congress. But I
    wanted to make sure that before we move with legislation, that
    we had the ranchers and the CEOs in because you all, the two of
    you have to be partners in helping us find the right
    legislative solution.
        I am very pleased also that President Biden's
    Administration agrees and he has announced that his
    Administration will be coordinating the investigations in our
    U.S. Department of Agriculture and our U.S. Justice Department.
    But also there is a very important role for us in Congress to
    do, and that is, as you all may remember, we passed the Rescue
    Plan and we were able to put that money in, but we want to do
    quite a bit more.
        And so I just wanted to share with you all, we are in this
    together. We have a huge problem, 17,000 cattle ranchers
    getting out of the business, and it is structured in a family
    basis and their next generation of family, their sons, their
    daughters are saying they are not going to do it. This is a
    direct threat on the security of the food supply of the
    greatest nation on Earth. We cannot and we must not let that
    happen. We have to do it together, you the meatpackers, the
    ranchers, and us here in Congress, so that our American people
    will be able to afford and enjoy this bountiful agriculture
    gift that God Almighty has blessed us with.
        And so I thank you from the bottom of my heart for you all
    coming and helping, and I look forward to working with you as
    we develop the legislative fix to this great challenge. Thank
    you all very much for being here. God bless you.
        And, Mr. David MacLennan with Cargill, thank you. And
    again, I want to compliment you on helping and addressing the
    issues facing our African American farmers.
        And to you, Mr. Tim Schellpeper of JBS, your comments and
    your insight was very helpful.
        And, Mr. Tim Klein of the National Beef Association, thank
    you. And I thank you for coming in person. Thank you.
        And to Mr. Donnie King with Tyson, thank you also. Thank
    all of you.
        And I also want to thank my great staff under the direction
    of Ms. Anne Simmons and Ms. Ashley Smith. They have really put
    together a tremendous hearing here. And I want also single out
    Daniel Feingold and Lesley McNitt for they really helped me at
    this great opportunity as Chairman of this extraordinary
    Committee.
        And so now I must read this. Under the Rules of the
    Committee, the record of today's hearing will remain open for
    10 calendar days to receive additional material and
    supplementary written responses from the witnesses to any
    questions posed by a Member.
        And with that, this hearing of the Committee is now
    adjourned. Thank you.
        [Whereupon, at 3:30 p.m., the Committee was adjourned.]
        [Material submitted for inclusion in the record follows:]
      Submitted Article by Hon. David Scott, a Representative in Congress
                                  from Georgia
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    [https://www.nytimes.com/2021/12/27/business/beef-prices-cattle-
    ranchers.html]
    Record Beef Prices, but Ranchers Aren't Cashing In
              ``You're feeding America and going broke doing it'': After
            years of consolidation, four companies dominate the meatpacking
            industry, while many ranchers are barely hanging on.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Steve Charter on his 8,000 acre ranch on the high plains of
            Montana.
              Credit. Erin Schaff/The New York Times

    By Peter S. Goodman,\1\ Photographs by Erin Schaff
    ---------------------------------------------------------------------------
        \1\ https://www.nytimes.com/by/peter-s-goodman.

    ---------------------------------------------------------------------------
    Published Dec. 27, 2021/Updated Dec. 29, 2021

        Shepherd, Montana--Judging from the prices at supermarkets and
    restaurants,\2\ this would appear to be a lucrative moment for cattle
    ranchers like Steve Charter.
    ---------------------------------------------------------------------------
        \2\ https://www.nytimes.com/2021/06/23/business/beef-prices.html.
    ---------------------------------------------------------------------------
        America is consuming more beef than ever, while prices have climbed
    by \1/5\ over the past year--a primary driver for the growing alarm
    over inflation.\3\
    ---------------------------------------------------------------------------
        \3\ https://www.nytimes.com/2021/11/16/briefing/inflation-biden-
    approval.html.
    ---------------------------------------------------------------------------
        But somewhere between American dinner plates and his 8,000 acre
    ranch on the high plains of Montana, Mr. Charter's share of the $66
    billion beef cattle industry has gone missing.
        A third-generation cattle rancher, Mr. Charter, 69, is accustomed
    to working 7 days a week, 365 days a year--in winter temperatures
    descending to ^40, and in summer swelter reaching 110.
        On a recent morning, he rumbled up a snow-crusted dirt road in his
    feed truck, delivering a mixture of grains to his herd of mother cows
    and calves. They roam a landscape that seems unbounded--grassland
    dotted by sagebrush, the horizons stretching beyond distant buttes.
        Mr. Charter has long imagined his six grandchildren continuing his
    way of life. But with no profits in 5 years, he is pondering the fate
    that has befallen more than half a million other American ranchers in
    recent decades: selling off his herd.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Mr. Charter preparing feed for his herd of mother cows and
            calves.
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              Mr. Charter with Willie and Stevie Williams, his
            grandchildren, on the farm.

        ``We are contemplating getting out,'' Mr. Charter said, his voice
    catching as he choked back tears. ``We are not getting our share of the
    consumer dollars.''
        The distress of American cattle ranchers represents the underside
    of the staggering winnings harvested by the conglomerates that dominate
    the meatpacking industry--Tyson Foods and Cargill, plus a pair of
    companies controlled by Brazilian corporate owners, National Beef
    Packing Company and JBS.
        Since the 1980s, the four largest meatpackers have used a wave of
    mergers to increase their share of the market from 36 percent to 85
    percent, according to the U.S. Department of Agriculture.
        Their dominance has allowed them to extinguish competition and
    dictate prices, exploiting how Federal authorities have weakened the
    enforcement of laws enacted a century ago to tame the excesses of the
    Robber Barons, say antitrust experts and advocates for the ranchers.
        One landmark piece of legislation, the Packers & Stockyards Act of
    1921,\4\ was adopted by Congress to ``safeguard farmers and
    ranchers''--among other market participants--from ``unjustly
    discriminatory and monopolistic practices.''
    ---------------------------------------------------------------------------
        \4\ https://www.ams.usda.gov/rules-regulations/packers-and-
    stockyards-act.
    ---------------------------------------------------------------------------
        Today's record high beef prices are most directly reflective of
    scarce stocks, another manifestation of the Great Supply Chain
    Disruption \5\ accompanying the pandemic. The initial spread of the
    coronavirus swept through slaughterhouses, killing scores of
    workers,\6\ sickening thousands and halting production.\7\ That caused
    shortages of beef.
    ---------------------------------------------------------------------------
        \5\ https://www.nytimes.com/2021/10/22/business/shortages-supply-
    chain.html.
        \6\ https://www.cdc.gov/mmwr/volumes/69/wr/mm6927e2.htm.
        \7\ https://www.nytimes.com/2020/04/18/business/coronavirus-meat-
    slaughterhouses.html.
    ---------------------------------------------------------------------------
        But the shock landed atop decades of takeovers that closed
    slaughterhouses. The basic laws of economics suggest what happens when
    the packers cut their capacity to process beef: The supply is reduced,
    increasing consumer prices. At the same time, fewer slaughterhouses
    limits the demand for live cattle, lowering prices paid to ranchers for
    their animals--an advantage for the packers.
        ``Their goal is to control the market so that they can control the
    price,'' said Marion Nestle, a professor of food studies and public
    health at New York University. ``The pandemic exposed the consequences
    of the consolidation of the meat industry.''
        The packers--now confronting a push from the Biden Administration
    to revive antitrust enforcement \8\--maintain that the attention on
    consolidation is misguided.
    ---------------------------------------------------------------------------
        \8\ https://www.nytimes.com/2021/12/25/business/biden-
    inflation.html.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Jeanie Alderson with her father, Irving Alderson. Their
            family has run cattle in Montana for over a century.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Jeanie Alderson's grandfather and relatives at her family's
            ranch.

        JBS, the largest meatpacker in the United States, declined to
    discuss the impact of consolidation on the market, instead referring
    questions to a Washington lobbying organization, the North American
    Meat Institute.
        ``Concentration has nothing to do with price,'' said a spokeswoman
    for the organization, Sarah Little. ``The cattle and beef markets are
    dynamic.''
        As slaughterhouses work through a glut of live cattle, ranchers
    have in recent weeks received rising prices for their animals, she
    added.
        Cassandra Fish, a former senior executive at Tyson who now runs a
    beef industry consultancy, said the shuttering of slaughterhouses by
    meatpackers in recent decades was prompted by the simple fact that many
    were losing money.
        ``The packers are not masterminds,'' she said. ``The packing
    industry was unprofitable for several years, so they closed plants.''
        But ranchers complain that the game is rigged.
        They generally raise calves, allowing them to roam across grassland
    until they are big enough to be sold to so-called feedlots that
    administer grains to bring them to slaughtering weight. The feedlots--
    the largest concentrated in Texas, Nebraska, Kansas and Colorado--then
    sell their animals to the packers.
        Because the feed lots face relentless pressure from the packers for
    lower prices, they in turn demand cut-rate terms from the ranchers.
        ``A lot of people don't understand how trapped ranchers are in this
    really broken system,'' said Jeanie Alderson, whose family has run
    cattle in southeastern Montana for more than a century. ``We don't have
    a market.''
    Billions for Meatpackers
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              A truck with cattle for slaughter arrived before sunrise at
            JBS's meat-processing plant in Greeley, Colo.

        Many of the cattle raised in Montana are eventually hauled to
    slaughterhouses run by JBS, the world's largest meat processor.
        The two brothers who control the enterprise, Wesley and Joesley
    Batista, possess a fortune estimated by Bloomberg News \9\ at $5.8
    billion. Four years ago, they went to prison after pleading guilty to
    participation in a Brazilian bribery ring that secured loans from
    government-owned banks. (They have since been released.) A $20 billion
    international acquisition spree put JBS in control of \1/4\ of the
    American capacity for slaughtering beef.
    ---------------------------------------------------------------------------
        \9\ https://www.bloomberg.com/news/articles/2021-07-15/brazil-s-
    batista-brothers-are-out-of-jail-and-worth-6-billion?sref=rWJsyGwt.
    ---------------------------------------------------------------------------
        While ranchers have been tallying losses, JBS has been celebrating
    gains--revenues of $18 billion between July and September, which
    represented an increase of 32 percent compared with the same quarter in
    2020.
        In past decades, when beef prices rose, so would payments to cattle
    ranchers, who claimed over half of what consumers paid for meat. But
    that relationship began to break down in 2015. Last year, cattle
    ranchers received only 37 cents on every dollar spent on beef,
    according to Federal data.
        ``You're having consumers exploited on one end of the supply chain,
    cattle producers exploited on the other,'' said Bill Bullard, a former
    rancher who now heads an advocacy group, the Ranchers--Cattlemen Action
    Legal Fund. ``The meatpackers are making all-time record profits.''
        His organization is a plaintiff in a class-action lawsuit that
    accuses meatpackers of manipulating prices by sharply reducing their
    purchases of cattle at so-called sale barns--open marketplaces where
    animals are inspected and purchased on the spot, with the prices
    disclosed publicly.
        Instead, the packers now overwhelmingly rely on private contracts
    with feed lots. Those contracts provide the feed lots with certainty
    that the packers will buy their animals. In exchange, the feed lots
    must lock into a price structure that tracks those in public auctions,
    where buyers are scarce.
        According to industry experts, this system allows packers to lock
    up the overwhelming supply of cattle at prices they impose, under terms
    hidden from public view. Given the market dominance of the four largest
    packers in their regions, feed lots lack alternative places to sell
    their animals once they reach slaughtering weight.
        ``There's no competition,'' said Ty Thompson, an auctioneer at the
    public auction yards in Billings, Mont., who also operates his own feed
    lots. ``We have so much supply and so little capacity, that there's no
    negotiation whatsoever.''
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              At Livingston Livestock, the animals are led into the ring
            for auction.
    Losing the Family Legacy
        In the rolling hill country of northern Missouri--a tableau of
    grain farms dotted by compact towns--Coy Young, a fifth-generation
    rancher, has concluded that raising cattle is pointless.
        ``You're feeding America and going broke doing it,'' he said. ``It
    doesn't pencil out to raise cattle in this country anymore.''
        Mr. Young, 38, carries credit card debts reaching $55,000. He
    plowed most of that debt into artificial insemination technology aimed
    at producing premium breeding cows.
        His payoff was supposed to come early last year, with a sale that
    Mr. Young anticipated would fetch $125,000. But the day that he trucked
    his herd to a nearby auction, panic over the pandemic assailed markets.
    Traders in Chicago pushed down the price of live cattle by more than
    ten percent. Mr. Young received a bid of only $32,000.
        It was a crushing blow, a price that seemed certain to trigger his
    financial unraveling. Still, he had no choice but to take it. Cattle
    are perishable goods. Holding on to them after they reach slaughtering
    weight entails the costs of feeding them. They begin to add more fat
    than muscle.
        A week later, the bank began calling Mr. Young demanding repayment.
    Sinking into despondency, he waited for his wife to drive to her
    nursing job--their means of paying the bills. He planned to kill
    himself, he said. When she pulled back into the driveway, having
    forgotten something, he reconsidered.
        ``You put your heart and soul into something, and then you lose
    your ass,'' he said. ``You don't see any other way out.''
        He plans to sell off his herd early next year and start a barbecue
    catering business.
        ``You're raised a farmer, and that's what you're supposed to do,''
    he said. ``It's my family legacy. It's like I'm losing my image as a
    man.''
    What Gets Lost
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Mr. Charter is accustomed to working 7 days a week, 365 days
            a year--in cold winters and hot summers.

        Ever since the Reagan Administration, the Federal Government has
    taken a lax approach to antitrust enforcement, investing in the popular
    notion that when large and efficient companies are permitted to amass
    greater scale, consumers benefit.
        That notion may now be up for readjustment.
        The Biden Administration and Members of Congress are pressing to
    diminish the dominance of the meatpackers as inflation concerns
    intensify.
        The Federal Trade Commission last month opened an inquiry \10\ into
    how anticompetitive practices by major companies have contributed to
    supply chain problems.
    ---------------------------------------------------------------------------
        \10\ https://www.ftc.gov/news-events/press-releases/2021/11/ftc-
    launches-inquiry-supply-chain-disruptions.
    ---------------------------------------------------------------------------
        ``The meat price increases we are seeing are not just the natural
    consequences of supply and demand,'' senior White House economists
    recently declared in a blog post.\11\ ``They are also the result of
    corporate decisions to take advantage of their market power in an
    uncompetitive market, to the detriment of consumers, farmers and
    ranchers, and our economy.''
    ---------------------------------------------------------------------------
        \11\ https://www.whitehouse.gov/briefing-room/blog/2021/12/10/
    recent-data-show-dominant-meat-processing-companies-are-taking-
    advantage-of-market-power-to-raise-prices-and-grow-profit-margins/.
    ---------------------------------------------------------------------------
        Last year, as the pandemic began, the Charter family recognized a
    full-on market failure.
        ``You could see a cow across the road, and you couldn't find ground
    beef in Billings, Montana,'' said Mr. Charter's daughter, Annika
    Charter-Williams, 34.
        As they made arrangements to sell about 120 head of cattle in March
    2020, they reached out to a friend who owns a feed lot that sells
    animals to a JBS plant in Utah.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              At the Alderson family's Bone Brothers ranch in Montana.

        Mr. Charter was taken aback by the terms for the first load: The
    slaughterhouse demanded that he commit to delivering his cattle, with
    the price to be dictated by JBS.
        ``I wanted to tell him to go to hell,'' Mr. Charter says. ``But
    what choice did I have?''
        His break-even point was $1.30 a pound. ``Without any consulting or
    any dealing, they just decided that they were going to pay me $1 a
    pound,'' he said.
        His daughter took the disaster as the impetus for creativity. She
    engaged a small, local slaughterhouse to process some of their
    remaining animals. Then she sold the beef directly to consumers across
    Montana, marketing it on social media.
        This resonated as a triumph--the successful sidestepping of the
    packers.
        It was also not enough.
        ``It looks like we're going to have to liquidate almost all the
    cattle,'' Mr. Charter said.
        When family ranches like his disappear, he added, so do the values
    that have governed their operations for generations--a commitment to
    caring for land and producing quality beef, rather than catering
    exclusively to the bottom line.
        ``People shouldn't be worried about us because we're kind of quaint
    and it's nice to have the cowboys out there,'' Mr. Charter said. ``We
    need a food system that serves everyone, and not just a handful of
    companies.''

              Peter S. Goodman is a global economics correspondent, based
            in New York. He was previously London-based European economics
            correspondent and national economics correspondent during the
            Great Recession. He has also worked at The Washington Post as
            Shanghai bureau chief. @petersgoodman
              A version of this article appears in print on Dec. 27, 2021,
            Section A, Page 1 of the New York edition with the headline:
            Boom in Beef, But Ranchers Can't Cash In.
                                     ______

    Submitted Chart by Hon. David Scott, a Representative in Congress from
                                    Georgia
    The ``Meat Margin''
    Avg. Price Paid to Beef Processors--Avg. Price Paid to Ranchers
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: Monthly Beef Price Data, Cents per Pound, USDA
            Economic Research Service.
                                     ______

     Submitted Statement by Hon. David Scott, a Representative in Congress
    from Georgia; on Behalf of Robert L. Larew, President, National Farmers
                                     Union
        Chairman Scott, Ranking Member Thompson, and Members of the
    Committee:

