[Senate Hearing 117-603]
[From the U.S. Government Publishing Office]
S. Hrg. 117-603
LEGISLATIVE HEARING TO REVIEW S. 4030,
THE CATTLE PRICE DISCOVERY AND
TRANSPARENCY ACT OF 2022, AND S. 3870,
THE MEAT AND POULTRY SPECIAL
INVESTIGATOR ACT OF 2022
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HEARING
[BEFORE THE]
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
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APRIL 26, 2022
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Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
50-071 PDF WASHINGTON : 2024
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
DEBBIE STABENOW, Michigan, Chairwoman
PATRICK J. LEAHY, Vermont JOHN BOOZMAN, Arkansas
SHERROD BROWN, Ohio MITCH McCONNELL, Kentucky
AMY KLOBUCHAR, Minnesota JOHN HOEVEN, North Dakota
MICHAEL F. BENNET, Colorado JONI ERNST, Iowa
KIRSTEN E. GILLIBRAND, New York CINDY HYDE-SMITH, Mississippi
TINA SMITH, Minnesota ROGER MARSHALL, Kansas
RICHARD J. DURBIN, Illinois TOMMY TUBERVILLE, Alabama
CORY BOOKER, New Jersey CHARLES GRASSLEY, Iowa
BEN RAY LUJAN, New Mexico JOHN THUNE, South Dakota
RAPHAEL WARNOCK, Georgia DEB FISCHER, Nebraska
MIKE BRAUN, Indiana
Joseph A. Shultz, Majority Staff Director
Jessica L. Williams, Chief Clerk
Fitzhugh Elder IV, Minority Staff Director
C O N T E N T S
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Tuesday, April 26, 2022
Page
Hearing:
Legislative Hearing To Review S. 4030, The Cattle Price Discovery
and Transparency Act of 2022, and S. 3870, The Meat and Poultry
Special Investigator Act of 2022............................... 1
----------
STATEMENTS PRESENTED BY SENATORS
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan... 1
Boozman, Hon. John, U.S. Senator from the State of Arkansas...... 2
Tester, Hon. Jon, U.S. Senator from the State of Montana......... 5
WITNESSES
Panel I
Green, Andy, Senior Advisor for Fair and Competitive Markets,
U.S. Department of Agriculture, Washington, DC................. 7
Summers, Bruce, Administrator, Agricultural Marketing Service,
U.S. Department of Agriculture, Washington, DC................. 7
Panel II
Ruffin, William R., Ruffin Farms, Bay Springs, MS................ 34
Tiffany, Shawn, President-Elect, Kansas Livestock Association and
Tiffany Cattle Company, Herington, KS.......................... 35
Ziesch, Shelly, Owner/Operator, Ziesch Ranch, Jamestown, ND...... 37
Koontz, Stephen R., Ph.D., Professor, Agricultural and Resource
Economics, Colorado State University, Fort Collins, CO......... 39
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APPENDIX
Prepared Statements:
Green, Andy.................................................. 54
Summers, Bruce............................................... 54
Ruffin, William R............................................ 60
Tiffany, Shawn............................................... 68
Ziesch, Shelly............................................... 72
Koontz, Stephen R., Ph.D..................................... 81
Document(s) Submitted for the Record:
Boozman, Hon. John:
Five Rivers Cattle Feeding, prepared statement for the Record 90
USDA, prepared statement for the Record...................... 94
Beef Northwest Feeders, prepared statement for the Record.... 95
Wilson Cattle Company, prepared statement for the Record..... 98
R-CALF USA, prepared statement for the Record................ 101
F Cross Cattle Company, prepared statement for the Record.... 105
Downey Ranch, Inc., prepared statement for the Record........ 107
Royalcrest LLC, prepared statement for the Record............ 108
Ashland Veterinary Center Inc., prepared statement for the
Record..................................................... 110
J.W. Freund Farms, Inc., prepared statement for the Record... 112
Irsik Farms, Inc., prepared statement for the Record......... 113
Blair Brothers Angus Ranch, prepared statement for the Record 114
Kelly Hoeme, prepared statement for the Record............... 116
Scott and Son Cattle Inc., prepared statement for the Record. 117
Means Ranch Company, LTD., prepared statement for the Record. 118
Dalebanks Angus, prepared statement for the Record........... 120
Mesquite Cattle Feeders Inc., prepared statement for the
Record..................................................... 122
Stedje Livestock, prepared statement for the Record.......... 123
Pratt Feeders, LLC, prepared statement for the Record........ 124
Wayne Peek, prepared statement for the Record................ 125
Performance Blenders, prepared statement for the Record...... 126
Giles Ranch, prepared statement for the Record............... 128
Harp Farms, Inc., prepared statement for the Record.......... 130
Arkansas Cattlemen's Association, prepared statement for the
Record..................................................... 132
California Cattlemen's Association, prepared statement for
the Record................................................. 134
Comments on the "Cattle Price Discovery and Transparency Act
of 2022", prepared statement for the Record................ 136
Fed Cattle Markets, prepared statement for the Record........ 138
Wilson Cattle Company, prepared statement for the Record..... 143
Friona Industries, prepared statement for the Record......... 144
LaVaca Cattle Company Inc., prepared statement for the Record 147
Undersigned State cattle organizations, prepared statement
for the Record............................................. 150
American Farm Bureau Federation, prepared statement for the
Record..................................................... 152
Adams Land & Cattle, prepared statement for the Record....... 154
