[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
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    \1\ https://www.nytimes.com/by/peter-s-goodman.

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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.
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    \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.
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    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.
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          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:
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    \[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]
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    \[3]\ https://www.washingtonpost.com/us-policy/2022/01/10/white-
house-inflation-strategy/?itid=lk_inline_manual_2.
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          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]
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    \[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.
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          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 1.5C 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 1.5C 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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