        On behalf of the family farmers, ranchers, and rural members of
    National Farmers Union (NFU), thank you for holding a hearing to
    address ongoing price, transparency, and market power challenges in
    cattle markets. Founded in 1902, NFU is a grassroots farm organization
    that represents more than 200,000 family farmers and ranchers across
    the country, including many cattle ranchers.
        Today, most sectors in America's farm and food system are heavily
    concentrated and dominated by a small handful of multinational
    corporations, and this is particularly evident in the livestock sector.
    Since 1977, the share of the meatpacking market controlled by the four
    largest beef packers increased from 25 percent to 85 percent.\1\ *
    ---------------------------------------------------------------------------
        \1\ Congressional Research Service, ``Livestock Marketing and
    Competition Issues,''  RL33325, January 30, 2009. https://
    www.everycrsreport.com/reports/RL33325.
        * Editor's note: footnotes annotated with  are retained in
    Committee file.
    ---------------------------------------------------------------------------
        During NFU's annual national convention in March 2022, Farmers
    Union delegates adopted a special order of business that calls for
    ``legislation that would strengthen antitrust laws, reverse the trend
    of consolidation, and protect family farmers and ranchers from
    anticompetitive practices.'' \2\ Furthermore, in 2021, NFU launched the
    ``Fairness for Farmers'' campaign, an effort to shed light upon the
    devastating impact that monopolies have had on family farmers and
    ranchers. In addition to raising awareness of these problems, the
    campaign calls for legislative action including improving price
    discovery and transparency, reforming the Packers and Stockyards Act
    (PSA), diversifying marketing opportunities, and strengthening
    antitrust enforcement.\3\
    ---------------------------------------------------------------------------
        \2\ NFU 2022 Special Order of Business: ``Fairness for Farmers.''
    https://nfu.org/policy/.
        \3\ https://nfu.org/fairness-for-farmers/.
    ---------------------------------------------------------------------------
        Farmers and ranchers need Congressional action to combat monopolies
    and provide fairness in the marketplace. There are multiple strong
    legislative proposals meant to address ongoing challenges in cattle
    markets and growing public awareness today of the shortcomings in these
    markets. I urge the Committee expedite the review and passage of these
    legislative solutions.
    Improving Price Discovery and Transparency in Cattle Markets
        One of NFU's chief concerns regarding cattle markets is the impact
    the decline in negotiated trades has on price discovery. While we
    recognize the benefits of alternative marketing arrangements (AMAs) as
    an option for cattle producers and packers, the cash market serves as
    the basis for all cattle prices. Cattle producers also need greater
    access to market information, which the implementation of a functioning
    cattle contract library could provide. Additionally, truth-in-labeling
    through mandatory country-of-origin labeling is needed so there is
    transparency in the marketplace for consumers.
    Price discovery and transparency
        High levels of concentration give meatpackers incredible levels of
    market power and market influence. The packers' control of the market
    also gives them significantly more market information than cattle
    producers. Congress passed the Livestock Mandatory Reporting Act (LMRA)
    in 1999 in response to concerns about AMAs and high levels of
    concentration in the meatpacking industry. LMRA resulted in mandatory
    price reporting of most transactions for livestock, and it has been
    renewed and amended multiple times.\4\ While LMR has been beneficial
    for price discovery in general, the continued erosion of the cash
    market for cattle is undermining its benefits.
    ---------------------------------------------------------------------------
        \4\ Mathews, Brorsen, Hahn, Arnade, and Dohlman,``Mandatory Price
    Reporting, Market Efficiency, and Price Discovery in Livestock
    Markets,''  USDA, Economic Research Service (ERS), LPDM-254-01,
    September 2015. https://www.ers.usda.gov/webdocs/outlooks/37626/
    53727_ldpm-254-01.pdf?v=5345.
    ---------------------------------------------------------------------------
        AMAs can be valuable tools for packers and producers. Packers
    prefer AMAs because they can reduce procurement and transaction costs
    and allow plants to operate closer to capacity more consistently. AMAs
    also have benefits for livestock sellers, allowing them to lock in
    prices, guarantee market access, and reduce transaction costs. However,
    the cash market serves as the basis for pricing through AMAs.
    Negotiated trades also provide the greatest level of price discovery in
    the market. Ensuring a robust cash market is thus important for
    improving and preserving price discovery in the cattle market.
        In the last 15 years, the level of cash trades has declined
    dramatically. Nationally, cash trades have declined from 52 percent of
    all trades in 2005 to 20 percent in 2021. Over the same period, formula
    trades increased from 33 percent to 61 percent.\5\ This change allows
    packers greater control over the cattle supply and price discovery.
    ---------------------------------------------------------------------------
        \5\ USDA AMS ``Annual LMR Live Cattle Purchase Type Breakdown by
    Region.''  https://www.ams.usda.gov/sites/default/files/media/
    LMRLiveCattleAnnualPurchaseTypeBreak
    down.pdf.
    ---------------------------------------------------------------------------
        NFU believes it is essential to establish mandatory minimums for
    negotiated trades to ensure price discovery in the cattle market. The
    Committee should review the amended Senate version of H.R. 5992--the
    Cattle Price Discovery and Transparency Act (in the Senate, S. 4030).
    This bill creates a framework for USDA to establish regional mandatory
    minimum negotiated trade to address declines in price discovery in
    cattle markets, in addition to other provisions to make the marketplace
    more transparent.
    Cattle contract library and other transparency provisions
        NFU recommends the establishment and maintenance, through the
    Livestock Mandatory Reporting program, of a cattle contract library,
    which would provide information included in contracts between packers
    and producers for the purchase of fed cattle. A contract library would
    provide equal access to market information for all market participants.
    A cattle contract library will give producers better information about
    all the different contract elements that may be helpful or detrimental
    to their operation, and thus help produces negotiate better contracts.
    The concept is being piloted but needs to be made permanent.
        The Committee should also consider other measures that can improve
    transparency in cattle markets. One example includes expediting carcass
    weight reporting and mandating reporting of cutout yield data. The
    spread between boxed beef and fed cattle prices has been a major
    concern among cattle producers in recent years. Following the dramatic
    divergence between boxed beef and fed cattle prices in the early months
    of the coronavirus pandemic, it took nearly 18 months for the spread to
    fall back to 5 year average levels.\6\ Giving cattle producers greater
    access to cutout yield data will improve their ability to negotiate
    prices that better reflect consumer beef values.
    ---------------------------------------------------------------------------
        \6\ Kansas State University, Livestock & Hay Charts, ``Choice-
    Select Boxed Beef Spread,''  March 21, 2022. https://
    www.agmanager.info/livestock-meat/livestock-marketing-charts/choice-
    select-boxed-beef-spread. Editor's note: the chart is updated weekly,
    as such the current version, for purposes of retention in Committee
    file, is dated May 9, 2022.
    ---------------------------------------------------------------------------
        A 14 day slaughter reporting requirement could also improve cattle
    producers' negotiating position. This requirement would ensure that
    cattle producers can project estimated slaughter numbers and packer
    needs for cattle. This will give producers a better understanding of
    supply and demand dynamics that impact the value of cattle.
    Mandatory Country-of-Origin Labeling
        A fair, competitive, and transparent market for beef requires
    product labels that are truthful. A supply chain that contains false or
    misleading product labels puts domestic producers at a competitive
    disadvantage while preventing consumers from making fully informed
    decisions about the products they buy. Cattle ranchers want to provide
    consumers with accurate information about the origins of the beef they
    buy, and Federal labeling laws should support farmers in achieving that
    goal.
        NFU supports the American Beef Labeling Act of 2022 (H.R. 7291) to
    reinstate mandatory country-of-origin labeling (COOL) for beef. NFU
    policy states that mandatory COOL ``is a valuable marketing tool for
    producers, and it allows consumer to know here the meat products they
    consume rare born, raised, slaughtered, and processed.'' \7\ We look
    forward to working with the Committee to address the ongoing failures
    of Federal labeling requirements for beef.
    ---------------------------------------------------------------------------
        \7\ National Farmers Union, Policy of the National Farmers Union,
    (March 2022). https://nfu.org/policy/.
    ---------------------------------------------------------------------------
    Strengthening Competition and Antitrust Laws and their Enforcement
        Given the high level of concentration in the marketplace, it is
    imperative that our antitrust and pro-competition laws work the way
    Congress intended. When the Packers and Stockyards Act, the Sherman
    Act, and Clayton Act were enacted more than a hundred years ago,
    Farmers Union members were strong supporters. Yet, lax enforcement in
    the last few decades has left consolidation and anticompetitive
    practices largely unchecked. As a result, farmers and ranchers have
    been deprived of marketing choices, innovation, fair prices, and equal
    treatment. NFU urges support for the Meat and Poultry Special
    Investigator Act (H.R. 4103) and the swift completion of forthcoming
    PSA rulemakings to strengthen competition and antirust laws and to
    encourage more robust enforcement of the law.
    The Meat and Poultry Special Investigator Act
        The U.S. Department of Agriculture (USDA), the Department of
    Justice (DOJ), and the Federal Trade Commission (FTC), need stronger
    tools to enforce existing antitrust laws. The Meat and Poultry Special
    Investigator Act would provide USDA the authority and resources it
    needs to address anticompetitive behavior when it arises. The bill also
    provides the cross-agency collaboration necessary to address
    monopolistic practices within the industry.
        The 2017 reorganization of USDA diminished the standing,
    independence, and resources of the agency charged with enforcing the
    PSA. Greater emphasis should be placed on PSA enforcement, especially
    because the law has been under-enforced in recent decades.\8\ The Meat
    and Poultry Special Investigator Act would help ensure that independent
    farmers and ranchers have a chance to succeed by creating a special
    investigator's office with subpoena power, a dedicated staff of experts
    and attorneys, and the provision of resources to expose wrongdoing in
    the marketplace. The special investigator's office would also promote
    cross-agency collaboration, working with DOJ and FTC to closely study
    and pursue actions against potential abuses. The office could also work
    with the Department of Homeland Security to protect against actions
    that would threaten our food supply.
    ---------------------------------------------------------------------------
        \8\ United States Government Accountability Office (GAO), Testimony
    before the Committee on Agriculture, Nutrition, and Forestry, United
    States Senate, ``Packers and Stockyards Programs: Continuing Problems
    with GIPSA Investigations of Competitive Practices,''  March 9, 2006.
    https://www.gao.gov/assets/gao-06-532t.pdf.
    ---------------------------------------------------------------------------
    Strengthening the Packers and Stockyards Act
        The enforcement of the PSA is critical to the long-term viability
    of cattle producers. NFU is heartened that President Biden's executive
    order on competition reaffirms the government's commitment to the
    principles that led to the passage of the PSA and specifically mentions
    the need for the Secretary of Agriculture to initiative rulemakings
    under the PSA ``to address the unfair treatment of farmers and improve
    conditions of competition in markets for their products.'' \9\
    ---------------------------------------------------------------------------
        \9\ Executive Order 14036 of July 9, 2021, ``Promoting Competition
    in the American Economy,''  Federal Register Vol. 86, No. 132, July
    14, 2021. https://www.federalregister.gov/documents/2021/07/14/2021-
    15069/promoting-competition-in-the-american-economy.
    ---------------------------------------------------------------------------
        As USDA prepares rulemaking to strengthen the PSA, the department
    should ensure that it is not necessary to show a competitive injury
    broadly to find an action of a packer, swine contractor, or live
    poultry dealer to be unlawful under the PSA. As USDA has repeatedly
    argued in court cases, the unambiguous language of section 202(a) and
    (b) of the PSA does not require any proof of an adverse effect on
    competition or of restraint of commerce or trade. The legislative
    history of the PSA shows that Congress intended to prohibit actions
    that give undue and unreasonable preferences without regard to whether
    they restrain trade, create a monopoly or control prices.\10\
    ---------------------------------------------------------------------------
        \10\ Congressional Research Service, ``USDA's GIPSA Rule' on
    Livestock and Poultry Marketing Practices,''  R41673, January 7, 2016.
    https://crsreports.congress.gov/product/pdf/R/R41673.
    ---------------------------------------------------------------------------
        More generally, the update to the PSA should provide greater
    clarity about what practices in the meat industries constitute unfair,
    unjustly discriminatory, or deceptive practices, and thus violate the
    PSA. PSA rulemaking should also institute anti-retaliation protections
    that help ensure farmers' right to association and so that farmers can
    speak up about unfair treatment without fear of retribution.
    Supporting the growth of local and regional processing
        The COVID-19 pandemic highlighted how large, seemingly efficient
    systems of production can falter when there are shocks to those
    systems. Local and regional food systems also faced disruptions but
    were often better positioned to adapt rapidly to new conditions and
    protect against shocks, given their shorter supply chains and more
    direct connection to consumers.\11\ Strengthening local and regional
    supply chains would promote greater competition in the cattle and beef
    industries. Local and regional slaughter facilities would also create
    new opportunities for ranchers.
    ---------------------------------------------------------------------------
        \11\ Dawn Thilmany, Elizabeth Canales, Sarah A. Low, and Kathryn
    Boys, ``Local Food Supply Chain Dynamics and Resilience during [COVID]-
    19,''  Applied Economic Perspectives and Policy, October 26, 2020.
    https://onlinelibrary.wiley.com/doi/full/10.1002/aepp.13121.
    ---------------------------------------------------------------------------
        Increasing local and regional slaughter capacity will create
    opportunities for cow-calf producers to add value to their cattle on
    their own operations. Thankfully, action is being taken on this front.
    USDA has made $1 billion available through loan guarantees, gap
    financing, and technical assistance to support new and expanding local
    and regional slaughter facilities. USDA has also provided various
    programs to help small and very small processing facilities weather the
    challenges they faced during the COVID-19 pandemic.
        Beyond increased capacity, it is also important that regulatory
    frameworks provide reasonable flexibility to small and very small
    processing facilities. Federal inspector requirements and fees can be
    burdensome for small facilities, causing many to operate under
    federally approved state inspection programs. However, even though
    state inspection programs must meet a standard of at least equal to
    Federal inspection standards, state-inspected meat is not allowed to be
    sold across state lines. We support allowing interstate sales of state-
    inspected meat and providing appropriate regulatory flexibility that
    reflects the operating conditions in small and very small facilities.
    Conclusion
        Thank you for holding this hearing today and for your attention to
    price, transparency, and other market challenges facing cattle markets.
    NFU stands ready to work with the Committee to address these issues and
    we would be happy to answer any questions you may have.
                                     ______

      Submitted Letter by Hon. Cynthia Axne, a Representative in Congress
        from Iowa; on Behalf of Bob Noble, President, Iowa Cattlemen's
                                  Association
    April 25, 2022

    Hon. David Scott,                    Hon. Glenn Thompson,
    Chairman,                            Ranking Minority Member,
    House Committee on Agriculture,      House Committee on Agriculture,
    Washington, D.C.;                    Washington, D.C.

      Re: An Examination of Price Discrepancies, Transparency, and Alleged
                Unfair Practices in Cattle Markets

        Dear Chairman Scott, Ranking Member Thompson, and Members of the
    House Agriculture Committee:

        The Iowa Cattlemen's Association (ICA) is a grassroots organization
    representing nearly 8,000 cattle producers and stakeholders affiliated
    with the cattle industry. As the definitive voice of Iowa's beef
    business, we have a responsibility to amplify messages from our members
    to key decision makers. The commitment of our members to improve the
    state of the fed cattle market has led us to forge our own path despite
    pushback from major meatpackers, economists, and corporate feedyards.
        For several years, we've asked Congress to enact legislation that
    would help level the playing field between meatpackers and producers.
    We've expressed the need to address the following primary challenges:
    lack of price discovery and transparency, meatpacking industry
    consolidation leading to fewer competitors, captive supply, and price
    manipulation. We've also called on the U.S. Department of Agriculture
    and the Department of Justice (DOJ) to investigate meatpackers for
    collusion, price manipulation, and market disruptions.
        Various Members of Congress, including Reps. Cindy Axne (IA-03) and
    Randy Feenstra (IA-04), have responded by introducing legislation and
    holding various hearings, yet nothing has come to fruition. The DOJ
    initiated an investigation of the four largest meatpackers in June
    2020, yet we've received no updates. These concerns even reached the
    [White House], which resulted in the President of the U.S. convening a
    producer roundtable to discuss the need for greater competition in beef
    processing.
        In July 2021, ICA member Jon Schaben testified as a witness before
    the Senate Judiciary Committee.\1\ * The sentiment of the testimony we
    submitted 9 months ago is unchanged; it is time for Congress to support
    a transparent and competitive marketplace with action.
    ---------------------------------------------------------------------------
        \1\ ``Written Testimony of the Iowa Cattlemen's Association.''
    Iowa Cattlemen's Association, 28 July 2021, [https://
    www.judiciary.senate.gov/download/mr-jon-schaben-728-testimony].
        * Editor's note: footnotes annotated with  are retained in
    Committee file.
    ---------------------------------------------------------------------------
        We encourage Members of the House Agriculture Committee to support
    the following bipartisan and bicameral bills:

      1.  Cattle Price Discovery and Transparency Act of 2022--to prevent
                further erosion of negotiated trade and price discovery,
                improve transparency, and level the playing field between
                meatpackers and producers with access to information;

      2.  Meat Packing Special Investigator Act--to address anticompetitive
                practices in the meat industry by better enforcing the
                Packers and Stockyards Act; and

      3.  A-PLUS Act--to increase meat processing capacity by allowing
                livestock auction market investment in small and regional
                packing facilities.

        Additionally, we ask this Committee to request a long overdue
    update from the DOJ regarding the antitrust investigation of Cargill,
    JBS, National Beef, and Tyson Foods. We're quickly approaching the 2
    year mark since the civil investigative demands were issued. While
    we've been waiting for results from the DOJ, the packers have been
    busy. Despite claiming no wrongdoing, JBS recently agreed to pony up
    $52.5 million in a price-fixing lawsuit.\2\
    ---------------------------------------------------------------------------
        \2\ ``Beef giant JBS to pay $52.5 million to settle price-fixing
    lawsuit.''  Des Moines Register, 4 February 2022, https://
    www.desmoinesregister.com/story/news/2022/02/04/jbs-settles-lawsuit-
    millions-price-fixing-beef-processors-meatpacking/6664089001/.
    ---------------------------------------------------------------------------
        The naysayer rhetoric is strong; we've been told that nothing is
    wrong with the fed cattle market, alternative marketing arrangements
    have improved quality, and no research has been conducted to determine
    thresholds for robust price discovery. We've also been informed that
    ``voluntary, industry-driven'' efforts are working; know that will
    certainly change if Congress does not require meatpackers to procure a
    portion of their cattle via negotiated means. The aforementioned
    opinions merely protect the interests of meatpackers and corporate
    feeders who benefit from lucrative formula contracts.
        Our beef supply chain starts on our nation's farms and ranches. If
    cattle producers are unable to mitigate risk or use market signals to
    make informed business decisions, how can we expect them to stay in the
    black on their balance sheets? When will Congress address the problems
    they have allowed to develop over the past century?
        Cattle producers know and understand the meaning of the saying
    ``All hat and no cattle.'' It's not a phrase of endearment. We've made
    our elected and agency officials aware of the challenges we face as
    producers, yet the circumstances remain unchanged. Now is the time for
    Congress to act.
        Questions related to this letter may be directed to Cora Fox,
    director of government relations, at [Redacted] or at [Redacted].
                Respectfully,
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Bob Noble,
    President, Iowa Cattlemen's Association.
                                     ______

    Submitted Statement by Hon. Cynthia Axne, a Representative in Congress
              from Iowa; on Behalf of Iowa Cattlemen's Association
        The Iowa Cattlemen's Association appreciated the opportunity to
    share our perspective with this Committee. We are grateful for the
    support from Congresswoman Axne and Congressman Feenstra, however, it
    is worth noting that we do not have an Iowa producer here to testify
    today. In a Senate Ag Committee hearing yesterday, Sen. Deb Fischer of
    Nebraska shared how difficult it is to find cattle producers that are
    willing to testify in Congressional hearings opposite from meatpackers.
    Let us be clear: While Congress cannot protect cattle producers and
    their businesses from being shunned by packers for testifying, Members
    of this Committee certainly shouldn't facilitate or allow packers to
    intimidate witnesses prior to a hearing.
                                     ______

     Submitted Letter by Hon. Glenn Thompson, a Representative in Congress
        from Pennsylvania; on Behalf of Neil L. Bradley, Executive Vice
     President, Chief Policy Officer, and Head of Strategic Advocacy, U.S.
                              Chamber of Commerce
    April 27, 2022

    Hon. David Scott,                    Hon. Glenn Thompson,
    Chairman,                            Ranking Minority Member,
    House Committee on Agriculture,      House Committee on Agriculture,
    Washington, D.C.;                    Washington, D.C.

        Dear Chairman Scott and Ranking Member Thompson:

        Thank you for your interest in cattle markets and meat prices. I
    write today regarding your April 27 hearing. As price increases hit
    American consumers, the Committee should focus on the real underlying
    causes, namely, macroeconomic trends that include supply and demand
    shocks and monetary policies, rather than the strawmen of industry
    concentration or unfair business practices. Moreover, the Committee
    should examine constructive fiscal, regulatory, and labor policies to
    increase supply and reduce prices. The Chamber stands ready to work
    with you and the entire Congress to address these issues.
    Market Forces Are Driving Prices
        Earlier this year, the Chamber explained the causes of higher meat
    prices:

              Like so many other products, the factors driving meat prices
            higher include increased demand, COVID-related supply chain
            disruptions, and increased input costs, especially higher
            energy and labor costs.
              One has to ask, if, as the Administration asserts,
            consolidation in meat and other industries has been a problem
            for years and it is also driving the current surge in prices,
            then why didn't it drive prices higher before? It is pretty
            clear that the Administration is attempting to use higher
            prices to justify their preexisting agenda to overturn decades
            of bipartisan consensus around antitrust and competition policy
            in favor of a `government-knows-best' regulatory approach. That
            isn't economics, it is politics and sadly, such government
            intervention would likely further constrain supply and push
            prices even higher.\1\ *
    ---------------------------------------------------------------------------
        \1\ See Chamber statement, at https://www.uschamber.com/security/
    supply-chain/u-s-chamber-objects-to-misguided-administration-efforts-
    to-address-meat-prices. See also Recording of US Chamber Food
    Inflation Event (https://www.youtube.com/watch?v=vTCLL7w78lM) Virtual
    Panel: Understanding Inflation Trends in Food and Related Industries.
        * Editor's note: footnotes annotated with  are retained in
    Committee file.

        These causes are readily apparent to the American public. As the
    Washington Post's Editorial Board recently explained in a piece titled,
    ``The White House once again offers a bizarre message on inflation,''
    ---------------------------------------------------------------------------
    the business community is not to blame for higher prices:

              President Biden is facing mounting criticism for inflation's
            rise to its highest level since 1982. Unfortunately, the White
            House's latest response is to blame greedy businesses.
            Economists across the political spectrum are rightly calling
            out the White House for this foolishness. Even some within the
            White House are questioning this approach.
              Inflation, which was relatively low for years, did not
            suddenly rise in recent months because businesses decided now
            was the ideal time to squeeze their customers. What actually
            happened is that demand soared for many products as the economy
            recovered. Often, there were not enough products to meet it,
            thanks to supply chain hiccups and labor shortages, so prices
            went up. In a surprise to many, consumers kept buying goods
            such as cars and washing machines even at higher prices.

        Indeed, the Post specifically refuted the President's narrative
    that industry concentration causes higher food prices: ``pinning the
    current inflation problems on corporate greed is a flimsy argument that
    won't stop Americans from beefing about inflation.'' \2\
    ---------------------------------------------------------------------------
        \2\ See https://www.washingtonpost.com/opinions/2022/01/10/white-
    house-again-offers-bizarre-message-inflation/.
    ---------------------------------------------------------------------------
    Industrial Concentration is Not Causing Higher Prices
        Contrary to the assumptions of many in Congress, the U.S. economy
    is not becoming more concentrated. In an exhaustive analysis of all
    available economic census data from the past 2 decades, Dr. Robert
    Kulick finds that since 2002, U.S. economic concentration has remained
    flat.\3\ In fact, since 2007, in both the manufacturing sector and the
    broader economy, the economy became less concentrated.
    ---------------------------------------------------------------------------
        \3\ Robert Kulick and Andrew Card, Industrial Concentration in the
    United States: 2002-2017  (March 2022) (``Kulick study''), at https://
    www.uschamber.com/finance/antitrust/industrial-concentration-in-the-
    united-states-2002-2017.
    ---------------------------------------------------------------------------
        In terms of meat specifically, the four-firm packer concentration
    ratios in beef and pork packing is monitored by the Packers and
    Stockyards Division (P&S) of the Agricultural Marketing Service (AMS).
    P&S data show the four-firm concentration ratio in fed cattle beef
    packing has not changed meaningfully in more than 25 years.\4\
    ---------------------------------------------------------------------------
        \4\ See https://www.meatinstitute.org/ht/a/GetDocumentAction/i/
    194719.
    ---------------------------------------------------------------------------
    The Attempt to Blame Business Is Driven by Politics, Not Facts
        Perhaps most troubling, recent efforts by the Administration to
    blame high prices on market concentration are reportedly driven by
    political advisors and are not supported by the economic evidence. On
    January 10, 2022, the Washington Post reported:

              In November and December, at least four Democratic polling
            experts told senior White House officials that they needed to
            find a new approach as public frustration over price hikes
            became widespread and highly damaging to Biden's popularity,
            according to three people with knowledge of the private
            conversations.
              ``What we said is, `You need a villain or an explanation for
            this. If you don't provide one, voters will fill one in. The
            right is providing an explanation, which is that you're
            spending too much,' '' one Democratic pollster who, like the
            others, spoke on the condition of anonymity to reflect private
            conversations, told The Washington Post. ``That point finally
            became convincing to people in the White House.'' \5\
    ---------------------------------------------------------------------------
        \5\ See https://www.washingtonpost.com/us-policy/2022/01/10/white-
    house-inflation-strategy/.

    ---------------------------------------------------------------------------
    The same article noted:

              Senior officials at the Treasury Department, for instance,
            have been unsettled by the White House's attempts to blame some
            large corporations for inflation, skeptical of that explanation
            for the recent rise in prices, according to four people with
            knowledge of internal administration dynamics.

        Indeed, in connection with this hearing, Ranking Member Thompson
    has warned against using this hearing as a ``political charade.'' \6\
    ---------------------------------------------------------------------------
        \6\ See https://directory.politicopro.com/congress/member/66884.
    ---------------------------------------------------------------------------
    Macroeconomic Trends Explain Higher Prices
        Instead of blaming the business community, the Committee should
    explore macroeconomic trends. Former Secretary of the Treasury Lawrence
    Summers, a senior official in both the Clinton and Obama
    Administrations, recently wrote the following:

              We have a serious inflation problem whatever the precise CPI
            [consumer price index] reading. Inflation is running well ahead
            of anything seen during the guns and butter Vietnam episode and
            50 percent above where it was when Pres Nixon imposed wage
            price controls.\7\
    ---------------------------------------------------------------------------
        \7\ See https://twitter.com/LHSummers/status/
    1481241779508846599?cxt=HHwWjoC94Z3jto4
    pAAAA.

        In recent months, Japan, China, and Germany all reported their
    highest inflation in more than a decade.\8\ Macroeconomic trends
    explain these high prices:
    ---------------------------------------------------------------------------
        \8\ See https://www.washingtonpost.com/opinions/2021/11/15/
    inflation-its-past-time-team-transitory-stand-down/.
    ---------------------------------------------------------------------------
        Oil Prices. The price of oil, ``the most important global
    determinant of inflation,'' is very high and not expected to decline
    rapidly.\9\ The war in Ukraine has already exacerbated this trend.
    ---------------------------------------------------------------------------
        \9\ Id.
    ---------------------------------------------------------------------------
        Supply and Demand. As a whole, American consumers have excess
    savings as a result of government pandemic relief. At the same time,
    the pandemic has caused many Americans to change their spending
    patterns. Since February 2020, spending on goods has grown six-fold
    compared to spending on services. Spending on goods is up almost 30%
    while services spending is up only 5%. When demand rises faster than
    supply can keep up, prices rise.\10\
    ---------------------------------------------------------------------------
        \10\ See https://www.washingtonpost.com/opinions/2022/01/10/white-
    house-again-offers-bizarre-message-inflation/.
    ---------------------------------------------------------------------------
        In terms of meat specifically, agricultural economists agree meat
    demand, exacerbated by the pandemic, has exposed a shortage of
    slaughterhouse capacity, a supply-chain problem similar to those of
    other industries.\11\
    ---------------------------------------------------------------------------
        \11\ See https://www.reuters.com/business/retail-consumer/high-us-
    meat-prices-packer-profiteering-or-capacity-crunch-2022-01-19/.
    ---------------------------------------------------------------------------
        Even President Biden's own Department of Agriculture (USDA),
    through its Economic Research Service (ERS), recognizes that
    macroeconomic trends, rather than industrial concentration or other
    business practices, explain high prices: ``High feed costs, increased
    demand, and changes in the supply chain have driven up prices for
    wholesale beef and dairy.'' \12\ In a separate report, ERS identified
    the causes of inflation: ``2020 was a year of high food price inflation
    due to shifts in consumption patterns and supply chain disruptions
    resulting from the coronavirus pandemic.'' \13\
    ---------------------------------------------------------------------------
        \12\ See https://www.ers.usda.gov/data-products/food-price-outlook/
    summary-findings/.
        \13\ See https://www.ers.usda.gov/data-products/ag-and-food-
    statistics-charting-the-essentials/food-prices-and-spending/.
    ---------------------------------------------------------------------------
        Supply Chain Problems. Supply is in large part constrained because
    global supply chains have not healed from lockdowns and from shifting
    consumer patterns, including increased demand for goods. Supply chain
    problems are pushing prices higher because consumers have to pay more
    for scarce goods and businesses have to pay more for the inputs they
    need to produce these goods.
        Worker Shortages. In the U.S., there are 4.6 million more job
    openings than workers to fill them. Businesses cannot make their
    products or provide their services at the levels necessary to meet
    demand without the appropriate number of workers. Additionally,
    businesses are having to pay workers substantially more to come to
    work, which is increasing their operating costs. As Secretary Summers
    points out, workers who switch jobs are receiving double-digit pay
    increases, costs that ultimately are passed along to consumers.
        Monetary Policy. The Federal Reserve has put approximately $5
    trillion into the financial system since the beginning of the COVID-19
    pandemic. This enormous sum is slowly trickling from the financial
    economy into the real economy, which is pushing up the price of goods
    and services.
        Rather than blame the business community, policymakers should
    explore other avenues to encourage competition and lower prices for
    consumers. As former Secretary Summers explained, policymakers should
    work to reduce tariffs, raise supplies of fossil fuels, and relax
    regulations. All of these tools would allow the business community to
    serve the needs of consumers more efficiently and at lower prices.
    Finally, monetary policy remains the best tool for fighting inflation.
        Thank you for the opportunity to share our views.
                Sincerely,
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Neil L. Bradley,
    Executive Vice President, Chief Policy Officer, and Head of Strategic
    Advocacy,
    U.S. Chamber of Commerce.

    CC: Members of the House Committee on Agriculture.
                                     ______

      Submitted Letter by Hon. Rodney Davis, a Representative in Congress
                                 from Illinois
    April 18, 2022

      Hon. David Scott,
      Chairman,
      House Agriculture Committee,
      Washington, D.C.

        Dear Chairman Scott,

        We are writing to you regarding the beef pricing hearing you
    announced for Wednesday, April 27, 2022, and our desire for the hearing
    to include witnesses with knowledge of the entire spectrum of pricing
    dynamics from farm to table.
        In the statement announcing the hearing you raised the important
    issue of consumer beef prices, but as you are aware, beef packers do
    not sell to consumers, nor do they set retail prices. Rather, packers
    primarily sell to processors, distributors, retailers, or food service
    operators. For the Committee to have a comprehensive dialogue about
    consumer prices, it is critical that the hearing include an expert
    economist or market analyst knowledgeable about the transactions and
    market dynamics that occur and affect prices between the packing house
    and the consumer's house. Too much of the policy debate around beef
    markets has focused on producers and packers, ignoring other components
    of the industry's multi-faceted, highly complex supply chain. There are
    many other factors reflected in the ultimate retail value of beef,
    including input costs, labor, logistics, inventories, and more.
        We respectfully request that you work with us to identify a witness
    that can address the retail and food service dimension of the beef
    supply chain after beef leaves the packing plant. We believe a
    collaborative effort will result in a more productive hearing. Thank
    you for your consideration.
                Sincerely,
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Hon. Rodney Davis,                   Hon. Jimmy Panetta,
    Member of Congress                   Member of Congress

                                         [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Hon. Dusty Johnson,                  Hon. Jim Costa,
    Member of Congress                   Member of Congress

                                         [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Hon. Eric A. ``Rick'' Crawford,      Hon. Stacey E. Plaskett,
    Member of Congress                   Member of Congress

                                     ______

      Submitted Letter by Hon. David Rouzer, a Representative in Congress
                              from North Carolina
      Hon. Charles Schumer,
      Senate Majority Leader,
      United States Senate,
      Washington D.C.

        Dear Senator Schumer,

        The undersigned organizations wish to express their deep concern
    about the factory farm incentives included in the Build Back Better
    Act, and urge you to reject the manure digester and Concentrated Animal
    Feeding Operation (CAFO) incentives outlined below in the final Bill
    and to prioritize funding farm practices that build healthy soils.
        CAFOs are an extractive, exploitative, and unsustainable model for
    American agriculture. Already, factory farms receive immense financial
    support through government subsidies and enjoy a lack of regulatory
    oversight. CAFOs and factory farms are not part of the climate solution
    and have no place in the Build Back Better Act. CAFOs pollute our
    climate and the environment, threaten public health, and
    disproportionately harm BIPOC communities. If the majority is to be the
    party of working-class families and revitalizing the U.S. economy,
    advocating for incentives that would exacerbate the harms caused by
    CAFOs and other factory farms would be grossly misguided.
        CAFOs fuel the climate crisis. The Build Back Better Act that
    passed the House of Representatives would substantially incentivize
    building CAFO methane digesters. A CAFO houses thousands of animals and
    collects their urine and manure in large pits located either under the
    CAFO building or in a nearby lagoon. The liquid waste releases methane
    as it decomposes, which is then burned for energy. This type of methane
    capture is falsely labeled as a ``renewable energy'' source as liquid
    manure emits more methane than solid manure in a dry lot or on
    pasture.\1\ Methane, a greenhouse gas, is 84 times more potent than
    carbon dioxide over a twenty year time frame. Manure digesters require
    a scale of thousands of animals to operate, causing further expansion
    of CAFOs \2\ and their greenhouse gas emissions, as well as
    displacement of small and medium-sized farmers across the nation. For
    example, manure digesters for dairies require thousands of animals to
    operate efficiently. Investing in manure digesters comes with the
    unacceptable trade-off of harming the surrounding communities by
    expanding the factory farms that are destroying their quality of life.
    ---------------------------------------------------------------------------
        \1\ https://www.epa.gov/sites/default/files/2021-04/documents/us-
    ghg-inventory-2021-main-text.pdf.
        \2\ https://www.thegazette.com/agriculture/nine-iowa-dairies-get-
    digester-permits-since-new-law-seven-plan-expansion/.
    ---------------------------------------------------------------------------
        Congress should be finding solutions that reduce reliance on a
    supply chain that creates liquid manure and methane, not patching
    together harmful remedies that prop up factory farms. The Build Back
    Better Act prioritizes building resilient human infrastructure and
    combating the climate crisis--CAFOs are antithetical to both.
        CAFOs are extremely detrimental to local air and water quality, as
    well as the broader environment. While methane may seem like an
    abstract threat, your friends, neighbors, and constituents suffer
    directly from the many other polluting impacts of CAFOs. Drinking
    water,\3\ especially in rural areas, is likely to be contaminated with
    nitrates and bacteria from CAFO-sourced manure after running off from
    fields and into local waterways and drinking wells. The Environmental
    Protection Agency has long cautioned that CAFOs are a leading
    contributor to dangerously high levels of toxic particles in water,\4\
    leading to fish kills and polluted drinking water.
    ---------------------------------------------------------------------------
        \3\ https://prospect.org/environment/new-york-dairy-farms-skirt-
    clean-water-act-requirements/.
        \4\ https://www3.epa.gov/npdes/pubs/cafo_proposed_env_assess_ch1-
    3.pdf.
    ---------------------------------------------------------------------------
        CAFOs and factory farms jeopardize public health. In 2019, the
    American Public Health Association called for a precautionary
    moratorium on new and expanding CAFOs.\5\ Workers and neighboring
    residents of CAFOs are at a higher risk of developing asthma,
    allergies, and decreased lung function \6\ than those who do not live
    by CAFOs. Over 150 pathogens can be found in manure from CAFOs \7\
    causing serious diseases in humans, such as Anthrax, Leptospirosis,
    Listeriosis, Salmonella poisoning, Giardiasis, and many others. Health
    risks are greater for children and those who are immunocompromised. The
    World Health Organization,\8\ Centers for Disease Control \9\ and Food
    and Agricultural Organization of the United Nations \10\ have warned
    that humans are also at ever-higher health risks because CAFOs create
    superbugs by increasingly relying on antibiotics to control diseases in
    animals, so much so that the microbes being controlled develop immunity
    to the drugs and mutate. As such, CAFOs create microbes that infect
    humans, and are resistant to life-saving antibiotics used by medical
    professionals.
    ---------------------------------------------------------------------------
        \5\ https://www.apha.org/Policies-and-Advocacy/Public-Health-
    Policy-Statements/Policy-Database/2020/01/13/Precautionary-Moratorium-
    on-New-and-Expanding-Concentrated-Animal-Feeding-Operations.
        \6\ https://docs.google.com/document/d/1JIPeE_KGecUnIpTYh53Nlr0b-K-
    b9BXjE01gvE5
    6NSo/edit.
        \7\ https://www.cdc.gov/nceh/ehs/docs/
    understanding_cafos_nalboh.pdf.
        \8\ https://www.who.int/news/item/07-11-2017-stop-using-
    antibiotics-in-healthy-animals-to-prevent-the-spread-of-antibiotic-
    resistance.
        \9\ https://www.cdc.gov/drugresistance/threat-report-2013/pdf/ar-
    threats-2013-508.pdf#page=6.
        \10\ https://www.un.org/pga/71/2016/09/21/press-release-hl-meeting-
    on-antimicrobial-resistance/.
    ---------------------------------------------------------------------------
        CAFOs are a tool of environmental racism and injustice. CAFOs tend
    to be built in and around communities with the least financial and
    political resources to fight back against the extractive operations. In
    many parts of the country, this tends to be in Black communities with
    histories of enslaved labor and sharecropping. In North Carolina, CAFOs
    were five times more likely to be located in majority non-white
    communities and seven times more likely in high-poverty areas.\11\
    Workers in CAFOs tend to be immigrants and face grueling working
    conditions.\12\ Communities of all affluence levels tend to oppose
    proposed CAFO sites, so the intentional placement in BIPOC and low-
    wealth communities is an environmental injustice that must be ended--
    not perpetuated by the Build Back Better Act.
    ---------------------------------------------------------------------------
        \11\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1637958/.
        \12\ https://moenvironment.org/cafo-toolkit/.
    ---------------------------------------------------------------------------
        CAFOs are a driving factor of an unjust food system that pollutes
    the environment, threatens human health, and perpetuates systemic
    racism and inequity. They have no role in the Build Back Better Act.
    CAFO operators already enjoy many incentives and do not need another
    program built from funds meant to support working families. Furthermore
    as written the bill would allow factory farms to stack incentives
    essentially encouraging a CAFO boom across the country. The House-
    passed BBB includes the following incentives:

       A set-aside for ``underutilized technology'' (which is
            likely to primarily fund manure digesters) in new grant funding
            for the Rural Energy for America Program (REAP);

       Expanded eligibility for the 30% renewable energy tax credit
            to offset up-front costs associated with building digester
            systems, including manure digesters; and

       An additional $9 Billion in funds for USDA's Environmental
            Quality Incentives Program without proper guardrails to
            restrict this funding from going to support manure digesters
            for CAFOs instead of other more beneficial practices that would
            contribute to diversified and equitable climate-friendly food
            production.

        Further incentivizing CAFOs would be misguided and firmly against
    the best interests of Americans. In 2019, the Center for Livable Future
    at Johns Hopkins University published poll results of likely voters
    \12\ in heavy CAFO states who strongly favored moratoriums on new
    CAFOs. Factory farms would not be viable without the Federal subsidies
    they rely on, the lack of regulatory oversight they enjoy , and the
    political power of the corporations that profit from them. CAFOs are
    not the first choice of voters, farmers, consumers, or even the free
    market--but rather the product of corporate food giants that make their
    money from exploitation, often aided by government support.
    ---------------------------------------------------------------------------
        \12\ https://clf.jhsph.edu/projects/food-citizen/cafo-moratorium-
    poll-results-2019.
    ---------------------------------------------------------------------------
        We, the undersigned organizations, urge that you reject any new
    CAFO incentives in the forthcoming draft of the Build Back Better Act
    to be voted on in the Senate.
                Sincerely,

    350 Eugene               Friends of Family        Planetary CARE
                              Farmers
    350 Hawaii               Gladney Farm             Planetphilia
    350 Seattle              Good Omand Farm          Plant Powered Metro
                                                       New York
    350 Triangle             Good Stewards            PlantPure Communities
    350 Wenatchee            Government               Princeton Student
    50by40                    Accountability Project   Climate Initiative
                              Food Integrity          ProVeg International
                              Campaign
    ActionAid USA            Grassroots               ProVeg USA
                              Environmental
                              Education
    Advancing Collective     Green Education and      PSR Arizona
     Equity                   Legal Fund
    ADVOCACY COLLABORATIVE   Green Sanctuary          Public Justice
    Agrarian Food Web LLC     committee of the        RapidShift Network
                              Unitarian-Universalist
                              Church of Silver
                              Spring
    Alaska Community Action  Green State Solutions    Reach Out America
     on Toxics
    All Together Now         Green Village            Real Food Media
     Pennsylvania             Communications
    Alliance of Nurses for   Greenpeace USA           Regenerative Organic
     Healthy Environments                              Alliance
    American Grassfed        Grow For Food            Regenerative Rising
     Association
    American Sustainable     Gulf Coast Center for    ReKaivery Inc.
     Business Network         Law & Policy
    Animal Legal Defense     Hawai`i Alliance for     Renewable Rikers
     Fund                     Progressive Action
                              (HAPA)
    Animal Legal Defense     Hebbard Fence, LLC       Representing myself
     Legislative Fund
    Animal Legal Society     Hedgerow Hill Farm, LLC  Residents Allied for
     (VLS)                                             the Future of Tioga
                                                       (RAFT)
    Animals Are Sentient     Hip Hop is Green         Resource Renewal
     Beings, Inc                                       Institute
    Applecroft Farm          Hudson Varick Resourcs   River Guardian
                                                       Foundation
    Arkansas Ozark           Humane Society           Rockland Farm Alliance
     Waterkeeper              International
    Assateague Coastal       Humane Society           Rural Coalition
     Trust                    Legislative Fund
    Balanced                 Humane Society of the    Rx4vida
                              United States
    Be Well with Brialle     Humane Society           Santa Cruz Climate
     and The Black Women's    Veterinary Medical       Action Network
     Healing Haven            Association             Savory Institute
                             Hungry Bear Farm
    Beyond Pesticides        I-70 Citizens Advisory   SCCAN
                              Group
    Big Reuse                Indigenous               Science and
                              Environmental Network    Environmental Health
                                                       Network
    Bionutrient Food         Indivisible Ambassadors  SEE-LA (Social Eco
     Association                                       Education)
    Black Veg Society        Institute for            SEED: Strategies for
    Black VegFest             Agriculture and Trade    Ethical and
                              Policy                   Environmental
                             Iowa Citizens for         Development, Inc.
                              Community Improvement
    Bothered Earth, LLC      Jefferson County         Seeding Sovereignty
                              Farmers & Neighbors,
                              Inc.
    Breakthrough Strategies  Johns Hopkins Center     Sierra Harvest
     and Solutions            for a Livable Future
    Bright Building LLC      JSA Sustainable Wealth   Slow Food USA
                              Management
    Brighter Green           Just Transition          Slow Food Youth
                              Alliance                 Network USA
    Broad Riverkeeper        Kickapoo Peace Circle    Small Business
                                                       Alliance
    Buffalo River Watershed  Kitchen Dwellers, LLC    Socially Responsible
     Alliance                                          Agriculture Project
    Businesses for a         Kitchen Sync Strategies  Sonoma Hot Sauce
     Livable Climate
    CA Businesses for a      Land Stewardship         STEAM URBAN
     Livable Climate          Project
    Call to Action Colorado  LEAD for Pollinators,    Stone Soup Garden
                              Inc.
    Campaign for Family      Lean and Green Kids      Stonewall farm
     Farms and the
     Environment
    CatholicNetwork US       Let's Green CA!          Stop SPOT & Gulflink
    Catskill Mountainkeeper  Locust Point Community   Stop the Algonquin
                              Garden                   Pipeline Expansion
                                                       (SAPE)
    Center for Arkansas      Long Beach Alliance for  StopCricketValley.org
     Farms and Food           Clean Energy
    Center for Biological    Los Jardines Institute   Stray Dog Institute
     Diversity
    Center for Food Safety   Loudoun Climate Project  Sunrise Hunterdon
                                                       County
    Centralas Wine LLC       Maryland Pesticide       System Change Not
                              [Education] Network      Climate Change
    Chicago Food Policy      Mercy For Animals        Temple Beth Zion
     Action Council                                    Brookline
    Chilis on Wheels         MiCCA                    Terra Advocati
    Clean and Healthy New    Michigan Organic Food    The Compassion Project
     York                     and Farm Alliance
    CleanAirNow              Mid-Ohio Valley Climate  The Green House
                              Action                   Connection Center
    Climate Hawks Vote       Milwaukee Riverkeeper    The Planetary Health
                                                       Collective
    Climate Justice          Montbello Neighborhood   The Pollination
     Alliance                 Improvement              Project
                              Association
    Climate Reality Project  MOSA Certified Organic   The Raven Corps
     Silicon Valley
    CO Businesses for a      MountainTrue             TIAA--Divest! From
     Livable Climate                                   Climate Destruction
    Coming Clean             National Family Farm     Toxic Free North
                              Coalition                Carolina
    Compassion in World      National Farm to School  True Health Initiative
     Farming USA              Network
    Concerned citizen        National Farm Worker     Tufts University
                              Ministry
    Dakota Rural Action      National Latino Farmers  U.S. PIRG
    DC Greens                 & Ranchers Trade        Unite North Metro
                              Association              Denver
    Earth Action, Inc.       Navitas Organics         Until Justice Data
                                                       Partners, Inc.
    Eating Animals Causes    NC Climate Justice       Utah Physicians for a
     Pandemics                Collective               Healthy Environment
    Encompass                NC Clinicians for        Vegan Activist
                              Climate Action           Alliance (VAA)
    Environment America      Neighboring Food Co-op   Vilicus Farms
                              Association
    Environmental Justice    Non Toxic Communities    VitalBeeBuds
     Ministry Cedar Lane     North Range Concerned    Voters for Animal
     Unitarian Universalist   Citizens                 Rights
     Church
    Extinction Rebellion     Northeast Organic Dairy  Walk Your Talk
     San Francisco Bay Area   Producers Alliance       Productions
    Factory Farming          Northeast Organic        Wall of Women
     Awareness Coalition      Farming Association of
                              New York
    Fair World Project       Northeast Organic        Wally Farms
                              Farming Association of
                              Vermont
    Family Farm Action       Northeast Organic        Water Climate Trust
    Family Farm Defenders     Farming Association-    Waterkeeper Alliance
                              Interstate Council
    Farm Aid                 Northern Plains          West End
                              Resource Council         Revitalization
                                                       Association WERA
    Farm Forward             NWI Food Council         WildEarth Guardians
    Farmworker Association   NYCLASS (New Yorkers     Wisconsin Health
     of Florida               for Clean, Livable,      Professionals for
    Food & Water Watch        and Safe Streets)        Climate Action
                                                      Women Food and
                                                       Agriculture Network
                                                       (WFAN)
    Food Animal Concerns     Ohio Ecological Food     Womxn from the
     Trust                    and Farm Association     Mountain
    Food as Medicine         Organic Seed Growers     World Animal
     Nutrition Counseling     and Trade Association    Protection US
    Food Revolution Network  Our Climate              world citizen
    Friends of the Earth     Our Climate Education    Zero Hour
                              Fund
    Pasture Raised Foods     PDA Arizona              People & Pollinators
                                                       Action Network
    Pesticide Action
     Network

    CC:

    Chairwoman Stabenow, Chairman Sanders.
                                     ______

     Submitted Letter by Hon. Don Bacon, a Representative in Congress from
       Nebraska; on Behalf of Brenda Masek, President, Nebraska Cattlemen
    April 26, 2022

      Hon. David Scott,
      Chairman

      Hon. Glenn Thompson,
      Ranking Minority Member
      House Agriculture Committee
      Washington, D.C.

      RE: An Examination of Price Discrepancies, Transparency, and Alleged
                Unfair Practices in Cattle Markets

        Dear Chairman Scott, Ranking Member Thompson and Members of the
    Committee:

        Nebraska Cattlemen is grateful for the opportunity to share our
    member's concerns regarding price discrepancies, beef cattle market
    transparency, and alleged unfair practices in cattle markets. Our
    organization is a grassroots membership organization representing
    thousands of farmers and ranchers from every scope and sector of the
    beef cattle industry in Nebraska.
        Our beef cattle producer members and their livelihoods are directly
    impacted by the beef cattle market's ability or inability to send
    appropriate price signals up and down the beef cattle supply chain. In
    the past decade, those price signals have encouraged ranchers to expand
    their cow herds and cattle feeders to expand their feeding operations
    as domestic and global demand has exponentially grown like few could
    have imagined. Yet today, as wholesale beef prices start to shift from
    historic highs, the percent of the available profit margins in the beef
    supply chain passed onto cattle producers remains disproportionally
    low.
        It has become painfully apparent to our members that, in recent
    years, the ability of the cattle market to send the correct price
    signals to producers is broken. For the greater part of a decade, this
    has been a headline issue for members of our organization. More
    recently, COVID-19's impact on the cattle market has reignited concerns
    that surfaced following a 2019 beef packing plant fire in Holcomb, KS.
    These concerns continue to focus on extreme market deteriorations that
    repeatedly take place for the production segments of the beef industry
    that are closely followed by rapid increases in boxed beef values. The
    repeat nature of these market reactions emphasizes how the production
    sector of the industry is exposed to the highest potential for risk
    with little to no leverage to change that risk position. Sharp
    increases in profits for meatpackers after repeated black swan events
    less than 7 months apart within the cattle market highlight and
    emphasize this issue. Cattle producers pride themselves as being
    independent business entities. As the packing and processing industry
    repeatedly takes advantage of these independent cattle producers,
    placing undue pressure on the production sector of the beef cattle
    industry, we fear a shift to market practices that mirror other
    livestock protein industries could be inevitable. The shift couldn't be
    further from the goals of current stakeholders in the industry.
        Where we are today is not a result of an evil plot to purposely
    stifle ranchers' livelihoods. Instead has been a progression--across
    the beef supply chain over the last 2 decades to become increasingly
    more efficient in fed cattle marketing and inventory management as an
    industry through alternative marketing agreements (AMAs). While these
    efficiencies have benefited some, they came at the cost of robust price
    discovery and market leverage for other producers. Undoubtedly, you
    will hear today about the positive industry effects of AMAs, otherwise
    defined by USDA Livestock Mandatory Reporting as ``formula'' trades,
    which have helped incentivize the production of higher quality beef.
    Please realize, however, that the long-term proliferation of AMA's has
    also led to a continued deterioration of price discovery as beef
    packers have financially incentivized the commitment of cattle without
    price negotiation.
        Price discovery is a public good. Negotiated cash market
    participants invest resources to negotiate and discover cash market
    prices for the entire industry, while those who utilize AMAs capitalize
    on that investment, benefit from the efficiencies, and use the prices
    discovered by cash market participants. This type of scenario is best
    described as a tragedy of the commons. When an increasing number of
    market participants overuse a public good or ``shared resource'' for
    their own short-term best interest, abuse of the shared resource
    results in less value of that resource overall for everyone in the long
    run. Until the price discovery ``public good'' is better valued, the
    industry could continue this downward trend until there is little to no
    negotiated trade left and price determination will need to rely on
    other outside markets. Data to support this claim can be found attached
    to this testimony in a report titled Annual LMR Live Cattle Purchase
    Type Breakdown by Region.
        How does our industry correct this course? Continuing to focus on
    expanding options for market participants to participate in price
    discovery is key. Our members seek options that contribute to price
    discovery, like working with the packing industry to sell on a
    negotiated grid--a mechanism that allows producers to garner premiums
    for higher-value cattle while still participating in the price
    discovery process by offering their cattle to numerous buyers. However,
    producers have grown frustrated with the lack of willingness of all
    packers to offer this marketing option. To incentivize packers to
    participate in the negotiated market and contribute to price discovery,
    the industry must either mandate participation, financially incentivize
    negotiated trade, or penalize entities who continually show a lack of
    participation in the price discovery process. We fully realize and
    acknowledge that a ``mandatory minimum'' for the purpose of compelling
    price discovery for cattle market participants is a concern for some
    cattle industry participants, yet there has not been an entity or
    organization that has identified an effective alternative to achieve
    the goal of compelling price discovery.
        An additional source of frustration for our members is the
    continued perception that all AMAs reward carcass merit and therefore
    lead to the production of higher quality cattle. Last summer, Nebraska
    Cattlemen worked with USDA-AMS to gain additional insight into the mix
    of transaction types that comprise the ``formula'' fed cattle price and
    volume data that USDA-LMR reports. Specifically, Nebraska Cattlemen
    sought more information regarding the total volume and/or percentage of
    total reported ``formula'' headcounts that are transacted in such a way
    that USDA quality and/or yield grade parameters have a bearing on the
    final price paid vs. the volume and/or percentage of total reported
    volume where that is not the case.
        Analysis of USDA-LMR data from January through mid-May of 2021
    indicated rather clearly that in the Nebraska and Iowa/Southern
    Minnesota LMR regions (compared to other regions), there is a higher
    percentage of cattle that fall into the ``formula'' transaction type
    that are simply marked at the LMR weekly Nebraska dressed steer
    weighted average price, or possibly that data point plus some
    predetermined premium. However, still there are no other premiums or
    discounts applied relative to quality grade or yield grade. We
    understand why this type of transaction falls into the ``formula'' data
    as it is not a negotiated cash sale, a negotiated grid sale, or a
    contract purchase--however, we also see it to be somewhat different
    than a transaction that involves quality and or yield grade premiums
    and discounts. Our specific ask was to look at the prevalence of this
    type of transaction type in the LMR ``formula'' data set on a regional,
    five-area, and nationwide scale.
        The results showed that the northern regions, specifically Nebraska
    and Iowa/Minnesota, exhibited the highest proportion of transactions
    with no premium or discount applied. With the quality of the cattle/
    beef not having any direct impact on the net price paid for cattle
    marketing in this manner, it would appear that any premium paid by the
    buyer is essentially done to reward suppliers for furnishing unpriced
    inventory and consequently reducing the buyers need to participate/
    compete in the negotiated market and contribute to the price discovery
    process. A copy of this report can be found attached to this testimony
    titled Highlights of the Evaluation of Formula Based Cattle Purchases.
        Just as cattle producers respond to market signals to expand their
    cow herds and feeding operations to meet domestic and global demand, we
    question why the beef packing industry has not responded to those same
    signals for the past 5 years?
        Adequate beef processing capacity is critical to maintaining
    profitability in the beef and cattle industry and ensuring a steady
    supply of beef and beef products to consumers. Currently, there is not
    only a shortage of adequate processing capacity, but also a reduction
    of processing throughput across the country. A recent study by RaboBank
    found that excess operational beef processing capacity fell to zero in
    late 2016 and turned negative in early 2017, resulting in a negative
    effect on cattle producer leverage in fed cattle negotiations because
    of lack of competition.
        To improve producer leverage in fed cattle negotiations, either
    cattle supplies must be reduced, or processing capacity must be
    expanded. With domestic and foreign beef demand at an all-time high,
    the obvious solution to meet this growing demand without shrinking the
    U.S. beef herd is to expand beef processing capacity. We understand
    expanding capacity with new construction comes with a certain level of
    risk and takes time, but we do believe there are opportunities with
    current facilities to help meet the growing demand for beef in the near
    term.
        Another key component to price discovery and price determination is
    market transparency. There have been efforts in both the house and the
    Senate to answer the call for increasing price discovery and expanding
    market transparency, specifically the adoption of a beef contract
    library and 14 day slaughter reporting window.
        Thank you for the opportunity to share the thoughts and concerns of
    Nebraska Cattlemen members. As we continue to work towards finding
    solutions to increase fed cattle market transparency and expand price
    discovery to robust levels, we look forward to being at the table to
    talk through solutions and take actions to protect our members' family
    legacies
                Best,
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Brenda Masek,
    President,
    Nebraska Cattlemen

    CC:

    Representative Don Bacon
     addendum: annual lmr live cattle purchase type breakdown by region &
         highlights of the evaluation of formula based cattle purchases

                                                                                                                Annual LMR Live Cattle Purchase Type Breakdown by Region
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        National
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           2012           2013           2014           2015           2016           2017           2018          2019          2020          2021
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         52.1%          49.4%          47.3%          42.6%          38.8%          37.4%          32.6%          26.0%19.5%     23.1%          23.1%          21.3%          25.6%          25.7%          25.5%          20.9%         23.4%
               Formula         33.2%          34.3%          37.4%          39.1%          43.7%          43.1%          47.4%          54.8%61.0%     59.8%          56.8%          57.0%          57.6%          57.2%          61.1%          64.8%         62.7%
      Forward Contract          4.8%           7.2%           6.8%          11.2%           9.5%          11.9%          13.2%          12.0%10.9%     10.8%          15.8%          17.5%          12.7%          13.0%           9.6%          11.0%          8.9%
       Negotiated Grid          9.9%           9.0%           8.5%           7.1%           8.0%           7.6%           6.7%           7.2% 8.6%      6.3%           4.3%           4.2%           4.1%           4.1%           3.8%           3.3%          5.0%
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         5-Area
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           20122021       2013           2014           2015           2016           2017           2018          2019          2020
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         55.8%          52.0%          49.8%          45.3%          43.2%          42.4%          36.8%          27.8%19.4%     24.1%          24.0%          21.3%          26.3%          26.8%          26.1%          20.5%         23.3%
               Formula         31.9%          33.3%          35.9%          38.1%          42.3%          42.2%          46.5%          56.2%64.7%     61.8%          58.7%          58.8%          59.4%          59.5%          64.2%          69.6%         67.0%
      Forward Contract          4.6%           7.1%           6.8%          10.4%           8.1%           9.9%          10.9%          10.0% 7.7%      8.6%          13.7%          16.7%          11.2%          10.8%           7.0%           7.6%          5.4%
       Negotiated Grid          7.7%           7.7%           7.5%           6.3%           6.4%           5.5%           5.7%           5.9% 8.2%      5.4%           3.6%           3.2%           3.1%           2.9%           2.7%           2.3%          4.3%
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                Texas-Oklahoma-New Mexico
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           20122021       2013           2014           2015           2016           2017           2018          2019          2020
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         47.2%          42.5%          36.7%          31.5%          26.4%          21.5%          17.0%          10.2% 7.4%      6.1%           3.0%           2.6%           6.4%           9.3%           6.2%           5.4%         10.1%
               Formula         42.2%          42.2%          48.4%          53.3%          60.4%          66.9%          72.7%          76.0%80.8%     83.0%          84.6%          85.9%          82.4%          81.8%          86.2%          87.9%         84.2%
      Forward Contract          3.1%           5.0%           4.4%           5.8%           5.4%           4.9%           4.4%           5.4% 5.0%      4.0%           7.4%           9.3%           7.0%           6.2%           4.9%           5.3%          4.3%
       Negotiated Grid          7.5%          10.3%          10.5%           9.3%           7.8%           6.7%           5.9%           8.4% 6.8%      6.9%           5.1%           2.1%           4.2%           2.6%           2.7%           1.6%          1.4%
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Kansas
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           20122021       2013           2014           2015           2016           2017           2018          2019          2020
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         50.6%          47.3%          44.8%          41.7%          39.9%          41.0%          36.9%          27.4%12.5%     21.0%          15.6%          12.5%          23.0%          21.9%          19.3%          16.2%         18.2%
               Formula         44.8%          46.0%          48.5%          48.0%          52.1%          51.6%          54.1%          63.6%74.4%     68.5%          69.5%          64.8%          67.3%          70.7%          76.4%          81.6%         76.7%
      Forward Contract          2.8%           5.4%           5.4%           7.8%           7.0%           6.3%           7.1%           5.7% 3.8%      6.5%          14.3%          22.2%           9.3%           7.0%           3.9%           1.7%          1.4%
       Negotiated Grid          1.8%           1.3%           1.3%           2.4%           1.0%           1.0%           2.0%           3.4% 9.3%      4.0%           0.7%           0.6%           0.4%           0.4%           0.4%           0.5%          3.7%
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        Nebraska
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           20122021       2013           2014           2015           2016           2017           2018          2019          2020
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         64.6%          63.7%          64.7%          61.0%          60.4%          55.8%          48.3%          38.9%31.1%     36.4%          38.3%          32.6%          42.1%          41.3%          43.0%          32.9%         36.1%
               Formula         18.3%          16.8%          17.8%          17.8%          22.6%          23.4%          28.7%          41.0%52.1%     48.4%          42.6%          44.4%          42.0%          41.0%          45.2%          52.4%         54.0%
      Forward Contract          5.8%           9.7%           7.8%          14.7%           9.0%          14.0%          15.6%          14.8% 8.8%     10.2%          14.7%          17.7%          12.7%          13.5%           8.5%          11.7%          4.6%
       Negotiated Grid         11.3%           9.8%           9.6%           6.5%           8.0%           6.7%           7.4%           5.3% 8.0%      5.0%           4.4%           5.3%           3.2%           4.2%           3.3%           3.0%          5.3%
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        Colorado
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           2012021 **     2013           2014           2015           2016           2017          2018 *        2019 **       2020 **
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         51.8%          40.7%          39.6%          28.5%          28.8%          19.7%          17.9%          12.5%  N/A     10.6%          11.2%           8.3%          13.8%          16.0%          13.5%            N/A           N/A
               Formula         30.1%          46.7%          46.3%          54.5%          57.9%          64.0%          64.1%          69.1%  N/A     71.4%          64.1%          70.8%          73.4%          69.4%          74.5%            N/A           N/A
      Forward Contract          8.6%           7.3%           7.5%          13.3%          10.5%          14.4%          16.0%          16.8%  N/A     16.8%          24.1%          20.3%          12.2%          14.1%          10.9%            N/A           N/A
       Negotiated Grid          9.5%           5.3%           6.6%           3.8%           2.7%           1.9%           2.0%           1.6%  N/A      1.2%           0.6%           0.6%           0.6%           0.5%           1.1%            N/A           N/A
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                     Iowa-Minnesota
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                               2005           2006           2007           2008           2009           2010           2011           20122021       2013           2014           2015           2016           2017           2018          2019          2020
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                  Cash         73.9%          68.8%          68.8%          66.7%          63.9%          65.6%          61.8%          56.4%47.5%     54.6%          57.0%          56.7%          50.9%          51.0%          57.1%          50.0%         51.2%
               Formula          7.2%           8.4%           8.2%           9.0%          10.3%          11.2%          10.9%          20.5%24.9%     23.2%          20.3%          20.2%          21.1%          21.3%          22.3%          25.3%         24.7%
      Forward Contract          7.1%          10.2%          13.3%          16.7%          13.2%          13.9%          17.1%          13.2%17.4%     13.8%          17.1%          16.1%          20.1%          19.8%          13.6%          17.8%         15.6%
       Negotiated Grid         11.8%          12.6%           9.7%           7.6%          12.6%           9.3%          10.2%           9.9%10.2%      8.4%           5.7%           7.0%           7.9%           7.9%           7.0%           6.9%          8.5%
    --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Source: USDA AMS Livestock, Poultry & Grain Market News.
    * Dataset has a minimum of one quarter removed due to 3/70/20 confidentiality guidelines.
    ** Entire dataset removed due to 3/70/20 confidentiality guidelines.

    Highlights of the Evaluation of Formula Based Cattle Purchases
        Formula purchase arrangements of fed cattle use an agreed to
    methodology of calculating the net price. The final net price for some
    formula purchases may include the application of any premiums or
    discounts associated with carcass performance as specified in the
    transaction agreement. In response to the cattle industry's desire for
    more transparency in the formula slaughter cattle market, AMS conducted
    an evaluation of formula-based cattle purchases reported under the
    requirements of the Livestock Mandatory Reporting Act and regulation to
    learn more about the makeup of these purchases. More specifically, AMS
    analyzed formula net price data for slaughter cattle purchases reported
    between January 4, 2021 and May 31, 2021, to evaluate the proportion of
    these formula purchases with no premium or discount applied and
    therefore likely priced from data referenced on another AMS report;
    versus similar formula cattle purchases that also included at least one
    premium or discount for quality, yield, weight, or other factor.
    Further, AMS evaluated this on a regional basis to see if there were
    any marketing differences among the states across the five-area region.
        Here are a few of the highlights found from this evaluation:

       Despite some variations among the five regions, a solid
            majority of formula purchases in all areas do have at least one
            premium or discount applied.

       The northern regions of Nebraska and Iowa/Minnesota
            exhibited the highest proportion of transactions with no
            premium or discount applied.

       While the proportion of cattle in which no premium or
            discount was applied likely represents formula transactions
            limited strictly to price reference methodology, it's also
            possible that some of these cattle simply met baseline
            specifications in which no premium or discount thresholds were
            triggered. A complete determination cannot be made under the
            current LMR reporting requirements.

                         LMR Formula Net Premium/Discount Application Percentages Jan.-May 2021
    ----------------------------------------------------------------------------------------------------------------
                                National       5-Area      TX/OK/NM       KS          NE          CO         IA/MN
    ----------------------------------------------------------------------------------------------------------------
    At least 1 Premium or           82%           82%          86%         85%         74%         84%         65%
     Discount was Applied
      No Premium or                 18%           18%          14%         15%         26%         16%         35%
       Discount Applied....
    ----------------------------------------------------------------------------------------------------------------
    * Five-Area--Texas, New Mexico, Oklahoma, Kansas, Colorado, Nebraska, Iowa, Minnesota.
    TX/OK/NM--Texas, Oklahoma, New Mexico; KS--Kansas; NE--Nebraska; CO--Colorado; IA/MN--Iowa, Minnesota.

                                     ______

       Supplementary Material Submitted by Donnie King, Chief Executive
                              Officer, Tyson Foods
    Insert 1
              Mr. Costa. Mr. Stockton on the previous panel testified that
            he has not really seen real enforcement in the Stockyards and
            Packers Act since the 1980s, and I'm wondering--and cites that
            as part of the reason in the price disparity between the cow-
            calf operator and the prices that American consumers are seeing
            in the grocery store. I know there are a lot of factors that
            impact the prices of protein when you go from the calf-cow
            operation or the dairy operation to the ultimate purchaser of
            that product that puts food on America's dinner table every
            night, and we know that that is a national security issue. I am
            wondering if any of you would care to comment on those factors,
            on the impacts of these cost increases.
              Mr. King. Well, I would--Congressman, I would just simply say
            that, as I testified earlier, virtually every input in the
            supply chain has gone up. And typically when you see a minor
            increase, companies tend to absorb that, but the rate of
            inflation and costs have gone up so dramatically that some of
            that had to be ultimately passed on to the consumer. And we've
            done that as well. But, this beef business is a cyclical
            business, and while we've seen the trough, I think it was like
            June of 2020 in terms of the price of fed cattle, if you look
            at it today, it's about $145 and based on futures will continue
            to move up, as Mr. Klein commented earlier.
              I agree with that assessment, and this 10 year cattle cycle
            that was testified about earlier, I would certainly expect,
            while everyone is making more money in the supply chain, I
            would expect that to flip some to the feeder and----
              Mr. Costa. Well, my time has expired, but if you could give
            the Committee a breakdown of those input costs so we can better
            understand it, I think that would be helpful. Thank you, Mr.
            Chairman.

        Thank you for the question, Congressman Costa. Input costs
    represent the largest component of what a consumer pays at the grocery
    store or restaurant and fluctuate continuously based on many factors.
    At Tyson, we believe it is helpful to think about those costs broken
    down into several categories based on an operator's position in the
    supply chain. First, feeder cattle coming in the feed yard are
    purchased from a variety of sources including auction markets, stocker
    operators, backgrounders, livestock dealers and direct from ranchers.
    These operators incur the cost of feed, fuel, fertilizer, labor,
    interest, equipment, insurance, animal health, transportation, and
    taxes. Second, feed yards incur the cost of the animal at purchase,
    feed ingredients, feed milling, labor, fuel, transportation, equipment,
    animal health, regulatory compliance, insurance, taxes, and interest.
    Packers incur the cost of the live animal, labor, energy, packaging,
    storage, equipment, transportation, regulatory compliance, interest,
    taxes, insurance, and corporate overhead. Last, retailers and food
    service operators incur the cost of transportation, labor, energy,
    packaging, equipment, markdowns, interest, insurance, taxes, and
    corporate overhead. All these costs factor into the price consumers pay
    at the grocery store or restaurant, and these costs have been
    increasing at alarming rates across the board due to supply chain
    challenges, increased cost of fuel, transportation bottlenecks at
    railyards and ports, overseas hostilities, and scarcity in the labor
    markets, to name a few. To illustrate trendlines in some of these input
    costs, I submit to the Committee the graphics below.
    Trendlines of Major Input Costs
        Kansas State shows a long-term trend of just cost of gain in the
    feed yard (grain and ration costs). This is up nearly 65% year over
    year.
    Cost of Grain, K-State Focus on Feedlots
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Feeder Cattle Index--Cost of Cattle coming into feedyard is
            up almost 40% since 2019. This also shows revenue coming off
            ranch.
    CME Fdr Index
    Weekly Average Price
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              USDA Five-Area Fed Cattle Cash Steer Price represents the
            cost of cattle coming to packing plant. This also shows revenue
            to feed yard. This input is up nearly 30% since 2020. (YTD was
            as of APR 22).
    Annual Average Five Area Cash Steer Price--$/cwt
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Hourly compensation for Packing sector compensation is up
            over 20% since 2018.
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Insert 2
              Mr. Feenstra. . . .
              Mr. King, I have been told that the four largest meatpackers
            agreed to provide information to the cattlemen's organization
            for a producer-led initiative to achieve 75 percent of
            negotiated trade needed for robust price discovery in each
            reporting region. The feeders made the effort to meet this
            voluntary threshold, but the initiative failed to due to lack
            of packer participation. Could you explain why this failed?
              Mr. King. Congressman, I'm not familiar with that. I would be
            happy to get the necessary information and get it to you and to
            this Committee.

        Thank you for the question, Congressman Feenstra. In 2020, members
    from various affiliates of an internal working group of the National
    Cattlemen's Beef Association agreed on a ``triggers framework'' to help
    determine acceptable levels of negotiated trades by region, from their
    perspective. This agreement was silent on packer participation, and
    Tyson Foods was not asked to participate in the discussions surrounding
    the framework or the resulting voluntary agreement. As part of the
    agreement, the producer groups hired Dr. Stephen Koontz of Colorado
    State University to conduct research on the levels of negotiated
    trades. During the pendency of Dr. Koontz's research, Tyson voluntarily
    provided data to inform his work until such point as Dr. Koontz
    informed Tyson our data was no longer required. Tyson has not seen the
    results of this study, and, to our knowledge, the results have never
    been published or otherwise made public.
                                     ______

     Submitted Statement by Hon. Ilhan Omar, a Representative in Congress
                                 from Minnesota
    (1) Big Ag Monopoly & Monopsony Concerns Across the Globe
        A few big agricultural corporations (Big Ag) and multinational food
    corporations have pushed out, shuttered, and exploited many small local
    farms to gain vast control of agricultural markets here and abroad.
        As the sole sellers of basic goods, these major companies have the
    freedom to artificially inflate their high prices and engage in
    predatory contracting practices to exploit small farmers who need those
    materials to run their family businesses. Small farmers are typically
    not able to negotiate these prices or pursue legal claims, since forced
    arbitration clauses and other unfair labor tactics are common in these
    contract agreements. This monopolistic behavior has also resulted in
    some of the recent price-gouging that we're seeing now, as more
    agricultural corporations continue to take advantage of inflation to
    pass costs not only onto suppliers but also consumers.
        As the sole buyers of local labor, these industrial meatpacking
    companies are also able to artificially set low wages for small
    producers and farm workers. Small suppliers and processing workers have
    suffered lower payer and worse working conditions while consumers pay
    higher prices for lower-quality food. This monopsonistic behavior has
    contributed to a steady rise in U.S. farm (debt) bankruptcies and the
    prevalence of farmer suicides since the 1980s, primarily due to
    financial stress.
        The increase in both monopoly and monopsony powers by these food
    corporations are connected in explaining the current plight facing many
    farmers in the United States and around the world. Corporate mergers,
    takeovers, and collusion have left family farmers and independent
    ranchers with fewer buyers for their essential goods, like livestock,
    and fewer suppliers of basic inputs, like fertilizer and feed. U.S.
    small farms are completely at the whims of Big Ag and their precarious
    price- and wage-setting practices. It's clear that Congress must take
    action to return power to our critical workforce that feeds and
    supports American communities every day.
        However, immediate Federal reform is needed not only to build
    resiliency in our own domestic food supply but also to strengthen
    international food production as well. Four agricultural biotech
    companies control more than \2/3\ of the world's seed market and four
    other transnational corporations control about \3/4\ of the world's
    grain trade. The corporate consolidation of our global food markets
    will only serve to benefit the profit margins of a select few at the
    cost of deepening poverty and food insecurity for the rest of humanity.
    This structural crisis of our global food system will not prepare us
    for humanitarian crises--caused by war, famine and climate change--and
    it will not help us combat the worsening hunger crisis due to the
    COVID-19 pandemic and current regional conflicts.
                                     ______

    Submitted Statement by Julie Anna Potts, President and Chief Executive
                     Officer, North American Meat Institute
        On behalf of the North American Meat Institute (NAMI or the Meat
    Institute) based in Washington, DC, and its members around the country,
    thank you for the opportunity to submit this testimony.
        The Meat Institute is the United States' oldest and largest trade
    association representing packers and processors of beef, pork, lamb,
    veal, turkey, and processed meat products. NAMI members include over
    350 meat packing and processing companies, large and small, and account
    for over 95 percent of the United States' output of meat and 70 percent
    of turkey production.
    Executive Summary
        This testimony provides a comprehensive picture of the uniquely
    complex, dynamic, integrated, and competitive markets in which cow-calf
    producers, stockers, backgrounders, cattle feeders, beef packers,
    processors, distributors, wholesalers, retailers, food service
    operators, and others operate.
        The testimony begins with a summary of the complex cattle and beef
    markets, followed by an examination of the supply and demand
    fundamentals driving the markets. U.S. Department of Agriculture (USDA)
    data show record beef production in 2019, 2020, and 2021, despite
    capacity constraints at packing and processing plants. Data also show
    cattle prices rebounded as packing capacity came into balance with the
    cattle supply, highlighted by cattle prices reaching their third-
    highest January price in the last decade during January 2022.
        The testimony also rebuts claims that industry concentration has
    led to inflation. The four-firm concentration ratio for fed cattle
    slaughter has not changed appreciably in nearly 30 years; today's
    skyrocketing inflation across the economy results from supply chain
    issues and high demand, not industry concentration.
        The testimony addresses proposed legislation and regulation. The
    cattle cash market mandate proposed by Senators Chuck Grassley and Deb
    Fischer would increase costs for producers and consumers at a time of
    high input costs and crippling inflation. Moreover, the mandate would
    have regional disparities: the Texas-Oklahoma-New Mexico region,
    Kansas, and Nebraska would shoulder the vast majority of the costs,
    while the Iowa-Minnesota region would escape relatively unscathed. For
    these and other reasons, lawmakers should oppose inserting the Federal
    Government into the free market.
        Finally, USDA is promulgating new proposed rules to regulate
    packers, which are likely to have far reaching, unintended
    consequences. At the same time, Congress is considering establishing a
    politically appointed Special Investigator within USDA to add to the
    Department's existing enforcement personnel, duplicating resources.
    With the promulgation of the new rules, the Special Investigator (and
    staff) would be compelled to bring cases to test the legal limits of
    the new rules, even if those cases are not warranted. The resulting
    legal uncertainty and chaos will accelerate changes in livestock and
    poultry marketing that will up-end the supply chain, adding costs to
    producers, consumers, and packers.
        Congress and USDA should resist making radical changes to the
    cattle and beef markets.
    Overview of the Highly Complex and Dynamic Cattle and Beef Markets
        Too often, the policy debate around the cattle and beef industry is
    an overly-simplified discussion limited to cattle producers versus beef
    packers. In discussions on these topics, it is imperative policy makers
    remember: packers don't buy fed cattle from cow-calf producers; nor do
    packers sell beef to consumers.
        As Dr. Dustin Aherin testified before the House Agriculture
    Committee's Livestock and Foreign Agriculture Subcommittee last summer:

              . . . [C]attle are not beef. Cattle are one of several inputs
            into beef production. Other major inputs include labor,
            physical capital, and technology. These inputs are always
            seeking, but never finding, the perfect balance between one
            another.\1\ *
    ---------------------------------------------------------------------------
        \1\ Aherin, Testimony  (https://docs.house.gov/meetings/AG/AG29/
    20210728/113973/HHRG-117-AG29-Wstate-AherinD-20210728.pdf) before the
    House Agriculture Livestock and Foreign Agriculture Subcommittee, July
    28, 2021.
        * Editor's note: footnotes annotated with  are retained in
    Committee file.

        The policy debate should be focused on a much broader context
    encompassing the dynamics across the whole value chain. For example, a
    recent paper published by the Federal Reserve Bank of Kansas City notes
    that one animal--and the beef produced from it--``could be sold as many
    as six times before it finally reaches the consumer.'' \2\
    ---------------------------------------------------------------------------
        \2\ Cowley, C. Long-Term Pressures and Prospects for the U.S.
    Cattle Industry, Kansas City Federal Reserve Bank Economic Review,
    December 17, 2021.
    ---------------------------------------------------------------------------
        Cattle change hands before they get to the slaughter plant, and for
    beef, each step in the post-slaughter process that are carried out by a
    variety of entities, is taken to add value and supply specific products
    for specific uses in various consumer markets.
        Though the fundamentals of supply and demand that drive cattle and
    beef markets are relatively straightforward, the markets themselves are
    extremely complex. Although highly integrated, cattle markets and beef
    markets have their own supply and demand factors.
        Derrell S. Peel, Ph.D., the Charles Breedlove Professor of
    Agribusiness in the Department of Agricultural Economics at Oklahoma
    State University, provides context in Chapter 1 of a must-read research
    paper for policymakers, The U.S. Beef Supply Chain: Issues and
    Challenges, published by The Agricultural and Food Policy Center, Texas
    A&M University.
        Dr. Peel emphasizes the sheer complexity and magnitude of the
    cattle and beef market.

              It is reasonable to ask why the beef cattle industry should
            be plagued with so many contentious issues that have persisted
            for so long. Much of the reason is attributable to the fact
            that the U.S. cattle and beef industry may well be the most
            complex set of markets in existence. In its entirety, the
            cattle and beef industry represents an extraordinarily
            complicated set of cattle production and marketing activities
            which provide the source of a massive set of beef products
            marketed through a diverse set of final markets and all
            coordinated by a multitude of inter-related market
            transactions. (p. 3, emphasis added)

        Looking at the cattle market first, from the ranch to the slaughter
    plant, live cattle typically change ownership two to three times--Dr.
    Peel describes ``multiple distinct and separate'' cattle production
    sectors.\3\ Cow-calf producers market their calves to cattle feeders,
    or to backgrounders who in turn sell those cattle to feeders. While
    calves are an output for a cow-calf producer, they are an input for
    backgrounders and feedlots who also operate in the cattle market.
    ---------------------------------------------------------------------------
        \3\ See The U.S. Beef Supply Chain: Issues and Challenges,
    (https://www.afpc.tamu.edu/research/publications/710/cattle.pdf) p. 3-
    4.
    ---------------------------------------------------------------------------
        The price for cattle at any of those three most common points of
    transactions is a function of how many cattle are in each respective
    market segment at a given point in time. In other words, the price is
    determined by supply of cattle to sell from one segment and the demand
    to buy cattle by the next segment. That explains why each segment can
    experience different margins and why there is a futures contract for
    two types of cattle: feeder cattle and fed cattle. When any of those
    segments are out of balance, prices move, and such moves can be
    dramatic.
        But that's just the cattle production side. Once a fed steer or
    heifer is finished at the feedlot, it is sold to a packer: a feeder's
    output and one of a packer's inputs are fed cattle. That animal is
    slaughtered and processed into various primal cuts. Those primal cuts
    are fabricated by the packers and/or further processors into numerous
    products, from muscle cuts like steaks, to hamburger or processed beef
    products. Dr. Peel also shines a light on the complexity and diversity
    of the processing, retail, and food service sectors:

              Packers fabricate to specific product specifications for
            various retail grocery customers, further processing and food
            service customers, and a variety of export markets. As a
            result, the major packers produce several thousand different
            products from a basic fabrication process that begins with
            several hundred carcass products and byproducts of slaughter
            and fabrication. Some packing facilities in certain locations
            have some or all packing capacity dedicated to value-added
            programs that operate as sole-source for upstream suppliers and
            downstream markets. (p. 23)
              * * * * *
              The COVID-19 pandemic revealed, somewhat to the shock and
            surprise of both consumers and producers, that the supply
            chains for retail grocery and food service are largely
            separate, very specialized, and quite complex. Not only are
            various beef cuts often used in different supply chains or used
            differently, but products like ground beef for retail grocery
            and for food service originate in very different supply chains
            (Peel, 2021). (p. 24)

        That was a lesson learned during COVID: as beef demand skyrocketed
    but packers' operational capacity to slaughter cattle was constrained,
    beef prices increased. This was seen across the beef supply chain, from
    the largest packers down to the local custom slaughter ``locker
    plant.''
    Supply and Demand Fundamentals at Work in the Beef Industry during
            COVID
        Last summer, testifying before the Senate Committee on Agriculture,
    Nutrition, and Forestry, Dr. Glynn Tonsor of Kansas State University
    highlighted the relationship between cattle prices and the size of the
    cattle herd, which has too often been forgotten or conveniently ignored
    during cattle market policy discussions. Dr. Tonsor testified:

              Perhaps no relationship is currently more central to economic
            discussions in the U.S. beef-cattle industry than the
            relationship of fed cattle inventories to processor
            capacity.\4\
    ---------------------------------------------------------------------------
        \4\ Tonsor, Testimony  (https://www.agriculture.senate.gov/
    hearings/examining-markets-transparency-and-prices-from-cattle-
    producer-to-consumer) before the Senate Committee on Agriculture,
    Nutrition, and Forestry, June 23, 2021.

        Cattle herd size must remain top-of-mind during any discussion of
    cattle prices. USDA released its annual cattle inventory report
    [1] on January 31, 2022, which provides a snapshot of the
    total cattle herd in the U.S. as of January 1. Compared to a year
    earlier, the report showed a reduction at every level in the U.S. beef
    cattle herd:
    ---------------------------------------------------------------------------
        \[1]\ https://downloads.usda.library.cornell.edu/usda-esmis/files/
    h702q636h/pn89f870n/jw828f69f/catl0122.pdf.

    ---------------------------------------------------------------------------
       Beef cows for breeding down two percent;

       Replacement heifers for breeding down three percent;

       Calf crop born in 2021 down one percent;

       Expected calf crop in 2022 down three percent; and

       Feeder steers and heifers for beef harvest down three
            percent.

        This, combined with strong beef demand continuing from 2021,
    suggests that 2022 will be a bullish year for cattle producers. This is
    especially the case as the supply of fed cattle becomes more aligned
    with the operational capacity of the packing industry's ability to
    harvest and process the available supply of cattle.
        Indeed, after 5 years of growth in the cattle supply, combined with
    the impact that COVID, insufficient labor, and supply chain disruptions
    had on the packing industry, cattle supply and demand were out of
    balance.
        Cattle prices hit record highs in 2014 and 2015, when the overall
    cattle herd was at its smallest since 1952 (for context, that was
    during the Truman Administration). Those record prices incentivized
    rapid herd expansion among producers.
    Cash Receipts for Cattle Versus Herd Size
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA AMS.

        While the beginning-of-the-year cattle inventory in the U.S. hit
    its peak in 2019, given the time needed to raise a calf to market
    weight, the supply of feeder cattle in the herd on the first of the
    year did not peak until January 2020. Total feeder cattle supply began
    2020 at the highest level in more than a decade.
    Total Feeder Cattle as of January 1
    (combined cattle on feed and feeder cattle outside feedlots)
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA January 1 Cattle Inventory reports.

        Two and a half months later, in March 2020, COVID hit. Slaughter
    plants were idled beginning in April. By the week ending May 1, 2020,
    weekly slaughter dropped by 40 percent and didn't recover until late
    June, but still lagged behind what would have been normal volumes
    during the season.
    2020 Weekly Cattle Slaughter
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA AMS.

        This situation--more cattle and constrained ability to process
    them--created a backlog of cattle inventory already in feedlots. That
    can be measured by the number of cattle on feed for 150 days or more.
    These ``long fed'' cattle make up the supply of cattle closest to being
    ready to be marketed to packers for slaughter and processed into beef.
    The backlogged oversupply resulted in low prices for fed cattle, even
    as consumer and export demand for beef remained high and resulted in
    increased wholesale beef prices.
    Monthly Cattle on Feed 150 Days or More
    (feedlots of 1,000 head+ capacity)
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA NASS.

        But in the face of the many challenges, the beef packing sector
    proved resilient. Total beef production in 2020 was a record 27.24
    billion pounds, slightly larger than the previous record of 27.22
    billion pounds in 2019. The increased volume was based on heavier
    slaughter weights. As expected, cattle weights increased because of the
    bottleneck of cattle on feed. Total head of commercial slaughter in
    2020 was only down two percent from 2019, despite the dramatic
    disruption to the cattle harvest during the second quarter of 2020 due
    to the pandemic.
        The supply of cattle remained large in 2021. USDA reports that in
    2021, the cattle-on-feed inventory reached the second highest monthly
    total on record for 7 months, each month from February through June,
    and then again in September and October.
        Throughout 2021, even as the comprehensive COVID-19 protections
    instituted by the meat industry since the spring of 2020 successfully
    lowered transmission among meatpacking workers and held case rates
    lower than case rates in the general U.S. population, worker shortages
    persisted. Through 2021, the Meat Institute regularly heard from member
    companies having up to 20 percent absenteeism on any day.
        However, packers worked their way through the supply of market
    ready cattle last year, primarily by adding Saturday shifts, especially
    during the first half of the year. Total Saturday slaughter during
    January through July 2021 was up 30 percent over 2020 and 33 percent
    over 2019.
    Total Saturday Cattle Slaughter
    (January through June)
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA AMS.

        In 2021, beef production and cattle slaughter both were up three
    percent from 2020, making 2021 another record year for beef production
    at 28 billion pounds. As slaughter rates recovered, and the industry
    worked through the backlog of cattle, supply and demand balance was
    restored. As a result, in January 2022, fed cattle prices rebounded to
    the highest January price since 2015, and the third highest January
    price in the past decade.
    January Feeder Cattle Supply vs. Fed Cattle Prices
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: ERS Domestic Livestock and Meat Data (3/29/22).

        For 2022, based on the supply and demand trends for fed cattle, the
    outlook for cattle prices is bullish across the board. On January 1,
    2022, the total number of cattle on feed on all sizes of feedlots was
    14.7 million head. That is the same inventory as 2021 and tied for the
    highest in more than a decade.
        However, unlike 2021, the inventory of feeder cattle outside of
    feedlots to be placed on feed during the year is smaller. Based on the
    numbers of steers, heifers not intended for cow replacement, and calves
    under 500 pounds, the beginning of the year supply of feeder cattle
    outside of feedlots is at its lowest since 2015 when fed cattle prices
    were at their historical peak.
    Feeder Cattle Outside Feedlots
    (as of 1 January)
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA NASS.

        The beginning of the year supply of feeder cattle outside of
    feedlots is a reliable indicator of a strong cattle market through 2022
    into 2023. Operational capacity at packing plants has increased. In
    February, cattle slaughter was 2.69 million head, which was a six
    percent increase over February 2021. Beef production was an all-time
    record for the month of February.
        In addition to 7 year highs for the January average fed cattle
    price, February, March, and April average fed cattle prices are also at
    their monthly high since 2015. In short, supply and demand fundamentals
    continue to drive the cattle and beef markets, as they did throughout
    the pandemic.
        COVID-19 hit as the feeder cattle supply peaked at a point higher
    than it had been in the previous decade; packers and processors
    navigated changing markets (far less food service/far more retail),
    labor shortages, and other supply chain disruptions; all while beef
    demand boomed. But beef production met the challenge, with record
    production in 2019, 2020, and 2021.
        Today, with the cattle herd contracting, meaning supply is
    tightening, and operational slaughter capacity increasing, meaning
    demand is expanding, cattle prices are rising. It is the cattle cycle
    in action. Policymakers should not intervene and attempt to control the
    free market fundamentals.
    Misplaced Claims about Increasing Consolidation and Concentration
        Members of the Meat Institute--and the entire industry supply
    chain--benefit from, and depend on, a fair, transparent, and
    competitive market.
        Much of the rhetoric about concentration in the beef packing sector
    wrongly implies that consolidation is on-going and that packers' market
    power is becoming more and more concentrated. That is not the case. The
    four-firm packer concentration ratio for fed cattle slaughter has not
    changed appreciably in nearly 30 years. According to the Agricultural
    Marketing Service's (AMS) Packers and Stockyards Division (P&S
    Division), the four firm concentration ratio was 82 percent in 1994;
    today it is 85 percent.
        The meat packing industry has been, and continues to be, one of the
    most highly scrutinized industries when it comes to antitrust review.
    The P&S Division is uniquely charged, by statute, to provide on-going
    oversight for fair business practices and to ensure competitive markets
    in the livestock, meat, and poultry industries. Any potential merger or
    acquisition regulators believe threatens ``too much market power'' is
    subject to review by the Justice Department or the Federal Trade
    Commission. The last proposed merger of two of the ``big four'' fed
    cattle slaughterers occurred in 2008--and it was blocked by the
    Department of Justice.
        Another clarification is needed. It is frequently claimed that the
    big four packers control 85 percent of beef production in the U.S.
    Again, that is not the case and a misleading exaggeration. Fed cattle
    make up 79 percent of the total cattle slaughter. Cows and other non-
    fed cattle, make up the balance, primarily slaughtered to be made into
    hamburger. The lean meat from these animals is a necessary ingredient
    to be made into America's supply of hamburger produced in combination
    with the less demanded muscle cuts from the fed cattle. This
    distinction is important because up to 50 percent of all beef in the
    U.S. is consumed as hamburger. Even factoring in the non-fed cattle
    slaughter plants they own; the four largest beef packers represent
    about 70 percent of total U.S. beef production.
        Critics of the industry frequently mistake individual packing plant
    size with overall industry concentration. The size and location of
    plants, however, reflect basic economic factors like the cattle supply
    and the economics of plant operations. Indeed, the cattle supply itself
    is concentrated. The farms and ranches that produce about half of all
    beef cattle in the U.S. are in just seven states. Further, more than 70
    percent of all fed cattle are in just five states. Economies of scale
    drive the capacity and production of a packing plant. That is
    especially true in areas with large numbers of fed cattle. Likewise,
    cow slaughter plants rely on a supply of cull cows from pasture-based
    cow-calf farms or dairy farms and are structured based on those
    factors.
        Each packing plant has its own cost structure. Packers bid on
    cattle based on the supply and demand factors in their own region.
    Owning a plant in Texas does not change the bottom-line to a company's
    operation in Iowa or Colorado.
        Finally, given that the structure of the beef packing industry is
    driven by supply and demand factors, the false premise regarding
    concentration providing undue market power for beef packers must be
    corrected. The bottom-line is the current level of four-firm
    concentration has existed for nearly 30 years and it has not ensured
    packer profitability at the expense of producers.
        No sector--cow-calf, feedlot, nor packer--has realized positive
    margins every year. For example, the four-firm ratio in 2014, when cow-
    calf and feedlot margins were at record highs, was the same as in 2017
    when all three sectors showed positive margins. However, over this more
    than 25 year timeline, the cow-calf sector suffered negative margins
    the fewest number of years of the three as the chart below shows.
    Historical Margins Per Head by Sector versus Packer Four Firm
            Concentration Ratio
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Packers and Stockyards Division (concentration);
            Sterling Marketing (margin).
    Beef Pricing and Inflation
        Despite claims by the Biden Administration, meat industry
    concentration is not the cause of inflation. As Larry Summers,
    Secretary of the Treasury for President Clinton, the Director of the
    National Economic Council for President Obama, and Charles W. Eliot
    Professor and President Emeritus at Harvard University tweeted:
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Again, the four firm concentration ratio in beef packing hasn't
    changed appreciably in nearly 3 decades, yet meat price inflation has
    varied from year to year.
    Four Firm Concentration versus Beef Price CPI and All Items CPI
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Packers and Stockyards Division (concentration);
            BLS (% change in CPI).

        Further, packers do not set retail prices: packers receive
    wholesale prices. Retailers, and the prices for which they sell beef to
    consumers, are affected by all the supply chain issues and input costs
    facing the broader economy, from trucking availability and diesel
    prices, to warehousing, labor, and product demand, which all affect
    their segment of the value chain.
    Wholesale vs. Retail Beef Prices
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Meat Price Spreads.

        Last year, wholesale beef prices peaked as would be expected during
    the heavy demand period for beef from Memorial Day to Labor Day. Those
    higher prices resulted from still limited supply in the face of strong
    demand. The slower pace of slaughter--for the reasons discussed above--
    constrained the beef supply even as retailers demanded more beef to
    meet consumers' demand. With limited production and supply relative to
    demand, wholesale prices rose during the seasonal high demand period.
    Monthly Cattle Slaughter vs. Monthly Average Wholesale Beef Price
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Economic Research Service.

        Per capita beef consumption during 2021 was above 2020 consumption
    by \1/2\ pound, and more than \3/4\ pound above per capita consumption
    during 2019.
        Consumer demand for beef was high based largely on increased
    consumer income. According to the Bureau of Economic Analysis (BEA),
    personal expenditures increased in June, July, August, and September
    2021, as personal income (from all sources, not just wages and
    salaries, but including government social benefits including pandemic-
    related payments) grew--even compared to 2020.
        In March 2021, Congress enacted additional COVID relief that
    included child tax credits, direct payments of $1,400, an increase in
    nutrition assistance (which supports retail purchases), and extended
    unemployment benefits. This added $4.232 trillion in government relief
    payments in addition to that which was paid in 2020. Coupled with
    economic and job recovery, this added an additional $21 trillion in
    personal income in 2021, compared to 2020.
        Much of the additional personal income was spent on food, and of
    that, spending focused on beef. Beef is the protein that is most
    sensitive to economic changes--consumption increases with higher income
    and decreases with lower income relative to other proteins. Also,
    during that time restaurants continued to re-open--increasing demand
    for wholesale beef. According to BEA spending on food service
    (restaurant demand) increased through 2021.
        The bottom line is neither beef nor industry concentration has
    driven the record inflation we've experienced. In the calculation of
    the Consumer Price Index, beef accounts for 0.546%, so even at a 12
    month increase of beef prices from January 2021 to January 2022 of 16%,
    beef added 0.08% inflation to the economy.
        Finally, in the 627 months beginning January 1970 through March
    2022, packers have received the smallest share of the consumer beef
    dollar in all months but May 2020, at the peak of the COVID related
    shutdowns on slaughter which reduced beef supplies.
    Share of Consumer Beef Dollar
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Source: USDA Meat Price Spreads Report.

        As of last month, the USDA reported the retail value of Choice beef
    at $7.685 per pound. The packer share of the retail beef dollar in
    March was 12 percent.
    March 2022: Share of Consumer Beef Dollar
    (USDA Meat Price Spreads data released 12 April)
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        On January 10, the Washington Post's editorial board [2]
    rightly called out the Administration's attempts to blame inflation on
    businesses:
    ---------------------------------------------------------------------------
        \[2]\ https://www.washingtonpost.com/opinions/2022/01/10/white-
    house-again-offers-bizarre-message-inflation/.

              President Biden is facing mounting criticism for inflation's
            rise to its highest level since 1982. Unfortunately, the White
            House's latest response is to blame greedy
            businesses.[3]
    ---------------------------------------------------------------------------
        \[3]\ https://www.washingtonpost.com/us-policy/2022/01/10/white-
    house-inflation-strategy/?itid=lk_inline_manual_2.
    ---------------------------------------------------------------------------
              Economists across the political spectrum are rightly calling
            out the White House [4] for this foolishness. Even
            some within the White House are questioning this approach, The
            Post reports.[5]
    ---------------------------------------------------------------------------
        \[4]\ https://twitter.com/LHSummers/status/
    1475230223985786889?s=20.
        \[5]\ https://www.washingtonpost.com/us-policy/2022/01/10/white-
    house-inflation-strategy/?itid=lk_inline_manual_3.
    ---------------------------------------------------------------------------
              Inflation, which was relatively low for years, did not
            suddenly rise in recent months because businesses decided now
            was the ideal time to squeeze their customers. What actually
            happened is that demand soared for many products as the economy
            recovered. Often, there were not enough products to meet it,
            thanks to supply chain hiccups and labor shortages, so prices
            went up. In a surprise to many, consumers kept buying goods
            such as cars and washing machines even at higher prices.

        As explained above, we could add beef to the list of highly
    demanded products that consumers kept buying at higher prices.
    Legislating and Regulating to ``Fix the Problem.''
        There have been several proposals to restructure and regulate the
    cattle market through significant government intervention. Prominent
    among the proposals is to require cattle feeders to sell cattle to
    packers, and packers to buy from feeders, a mandatory minimum volume of
    fed cattle on a cash, spot market, or ``negotiated'' basis. These
    proposals, however, threaten the industry with numerous adverse and
    unintended consequences.
        Innovation via formula and contract sales--collectively known as
    alternative marketing arrangements (AMAs)--originated with cattle
    feeders attempting to capture value associated with improved quality
    cattle.
        Turning back to Dr. Peel, he describes the advent of AMAs and
    value-based marketing that shifted packers away from buying cattle on
    the average:

              Until the 1990s most fed cattle were priced on averages, at
            the pen level and even entire showlists. Very little quality
            differentiation meant that high quality cattle were
            undervalued, and low-quality cattle usually received the
            average price. Packers had little incentive to differentiate
            cattle quality since they had to process all the cattle anyway.
            All that was important to packers was to get the average
            correct. The lack of quality signals meant that producers had
            little incentive to improve cattle. The problem was apparent;
            quality grading was low and beef demand was declining. This led
            to a major push in the industry for ``value-based marketing,''
            which aimed to differentiate and value cattle according to
            quality differences. (p. 32)

        The resulting shift towards AMAs and value-based marketing
    corresponded to an improvement in beef grade quality and has helped
    drive increased consumer demand.
    U.S. Beef Quality Grade vs. Type of Cattle Sale
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The success behind value-based marketing and AMAs is based on
    transmitting market signals about consumers' preferences to producers.
    The results include increased choices for consumers and premiums and
    certainty for producers. Yet the black swan events of the past 3 years
    have brought calls for change from some producers--even though
    regulating the terms of fed cattle sales would not have resulted in a
    fundamental change in the cattle market over that period. The volume of
    cash market sales is roughly the same today as it was during the record
    cattle price years of 2014 and 2015.
        Again, Dr. Peel:

              Indeed, the emotions, anger and frustration accompanying
            recent events such as the Holcomb packing plant fire in 2019,
            the ongoing COVID-19 pandemic beginning in 2020, and the winter
            storm of February 2021 have fueled demands for an array of
            potential legislative actions that attempt to jump to a
            solution without addressing the complex structural and
            behavioral issues that brought the industry to the current
            situation. The risk is that these overly simplistic solutions
            will have long term detrimental impacts on cattle producers,
            the industry, and consumers, and jeopardize the ability of the
            industry to compete in dynamic global protein markets for a
            successful future. (p. 2) (emphasis added)
    Cattle Price Discovery and Transparency Act
        Senators Chuck Grassley and Deb Fischer have introduced the Cattle
    Price Discovery and Transparency Act. The Grassley-Fischer bill
    mandates cattle feeders sell and packers buy a certain percentage of
    cattle on the negotiated, spot market, restricting the use of AMAs. In
    other words, some cattle producers who want to market their cattle
    through AMAs would be prohibited from doing so, by government fiat.
        The Grassley-Fischer bill requires the Secretary of Agriculture to
    establish minimum thresholds below which negotiated trade volumes
    cannot fall. Those minimums would vary by region, cannot be less than
    the average percent of negotiated sales and negotiated grid sales in
    each region made during the 2 year period between January 1, 2020, and
    January 1, 2022--a period when cattle markets were most disrupted by
    COVID, labor shortages, and supply chain issues.
        As expert witnesses have testified, even if 100 percent of fed
    cattle were sold on the cash market, prices for cattle producers would
    not have been any higher than what the market allowed in 2020 and the
    first half of 2021.
        Interestingly, under this plan, no region may have a mandatory
    minimum of negotiated sales that exceeds 50 percent. According to an
    analysis of the legislation released last week by Texas A&M
    University's Agriculture and Food Policy Center (AFPC),\5\ the upper
    limit for the mandate in the legislation--50 percent cash sales--would
    only affect the Iowa-Minnesota region. Iowa-Minnesota is the only
    region in which the mandatory minimum would be set below the actual
    market. The 24 month average of negotiated sales in that region during
    the 2020-2022 baseline period established in the legislation was 51.3
    percent. In short, this bill could reduce--albeit marginally--the
    percent of cash negotiated sales in Iowa and Minnesota, while forcing
    dramatic increases elsewhere.
    ---------------------------------------------------------------------------
        \5\ Benavidez, J., Anderson, D., Fischer, B., Outlaw, J., Analysis
    of S. 4030--Cattle Price Discovery and Transparency Act of 2022
    (https://www.afpc.tamu.edu/research/publications/files/715/BP-22-4-
    Cattle-Market-Transparency.pdf) Briefing Paper 22-04, Texas A&M AFPC,
    April 2022.
    ---------------------------------------------------------------------------
        Producers and feeders in Texas, Oklahoma, New Mexico and Kansas,
    have the most to lose. According to Texas A&M, based on the formula in
    the legislation, 53 percent of the weekly cattle marketings in 2020-
    2022 would not meet the mandatory minimum established. In the Texas,
    Oklahoma and New Mexico region, based on 2020-2022 actual cattle
    marketings, the proposed minimum would not be met 98 percent of the
    time. Moreover, the legislation gives the Secretary of Agriculture
    authority to set the mandatory minimum as high as 50 percent. In that
    scenario, the Texas A&M briefing paper projects the number of
    negotiated sales to ``explode, increasing from roughly 1.7 million head
    . . . to more than 12 million head from 2022 to 2026,'' which would
    make the cost estimates ``far greater than the estimates in this
    report.'' \6\
    ---------------------------------------------------------------------------
        \6\ Ibid. at p. 6.
    ---------------------------------------------------------------------------
        At the 2022 American Farm Bureau Federation Annual Convention in
    Atlanta, Dr. Stephen R. Koontz, professor in the Department of
    Agricultural and Resource Economics at Colorado State University said,
    ``Mandated cash trade is not going to get you better price discovery.
    It's going to put a $50 cost on calves impacted.''
        A January analysis \7\ by Texas A&M of an earlier version of the
    Grassley Fischer bill concludes:
    ---------------------------------------------------------------------------
        \7\ Benavidez, J., Anderson, D., Fischer, B., Outlaw, J., Analysis
    of S. 3229--Cattle Price Discovery and Transparency Act of 2022
    (https://www.afpc.tamu.edu/research/publications/files/712/BP-22-
    Cattle-Market-Transparency.pdf) Briefing Paper 22-02, Texas A&M AFPC,
    January 2022.

              Mandated levels of negotiated trade are expected to have
            negative effects on cattle and calf prices. That is to say that
            the mandate will result in lower short term fed cattle prices
            due to the increase in the costs of the feeder-packer cattle
            sale transaction. Research has shown there is a value to AMAs
            in the form of lower costs, improved logistics, and reduced
            risk. Mandating higher levels of negotiated trade will result
            in higher transaction costs. The higher transaction costs will
            result in lower cattle and calf prices and higher wholesale and
            retail beef prices. Lower prices will have the long-term effect
            of reducing cattle and beef production resulting in higher
            prices. We would suggest that fed cattle and feeder calf prices
            would increase back to their long-term expected levels, but not
            necessarily increase to higher levels. The long run price
            reversion back to earlier equilibrium levels is driven by the
            reduction in cattle and beef production. Based on this, one
    ---------------------------------------------------------------------------
            might argue that the industry will be smaller.

        That paper analyzed the cost of cash market mandates projected over
    the next 5 years at the $50 per head cost calculated by Dr. Koontz.
    While that specific proposal is no longer on the table, a look at the
    regional disruption and inequity is apt. The Texas-Oklahoma-New Mexico
    region, at $50 per head cost, stood to lose $123.9 million, followed by
    Kansas at $102.9 million. Nebraska would have fared better at ``only''
    $75.3 million in losses. As for Iowa, the aggregate 5 year cost was
    projected at a mere $52,520.
        Under the revised Grassley Fischer bill, Texas A&M estimates that
    in the Five Area region, the mandatory minimum if enacted now, would be
    expected to subject 2.252 million head of fed cattle to the $50 per
    head loss under the mandatory negotiated sales minimum. Again, the
    regional inequity is instructive, as shown in the chart below.
    2022-26 Aggregate Losses by Region under S. 4030
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

              Based on Texas A&M analysis and estimates.

        The legislation could have far wider adverse impacts that are yet
    unknown and currently impossible to analyze. The proposal directs the
    Secretary to establish five to seven contiguous regions that encompass
    the entire continental U.S.--from Maine to Arizona, Washington to
    Florida--that reflect ``similar fed cattle purchasing practices.'' A
    tall order. This effectively would cause regulatory gerrymandering for
    no other reason than to impose unnecessary and costly mandatory
    minimums for negotiated fed cattle sales.
        Now, as cattle markets return to balance, is not the time to
    disrupt the cattle market with a sweeping new government mandate. At
    the end of 2021, cattle prices were at a 5 year high. In the first
    quarter of 2022, cattle prices were at 7 year highs. And, as discussed
    below, USDA is drafting proposed regulatory changes under the Packers
    and Stockyards Act.
        Proposals to implement a mandatory minimum volume of negotiated
    cash sales go far beyond the purported objective of market transparency
    and price discovery and instead would directly regulate the terms of
    sale in a private transaction between two businesses, the producers and
    packers. A cash market mandate would represent the beginning of the
    Federal Government regulating more--or all--terms of sale in the cattle
    market. Such behavior should be concerning to producers given the
    number of transactions among the segments of the cattle production
    supply chain described earlier.
        Further, there have been suggestions Congress should amend the
    confidentiality provisions in the Agricultural Marketing Act applicable
    to Livestock Mandatory Reporting (LMR). One bill has been introduced
    that would prohibit USDA from withholding any ``information,
    statistics, and documents.'' This concept has data privacy and
    antitrust implications for both packers and feeders. USDA has examined
    the LMR confidentiality requirements and determined relaxing the
    requirements would not ensure anonymity among the market participants.
    Producers are not the only market participants using the published LMR
    data: packers and others constantly analyze the data, and any loosening
    of the confidentiality requirements could provide some market
    participants full view of their competitors' actions in the market.
        By design, a mandate for packers to meet a minimum volume of
    negotiated cash sales would limit a producer's ability to use other,
    preferred types of cattle procurement and marketing tools, including
    forward contracts and various formula-based purchases that comprise the
    majority of transactions for market-ready cattle. These pricing
    methods, combined and balanced with the negotiated cash market pricing,
    have served U.S. cattle producers, the beef industry, and consumers
    well over the past 2 decades by:

       Providing producers and cattle feeders with an effective
            risk management tool;

       Reducing marketing costs for cattle feeders and producers;

       Improving efficiency though the supply chain;

       Improving the quality of U.S. beef;

       Meeting U.S. consumer demand and building trust by
            incentivizing not only quality, but the safety, sustainability,
            and consistency of U.S. beef; and

       Enhancing the competitiveness of U.S. beef in global export
            markets.

        The Grassley-Fischer bill contains a Sense of the Senate that
    begins:

              Sense of the Senate.--It is the sense of the Senate that--

                      (1) all participants in the fed cattle market have a
                    responsibility to contribute to sufficient levels of
                    negotiated trade of fed cattle in all cattle feeding
                    regions in order to achieve competitive bidding and
                    maximum transparency in all relevant markets and robust
                    price discovery for the benefit of all market
                    participants . . . (emphasis added)

        Despite the rhetoric, the latest version of the Grassley-Fischer
    cash market mandate targets the mandate so it only applies to the
    largest beef packers. The reduction in the scope of the mandate is
    illuminating. On one hand, it confirms the benefits and importance of
    AMAs for producers, packers, and consumers: if the cash market provided
    the same benefits as AMAs, there would have been no need scale-back the
    mandate.
        But applying the cash market mandate to only the largest packers
    reveals the proposed mandate for what it is: a punitive tool. Under the
    latest version of the bill, if a beef packer gets too large, they will
    be forced to buy a certain percentage of cattle on the cash market. But
    per the analysis discussed above, it will be the producers supplying
    these packers who will pay much of the price. Gone is the illusion that
    the cash market is somehow more virtuous than other means of marketing
    cattle; gone is the argument that the cash market is necessary for
    transparency and price discovery. Instead, the cash market mandate is
    just that: a government mandate designed to punish the largest
    companies and their suppliers. In this sense, the mandate is an
    antitrust tool that could be used in any industry. If a company gets
    too large, it will be punished with a government mandate directing how
    the company can purchase inputs. Such a government mandate should
    elicit opposition from anyone interested in protecting the free market.
        The Grassley-Fischer cash mandate is rooted in the belief that a
    government-managed market is preferable to the free market; in the
    belief that legislators know the best way for cattle producers to
    market cattle; in the belief that when black swan events occur, the
    government, with an inflexible, prescriptive mandate, will be better
    situated to respond than the resilient free market.
        Ultimately, all cattle are purchased by a packer. The packer will
    buy cattle by whichever method producers want to market them. If cattle
    marketing become less efficient and transaction costs go up, the packer
    will spread those costs elsewhere. As Dr. Peel noted, when cattle were
    purchased on the average, high quality cattle were undervalued, and
    low-quality cattle were overvalued, receiving the average price.
    Packers have little incentive to differentiate cattle quality since
    they have to process all the cattle anyway. All that will be important
    to packers is to get the average right to generate a margin.
    Market Transparency
        Despite claims to the contrary, there is robust price discovery in
    the cattle and beef markets.
        Congress established and USDA administers the Livestock Mandatory
    Reporting Act (LMR) program to facilitate open, transparent price
    discovery and provide all market participants, both large and small,
    with comparable levels of market information for slaughter cattle and
    beef, and other species. Under LMR, packers must report to AMS daily
    the prices they pay to procure cattle, and other information, including
    slaughter data for cattle harvested during a specified time period and
    with net prices, actual weights, dressing percentages, percent of beef
    grading Choice, and price ranges, and then AMS publishes the anonymized
    data.
        AMS publishes 24 daily and 20 weekly cattle reports each week.
    Weekly reports start Monday afternoon and end the next Monday morning.
    These reports cover time periods, regions, and activities and the data
    include actual cattle prices.
        Further, packers report all original sale beef transactions in both
    volume and price through the Daily Boxed Beef Report. This data is
    reported twice daily, at 11:00 a.m. and at 3:00 p.m. Central Time. The
    morning report covers market activity since 1:30 p.m. of the prior
    business day until 9:30 a.m. of the current business day. The afternoon
    report is cumulative, including all market activity in the morning plus
    all additional transactions between 9:30 a.m. and 1:30 p.m., and is on
    the USDA DataMart website. The boxed beef report covers both individual
    beef item sales and beef cutout values and current volumes, both of
    which are derived from the individual beef item sales data.
        Few if any other industries have this magnitude of transparency via
    mandatory reporting of detailed price and product data on an on-going,
    daily basis, published for all other market participants--including up-
    stream sellers, downstream buyers, and direct competitors--to view,
    analyze, and use strategically.
    Meat and Poultry Special Investigator Act
        The Meat and Poultry Special Investigator Act duplicates existing
    regulatory enforcement authority and is unnecessary.
        The Agricultural Marketing Service's P&S Division currently
    investigates [6] allegations of impropriety and brings
    administrative cases and levies fines when warranted. Under certain
    circumstances, the P&S Division takes civil action working through the
    Department of Justice (DOJ). Penalties for violations of the Packers
    and Stockyards Act (P&S Act) can include civil penalties, permanent
    injunctions, fines, and even jail sentences.
    ---------------------------------------------------------------------------
        \[6]\ https://www.ams.usda.gov/services/enforcement/psd.
    ---------------------------------------------------------------------------
        The bill, however, would create a new office led by a political
    appointee with the same responsibilities for enforcing the same
    authority, the P&S Act, as the current P&S Division has. A duplicative
    regulatory office is wasteful and unnecessary, and a political
    appointee leading a regulatory enforcement office such as this would
    have to respond to the political whims of the Administration.
        Just this year, USDA established a complaint portal [7]
    for producers to use to submit allegations of P&S Act violations to
    USDA and DOJ. The new tool provides producers and the P&S Division
    another resource for submitting, evaluating, and, if necessary,
    prosecuting violations. If the P&S Division staff are not doing their
    jobs, there are other ways to address it than by adding a political
    appointee into the regulatory and enforcement mix.
    ---------------------------------------------------------------------------
        \[7]\ https://www.usda.gov/farmerfairness.
    ---------------------------------------------------------------------------
        USDA is promulgating new proposed rules under the P&S Act,
    discussed further below, which are likely to have far reaching,
    unintended consequences. Establishing a politically appointed Special
    Investigator at the same time is a regulatory time-bomb. The Special
    Investigator (and staff) would feel emboldened and obligated to bring
    as many cases as possible, whether warranted or not, to test the legal
    limits of the new rules. The resulting legal uncertainty and chaos will
    accelerate changes in livestock and poultry marketing that will likely
    add cost to producers and packers and up-end the supply chain.
        The Special Investigator Act is a solution in search of a problem,
    and would result in a politically-driven, substantial expansion of
    USDA's regulatory regime.
    Proposed Regulatory Actions by USDA Under the Packers and Stockyards
            Act will Adversely Affect Producers and Packers.
        In June 2021, USDA announced plans to propose rules to ``strengthen
    enforcement'' of the Packers and Stockyards Act (PSA).\8\ The expected
    proposed regulations would be problematic for several reasons,
    including their impact on livestock producers' options to market their
    cattle, as described.
    ---------------------------------------------------------------------------
        \8\ https://www.usda.gov/media/press-releases/2021/06/11/usda-
    begin-work-strengthen-enforcement-packers-and-stockyards-act.
    ---------------------------------------------------------------------------
        The concepts expressed in USDA's announcement are not new and were
    considered, and rejected, in the past. When proposed, they will
    conflict with legal precedent in no less than eight Federal appellate
    circuits, and will hurt livestock producers, packers, and consumers.
        For example, USDA plans on re-proposing a rule to clarify that a
    plaintiff need not demonstrate harm to competition to bring and prevail
    in Packers and Stockyards Act litigation. Additionally, USDA indicates
    that it intends to ``propose a new rule that will provide greater
    clarity to strengthen enforcement of unfair and deceptive practices,
    undue preferences, and unjust prejudices.'' \9\ It is beyond dispute
    that eliminating the need for a plaintiff to show harm to competition,
    or likely harm to competition, will encourage litigation, most of it
    likely specious litigation. That threat will severely limit or
    terminate AMAs with all the adverse unintended consequences discussed.
    ---------------------------------------------------------------------------
        \9\ Ibid.
    ---------------------------------------------------------------------------
        One unintended consequence so far overlooked could come in the form
    of compromising the livestock and meat industry's significant gains and
    ambitious goals for improving sustainability.
        Today, the industry produces more than twice as much beef with
    roughly the same number of cattle as in 1959, and 18 percent more beef
    than when the U.S. cattle herd hit its largest size in 1975. Farmers
    and ranchers produce beef using 33% less land, 12% less water, and with
    a 16% smaller carbon footprint in 2007 compared to 1977.\10\ That is an
    astounding sustainability success story.
    ---------------------------------------------------------------------------
        \10\ Neumeier and Mitloehner doi:10.2527/af.2013-0022.
    ---------------------------------------------------------------------------
    Productivity in Sustainable Beef Production
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The U.S. meat industry cannot continue to build on this remarkable
    sustainable productivity growth and meet consumer expectations if the
    government restricts interactions between packers and producers. By
    design, USDA's proposed rules will discourage the use of AMAs--the very
    tools that have improved efficiency, productivity, and risk management
    over the past 2 decades and allowed the sector to meet consumer
    expectations for increased beef quality and sustainably produced cattle
    and beef.
        As multiple agricultural economists \11\ and cattle producers \12\
    have explained, AMAs increase market efficiency by transmitting market
    signals about consumers' preferences to producers. Restaurants,
    retailers, food service customers, and investors are moving rapidly to
    align their product and financial portfolios with environmental, social
    and corporate governance goals. This realignment--driven by consumers--
    will not be achieved by eliminating value-based marketing and turning
    back the clock to the days of commodity cattle purchased on the
    average.
    ---------------------------------------------------------------------------
        \11\ See the following: The U.S. Beef Supply Chain: Issues and
    Challenges, Proceedings of a Workshop on Cattle Markets, Agriculture
    and Food Policy Center, Texas A&M University, 2021, cattle.pdf
    (tamu.edu) (https://www.afpc.tamu.edu/research/publications/710/
    cattle.pdf); Anderson, et al., Univ. of Arkansas, 2022, https://cpb-us-
    e1.wpmucdn.com/wordpressua.uark.edu/dist/6/907/files/2022/01/CPDTA-
    analysis-01.18.22.pdf;  Koontz, S., Costs and Benefits of Mandatory
    Negotiated Cash Participation in Fed Cattle Markets, 2022; Glynn
    Tonsor, Ph.D., Professor, Department of Agricultural Economics, Kansas
    State University, testimony before the Senate Agriculture Committee,
    June 23, 2021, https://www.agriculture.senate.gov/imo/media/doc/
    Testimony_Tonsor%2006.23.211.pdf.
        \12\ See Gardiner, Testimony  (https://www.agriculture.senate.gov/
    hearings/examining-markets-transparency-and-prices-from-cattle-
    producer-to-consumer) before the Senate Committee on Agriculture,
    Nutrition, and Forestry, June 23, 2021.
    ---------------------------------------------------------------------------
        In his testimony before the House Agriculture Committee's Livestock
    and Foreign Agriculture Subcommittee, Dr. Jayson Lusk stated:

              [S]trengthening of consumer demand for beef over the past
            several decades has occurred over a period in which there was
            increased use of formula pricing that rewarded quality
            improvements. Eroding the ability of consumers, retailers, and
            packers to incentivize quality through formulas and vertical
            coordination may have detrimental impacts on demand.\13\
    ---------------------------------------------------------------------------
        \13\ Jayson Lusk, Ph.D., Distinguished Professor and Head,
    Department of Economics, Perdue University, testimony before the House
    Agriculture Subcommittee on Livestock and Foreign Agriculture, July 28,
    2021, https://docs.house.gov/meetings/AG/AG29/20210728/113973/HHRG-117-
    AG29-Wstate-LuskJ-20210728.pdf.
    ---------------------------------------------------------------------------
    Conclusion
        The discussion above demonstrates the complexity of the cattle and
    beef markets that defy overly simplistic policy prescriptions. Market
    fundamentals drive the cattle and beef markets, and what we saw before
    and during the course of the pandemic was to be expected. Indeed,
    cattle and beef markets were not the only sectors of the economy
    adversely impacted in the past 2 years. Congress and USDA should not
    make radical changes to the cattle and beef markets: such changes will
    up-end the markets, increase costs for the entire supply chain,
    including for consumers during this time of record inflation, and bring
    unintended consequences.
        The North American Meat Institute is prepared to discuss these
    issues and work with the Committee on the issues facing the industry.
    Thank you for the opportunity to provide this testimony.
                                     ______

                              Submitted Questions
    Response from David W. MacLennan, Board Chair, President, and Chief
            Executive Officer, Cargill, Inc.
    Questions Submitted by Hon. Alma S. Adams, a Representative in Congress
            from North Carolina
        Question 1. My question, Mr. Chairman, has to do with our HBCUs and
    specifically our 1890 Land-Grant Universities who specialize in
    agriculture and farming. As you know, in no small part, these
    institutions and our Black farmers, have helped feed their communities
    for decades. But these farmers also have lost their farms due to
    decades of discrimination by banks and actions by our very own USDA. I
    know that Cargill has taken a first step by investing $1 million over 3
    years in scholarships and fellowships at Tuskegee University and Alcorn
    University, each.
        However, if Cargill were a publicly traded company, it would rank
    at near the top of Fortune 500 corporations. So, what else can you be
    doing, and I'd like to also hear from Tyson, JBS and National Beef what
    each of you are doing with HBCUs?
        And I'd like each of you to follow up in writing specifically what
    collaboration you have with non-HBCU Universities so we can see what is
    also possible?
        Answer. Thank you for mentioning the Cargill University THRIVE
    Program. Many college students face barriers to success, from affording
    tuition to accessing promising career paths when stepping into the job
    market. The program was created to address this challenge, working with
    university partners to ensure more equitable access for women and
    minority students in Science, Technology, Engineering and Mathematics
    (STEM), as well as agriculture and business. Focused on universities
    serving minority students, the THRIVE program provides financial
    support through scholarships and expands further to encourage long-term
    academic success through mentoring, development programming and career
    coaching. The goal is to help participating students convert their
    education into meaningful careers.
        The THRIVE program was initially offered at Alcorn State University
    and Tuskegee University (both Historically Black College &
    Universities), Texas A&M University (a Hispanic-Serving Institution)
    and long-standing Cargill partner institutions including Iowa State
    University; Kansas State University; University of Minnesota;
    Minorities in Agriculture, Natural Resources and Related Sciences
    (MANRRS); and the Association of Latino Professionals for America
    (ALPFA).
        Cargill is also the first company to sponsor an 1890 Universities
    Foundation Congressional Fellow, who is currently in his first year
    with the House Committee on Agriculture.
        Attracting and retaining great talent is extremely important to
    Cargill. We realize that those who choose to work for us have options.
    We have increased pay and benefits to better compete in today's
    employment environment. Because we employ people from 160 different
    countries, speaking 50+ languages, we recently announced investments in
    education, from ESL courses to basic life skills all the way to tuition
    reimbursement for college degrees.
        In addition to the THRIVE program, we provide students and recent
    graduates from many diverse education institutions many amazing
    opportunities to learn from the best our industry has to offer. Through
    our internship program, we engage students in 12 week hands on learning
    programs. Cargill Internships are typically paid, and in some
    countries, we offer relocation reimbursement and housing assistance for
    those who qualify.
        Our U.S. co-op programs are 8 month, paid terms running from
    January to August or May to December. Available roles are based on
    current and future business needs at Cargill and pull from universities
    and colleges across the U.S. Our co-ops may require relocation; we
    provide housing assistance and relocation reimbursement for those who
    qualify.
        The Cargill Global Scholars Program (CGSP) is a distinctive, 2 year
    scholarship program that provides financial support to undergraduate
    students in Brazil, China, India, Indonesia, and the United States. The
    CGSP offers leadership development opportunities through seminars,
    networking events and a one-on-one mentoring program facilitated by
    Cargill volunteers globally, and an alumni network that will help them
    keep connected with past, current, and future scholars.
        The students selected are those who demonstrate exemplary academic
    achievement and leadership potential and study in a field relevant to
    Cargill's world of food, agriculture and risk management. We believe
    these students will become leaders in industries and fields that will
    have an impact on Cargill's businesses in the future.

        Question 2. I know some folks enjoy a good hamburger or a good cut
    of steak. However, we cannot ignore the truth that the agriculture
    industry is a major polluter with annual emissions equivalent to 143
    million cars. The emissions produced by the livestock industry alone
    are larger than Exxon Mobil, Shell, and BP.
        The stakes for future generations could not be higher. And so, I
    pose this question to all of you. What will the industry do to foster a
    better working relationship to produce a cleaner environment that our
    country and world desperately needs?
        Answer. Thanks to the hard work of ranchers, the North American
    beef supply chain is already the most sustainable in the world. But we
    will never rest with the status quo. In our beef business, we are
    working with partners and directly with producers to continue to reduce
    the climate impact of America's beef production.
        For decades, Cargill has been working with thousands of family
    farmers, ranchers and producers to increase the efficiency of beef
    production. We are a founding member of the Global Roundtable for
    Sustainable Beef and are helping lead efforts with the Canadian
    Roundtable for Sustainable Beef and U.S. Roundtable for Sustainable
    beef. We collaborate with industry partners and customers to improve
    the sustainability and transparency of the beef supply chain.
        We also continue to improve livestock feed efficiency. Over the
    last 15 years we have seen an overall trend in reducing the volume of
    feed for each pound of beef produced. We focus on developing more
    sustainable ways to manufacture feed and improve the nutritional and
    feed conversion value of feed. We participate in the Canadian
    Roundtable for Sustainable Crops, whose work also includes a focus on
    sustainable feed.
        We are partnering with U.S. cattle ranchers, NGOs such as the
    National Fish and Wildlife Foundation; the World Wildlife Fund; The
    Nature Conservancy, and with some of the largest consumer food brands
    in the U.S. including McDonald's and Burger King to continue advancing
    the sustainability of beef production.
        Together we will achieve a 30% greenhouse gas (GHG) reduction
    across the North American beef supply chain by 2030. This equates to
    removing two million cars from U.S. highways for a year.
    Question Submitted by Hon. J. Luis Correa, a Representative in Congress
            from California
        Question. Mr. MacLennan, your company is active in agriculture
    around the world, and Cargill recently testified before the
    subcommittee I chair on the Homeland Security Committee, where we
    discussed ways your company is working to address the root causes of
    migration and create jobs and economic opportunity in Central America.
    I want to commend you for your company's investment in the region and
    thank you for your continued work in this area.
        We've heard today how labor shortages have impacted the meat and
    cattle markets; can you help us understand who immigration reform would
    help to address some of the issues we're discussing today?
        Answer. Cargill is proud to be a U.S.-based company with 40,000
    U.S. employees and we continue to invest in the United States. Like
    many American businesses, we are trying our best to contend with a
    nearly unprecedented labor shortage. Cargill is averaging approximately
    10% fewer workers in our beef plants--that's nearly 220 employees short
    in every plant, due to labor constraints.
        The recent increase in illegal migration and domestic labor
    shortages has prompted a renewed focus on the need for an enhanced U.S.
    immigration policy--an immigration policy that works. Cargill supports
    comprehensive immigration policy that addresses more than just
    enforcement. Specifically, we need clearer, faster access to year-round
    work visas, especially for industries like food manufacturing that are
    facing these extreme labor shortages.
        And at the same time, it is critical that we bring economic
    opportunities to vulnerable populations in the communities in which we
    operate, which is why we are also investing in the Partnership for
    Central America. By investing in our communities through our business
    and our partnerships, we can help them to become thriving and
    prosperous.
        Cargill's businesses in Central America have benefited American
    farmers and workers by creating new export markets and increasing the
    purchasing power of those in the region. Our investments provide jobs,
    grow local businesses, and raise living standards. This has enabled
    more people in the region to purchase more American products--directly
    supporting American farmers and workers.
    Response from Timothy O. Schellpeper, Chief Executive Officer, JBS USA
            Food Company
    Questions Submitted by Hon. Alma S. Adams, a Representative in Congress
            from North Carolina
        Question 1. My question, Mr. Chairman, has to do with our HBCUs and
    specifically our 1890 Land-Grant Universities who specialize in
    agriculture and farming. As you know, in no small part, these
    institutions and our Black farmers, have helped feed their communities
    for decades. But these farmers also have lost their farms due to
    decades of discrimination by banks and actions by our very own USDA. I
    know that Cargill has taken a first step by investing $1 million over 3
    years in scholarships and fellowships at Tuskegee University and Alcorn
    University, each.
        However, if Cargill were a publicly traded company, it would rank
    at near the top of Fortune 500 corporations. So, what else can you be
    doing, and I'd like to also hear from Tyson, JBS and National Beef what
    each of you are doing with HBCUs?
        And I'd like each of you to follow up in writing specifically what
    collaboration you have with non-HBCU Universities so we can see what is
    also possible?
        Answer. Congresswoman Adams,

        Thank you for your question regarding our collaboration and
    interaction with HBCUs. At JBS USA, we have several partnerships with
    HBCUs and non-HBCUs to promote agriculture as a viable career option
    for the next generation of future leaders.
        JBS USA and Pilgrim's has engaged with Historically Black Colleges
    and Universities as a part of the company's broader recruiting strategy
    for many years, with the most robust strategy being between 2015 and
    2022. Universities that we have regularly engaged with during this
    timeframe are Tuskegee University, North Carolina A&T, Florida A&M,
    Alabama A&M, and more recently, Prairie View A&M.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Although in-person engagement is preferred, the COVID-19 pandemic
    significantly changed the landscape of recruiting, driving the company
    to use virtual platforms--specifically, Handshake--to reach and recruit
    students. Fortunately, this shift also dramatically increased the
    number of schools and students we were able to engage with.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Today, we post positions at 35 HBCU Schools on Handshake--of those,
    19 have prominent agriculture programs that we regularly engage with
    via campaigns and virtual career fairs. Every year, Handshake provides
    the company with a summary of our efforts and in the 2021-2022
    recruiting season, we have shown at 16.2 percent year over year
    improvement in our engagement with black students. This year, JBS and
    Pilgrim's ranked number 15 of 23,000 food companies on the platform in
    our ability to attract students from underrepresented groups.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        In comparison to our peers, which include Smithfield Foods, Conagra
    Brands, Tyson Foods, Nestle, and Cargill, we are tied for our ability
    to convert black applicants to apply to our postings (24 percent).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Looking forward into the 2022-2023 recruiting season, JBS and
    Pilgrim's will continue to engage with Black students attending HBCU
    schools and non-HBCU schools in order to increase applications from
    qualified and diverse individuals for our training programs. Regarding
    in-person engagement, the company will resume campus visits at five
    prominent HBCU schools with agriculture programs in states where we
    have operations.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        JBS and Pilgrim's will continue our work to increase our
    interactions with black students across the country by engaging with
    HBCU schools, which will help us to ensure that we maintain a diverse
    candidate pipeline as we attract, select, and retain talented
    individuals for our opportunities.

        Question 2. I know some folks enjoy a good hamburger or a good cut
    of steak. However, we cannot ignore the truth that the agriculture
    industry is a major polluter with annual emissions equivalent to 143
    million cars. The emissions produced by the livestock industry alone
    are larger than Exxon Mobil, Shell, and BP.
        The stakes for future generations could not be higher. And so, I
    pose this question to all of you. What will the industry do to foster a
    better working relationship to produce a cleaner environment that our
    country and world desperately needs?
        Answer. At JBS USA, we care about our role in the world and embrace
    our responsibility as a global food company. That's why we were the
    first global meat and poultry company to commit to achieve net-zero
    greenhouse gas emissions by 2040. We believe that agriculture can and
    must be a part of the global climate solution.
        JBS USA's net zero ambition reflects our goal to meet the health
    and nutritional needs of the growing global population in a sustainable
    manner that preserves the planet's resources for future generations. As
    part of its commitment, JBS USA has signed on to the United Nations
    Global Compact's Business Ambition for 1.5C initiative, which aligns
    with the most ambitious aim of the Paris Agreement to limit global
    warming.
        We are currently developing GHG emission reduction targets across
    our global operations and value chains in South America, North America,
    Europe, the UK, Australia and New Zealand. We will provide a time-bound
    roadmap that provides interim targets consistent with the criteria set
    forth by the Science Based Targets initiative for a 1.5C trajectory.
    JBS USA will also provide annual updates on progress to ensure
    transparency.
        To accomplish our net-zero goal, we have adopted several strategies
    to achieve reductions in emissions, including:

       Reducing direct emissions in our facilities: JBS will reduce
            our global scope 1 and 2 emission intensity by at least 30% by
            2030 against base year 2019.

       Investing in the future: JBS will invest more than $1
            billion in incremental capital expenditures over the next
            decade in emission reduction projects.

       Fostering innovation with farmers and ranchers: JBS is
            investing $100 million by 2030 in research and development
            projects to assist producer efforts to strengthen and scale
            regenerative farming practices, including carbon sequestration
            and on-farm emission mitigation technologies. This investment
            will contribute to reducing scope 3 emissions across the value
            chain, in our efforts toward net zero.

       Ensuring accountability: Across the company, performance
            against environmental goals, including GHG emission reduction
            targets, will be part of senior executive compensation
            considerations.
    Response from Tim Klein, President and Chief Executive Officer,
            National Beef Packing Company, LLC
    Questions Submitted by Hon. Alma S. Adams, a Representative in Congress
            from North Carolina
        Question 1. My question, Mr. Chairman, has to do with our HBCUs and
    specifically our 1890 Land-Grant Universities who specialize in
    agriculture and farming. As you know, in no small part, these
    institutions and our Black farmers, have helped feed their communities
    for decades. But these farmers also have lost their farms due to
    decades of discrimination by banks and actions by our very own USDA. I
    know that Cargill has taken a first step by investing $1 million over 3
    years in scholarships and fellowships at Tuskegee University and Alcorn
    University, each.
        However, if Cargill were a publicly traded company, it would rank
    at near the top of Fortune 500 corporations. So, what else can you be
    doing, and I'd like to also hear from Tyson, JBS and National Beef what
    each of you are doing with HBCUs?
        And I'd like each of you to follow up in writing specifically what
    collaboration you have with non-HBCU Universities so we can see what is
    also possible?
        Answer. July 6, 2022

      Hon. David Scott,
      Chairman,
      House Agriculture Committee,
      Washington, D.C.;

      Hon. Glenn Thompson,
      Ranking Minority Member,
      House Agriculture Committee,
      Washington, D.C.

      Re: Responses to Questions for the Record from House Committee on
                Agriculture Public Hearing Entitled ``An Examination of
                Price Discrepancies, Transparency, and Alleged Unfair
                Practices in Cattle Markets''

        Dear Chairman Scott and Ranking Member Thompson:

        On behalf of National Beef Packing Company, LLC, enclosed please
    find responses to Congresswoman Alma Adams' Questions for Record,
    following the House Committee on Agriculture's April 27, 2022, Public
    Hearing entitled, ``An Examination of Price Discrepancies,
    Transparency, and Alleged Unfair Practices in Cattle Markets.''
                Sincerely,
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Tim Klein,
    President and Chief Executive Officer.

        National Beef collaborates at times with land-grant colleges and
    universities on business-related topics such as food safety and
    sustainability. In addition, National Beef sponsors an annual award
    given to two food-science students attending a local land-grant
    university. Each year, National Beef hires as summer interns students
    who are pursuing agricultural-related degrees at various colleges and
    universities. These internship opportunities, as well as our open
    degree-required positions, are posted on our website and any qualified
    applicant may apply. We do not currently have any collaborative
    relationships with any HBCU.

        Question 2. I know some folks enjoy a good hamburger or a good cut
    of steak. However, we cannot ignore the truth that the agriculture
    industry is a major polluter with annual emissions equivalent to 143
    million cars. The emissions produced by the livestock industry alone
    are larger than Exxon Mobil, Shell, and BP.
        The stakes for future generations could not be higher. And so, I
    pose this question to all of you. What will the industry do to foster a
    better working relationship to produce a cleaner environment that our
    country and world desperately needs?
        Answer. National Beef is committed to producing safe, quality
    products that feed U.S. families in a manner that optimizes efficiency
    while minimizing waste. Accordingly, National Beef will always look for
    new ways in which science, technology, and innovation may help further
    reduce the environmental footprint of our world-class beef operations.
    Response from Donnie King, Chief Executive Officer, Tyson Foods
    Questions Submitted by Hon. Alma S. Adams, a Representative in Congress
            from North Carolina
        Question 1. My question, Mr. Chairman, has to do with our HBCUs and
    specifically our 1890 Land-Grant Universities who specialize in
    agriculture and farming. As you know, in no small part, these
    institutions and our Black farmers, have helped feed their communities
    for decades. But these farmers also have lost their farms due to
    decades of discrimination by banks and actions by our very own USDA. I
    know that Cargill has taken a first step by investing $1 million over 3
    years in scholarships and fellowships at Tuskegee University and Alcorn
    University, each.
        However, if Cargill were a publicly traded company, it would rank
    at near the top of Fortune 500 corporations. So, what else can you be
    doing, and I'd like to also hear from Tyson, JBS and National Beef what
    each of you are doing with HBCUs?
        And I'd like each of you to follow up in writing specifically what
    collaboration you have with non-HBCU Universities so we can see what is
    also possible?
        Answer. Rep. Adams, thank you for your question on Tyson's
    collaborations with Historically Black Colleges and Universities
    (HBCU's). Tyson's currently has several meaningful collaborations with
    HBCU's that we hope to build on in the coming years. As you may know,
    earlier this spring Tyson's signed on as the first ever, 3 year title
    sponsor of the Black College World Series, which features student-
    athletes from HBCU's in NCAA Division II and the NAIA. In addition, our
    African Ancestry Alliance Business Resource Group has initiated a
    speaker series at North Carolina A&T to engage with students in
    conversation related to their professional growth and development.
    Furthermore, we are finalizing strategic recruiting partnerships with
    eight HBCU's in addition to finalizing a partnership with a third-party
    organization that has recruiting relationships across diverse
    universities, including HBCU's, Hispanic Serving Institutions, and
    Asian American Pacific Islander Serving Institutions. Last, our newest
    Team Member education benefit--Upward Academy Online--is a partnership
    with Guild Education to provide access to over 175 flexible academic
    programs, including college degrees, to all Tyson Team Members. The
    cost of the education is 100% covered by Tyson and includes degrees and
    certificate programs at several HBCU's, including North Carolina A&T.
    We will look to build on and expand these partnerships in coming years.

        Question 2. I know some folks enjoy a good hamburger or a good cut
    of steak. However, we cannot ignore the truth that the agriculture
    industry is a major polluter with annual emissions equivalent to 143
    million cars. The emissions produced by the livestock industry alone
    are larger than Exxon Mobil, Shell, and BP.
        The stakes for future generations could not be higher. And so, I
    pose this question to all of you. What will the industry do to foster a
    better working relationship to produce a cleaner environment that our
    country and world desperately needs?
        Answer. By 2050, we anticipate the world will need to find a way to
    feed an additional two billion people. It's critical that we find
    solutions that support an equitable and resilient food system--one that
    supports all people and sustains our planet. Tyson has invested in
    research and new technologies to protect our planet and provide high
    quality, affordable food.
        We recently announced our ambition of achieving net-zero greenhouse
    gas emissions, including scope 1, 2, and 3 emissions, by 2050. To
    reduce greenhouse gas emissions, we have, for example, developed a
    beef-focused greenhouse gas emissions accounting framework to capture
    cradle-to-gate emissions and verify emission reductions from producers'
    use of more sustainable agricultural practices. We are also working
    alongside universities, conservation specialists, and technical
    experts, such as the Environmental Defense Fund and Farmers Business
    Network, to find innovative ways to increase food production while also
    maximizing positive environmental outcomes. To continually innovate in
    this area, Tyson Ventures has exceeded $100M in total investments to
    support startups and other companies focused on emerging proteins, new
    technologies for food and worker safety, and sustainable food
    production.
        We are also looking beyond emissions and towards good environmental
    stewardship. One way we are doing this is through a Zero Waste to
    Landfill initiative, which Tyson launched as pilot projects at three
    production facilities in 2020. In the first year, we diverted almost
    5.2 million pounds of waste from landfills, a 60% increase from the
    previous year. We've since achieved Zero Waste to Landfill gold-level
    validation at six U.S. plants where 95-99% of certain waste streams has
    been diverted from landfills. We are now applying learnings from these
    pilots and validation achievements to inform an enterprise waste and
    recycling strategy, as well as set future goals. We are also working to
    reduce packaging waste by piloting sustainable packaging solutions for
    several products and testing the validation of new recyclable, pulp
    fiber trays to replace traditional trays made of foam. Finally, Tyson
    is tackling water use reduction at our processing facilities, and we
    are proud to share that three of our U.S. plants have received Alliance
    for Water Stewardship verification.
        As the world grows and changes, we are committed to working with
    Congress, the Administration, researchers, startups, and nonprofit
    organizations to find innovative ways to feed people responsibly.
    Question Submitted by Hon. J. Luis Correa, a Representative in Congress
            from California
        Question. Mr. King, can you share Tyson's perspective on how
    immigration reform can address labor shortages?
        Answer. Rep. Correa thank you for your question on immigration
    reform. As you know, labor shortages have been one of the most
    significant challenges facing the industry over the last several years.
    Tyson Foods has been an advocate for comprehensive immigration reform
    for many years. A bipartisan solution that addresses border security,
    the undocumented individuals currently living in the U.S., an updated
    employer verification system, and a plan for future flow that takes
    business needs into consideration would have a direct positive impact
    on labor shortages. Additionally, providing a pathway for citizenship
    for individuals currently in the United States with Deferred Action
    Childhood Arrival (DACA) status, Temporary Protective Status (TPS) and
    Humanitarian Parolee status would provide stability to both the
    affected individuals and the business community.

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