North American Meat Institute, prepared statement for the
Record..................................................... 157
National Cattlemen's Beef Association, prepared statement for
the Record................................................. 184
Magnum Feedyard Company, prepared statement for the Record... 185
Strassburger, prepared statement for the Record.............. 188
Agriculture and Food Policy Center Texas A&M University,
April 2022, prepared statement for the Record.............. 190
Agriculture and Food Policy Center Texas A&M University,
January 2022, prepared statement for the Record............ 200
Agricultural Economics and Agribusiness, University of
Arkansas, prepared statement for the Record................ 212
Department of Agricultural Economics, University of Nebraska
Lincoln, prepared statement for the Record................. 252
Dr. Seth Meyer, USDA, prepared statement for the Record...... 301
Agriculture and Food Policy Center, Texas A&M University,
June 2021, prepared statement for the Record............... 303
Grassley, Hon. Charles:
Agri-Pulse, prepared statement for the Record................ 504
Iowa Cattlemen's Association, prepared statement for the
Record..................................................... 506
Fischer, Hon. Deb:
Nebraska Cattlemen, prepared statement for the Record........ 508
Cattle Markets, prepared statement for the Record............ 513
The State of Beef, prepared statement for the Record......... 516
Question and Answer:
Green, Andy:
Written response to questions from Hon. John Boozman......... 524
Written response to questions from Hon. Raphael Warnock...... 529
Written response to questions from Hon. Roger Marshall....... 531
Written response to questions from Hon. John Thune........... 533
Written response to questions from Hon. Deb Fischer.......... 535
Summers, Bruce:
Written response to questions from Hon. John Boozman......... 537
Written response to questions from Hon. John Thune........... 539
Ruffin, William R.:
Written response to questions from Hon. Roger Marshall....... 541
Written response to questions from Hon. Charles Grassley..... 542
Written response to questions from Hon. John Thune........... 542
Written response to questions from Hon. Deb Fischer.......... 543
Tiffany, Shawn:
Written response to questions from Hon. John Boozman......... 544
Written response to questions from Hon. Charles Grassley..... 546
Written response to questions from Hon. John Thune........... 549
Ziesch, Shelly:
Written response to questions from Hon. Raphael Warnock...... 551
Written response to questions from Hon. Roger Marshall....... 552
Written response to questions from Hon. Charles Grassley..... 553
Written response to questions from Hon. John Thune........... 553
Koontz, Stephen R., Ph.D.:
Written response to questions from Hon. John Boozman......... 554
Written response to questions from Hon. Roger Marshall....... 562
Written response to questions from Hon. Charles Grassley..... 563
Written response to questions from Hon. John Thune........... 572
Meyer, Dr. Seth:
Written response to questions from Hon. John Boozman......... 576
LEGISLATIVE HEARING TO REVIEW S. 4030, THE CATTLE PRICE DISCOVERY AND
TRANSPARENCY ACT OF 2022, AND S. 3870, THE MEAT AND POULTRY SPECIAL
INVESTIGATOR ACT OF 2022
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TUESDAY, APRIL 26, 2022
U.S. Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., via
Webex and in room 215, Dirksen Senate Office Building, Hon.
Debbie Stabenow, Chairwoman of the Committee, presiding.
Present or submitting a statement: Senators Stabenow,
Brown, Klobuchar, Bennet, Gillibrand, Smith, Booker, Lujan,
Warnock, Boozman, Hoeven, Ernst, Hyde-Smith, Marshall,
Tuberville, Grassley, Thune, Fischer, and Braun.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN, CHAIRWOMAN, U.S. COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
Chairwoman Stabenow. Good morning, and welcome to everyone
that is here with us. I call this hearing to order for the U.S.
Senate Committee on Agriculture, Nutrition, and Forestry.
Today we are holding a legislative hearing on two
bipartisan bills aimed at improving competition and
transparency in the livestock industry. Thanks to Senators
Grassley, Fischer, Tester, and Wyden for leading on the Cattle
Price Discovery and Transparency Act of 2022, and thanks to
Senators Tester and Grassley for leading the Meat and Poultry
Special Investigator Act of 2022.
The Cattle Price Discovery and Transparency Act includes
several reforms aimed at improving transparency and price
discovery in cattle markets, and the Meat and Poultry Special
Investigator Act would further support fairness in cattle
markets by creating a new USDA office dedicated to enforcing
competition rules under the Packers and Stockyards Act.
The last few years have made it clear we need to create a
more resilient food supply chain that is better able to
withstand disruptions, whether it is a pandemic, a cyberattack,
weather disasters, or a war in Ukraine.
Early in the pandemic, enormous shifts in consumer demand,
along with COVID-19 outbreaks among processing plant workers
and other disruptions left farmers with low prices and few
available markets. Consumers all saw empty shelves and sky-high
prices at the grocery store, all while huge companies reaped
record profits.
Our food supply chain, while efficient, also proved to be
highly vulnerable. Consolidation and lack of competition was a
significant contributing factor. The cattle industry is a prime
example. Just four big companies control 85 percent of the beef
slaughter in our country, and two of them are foreign owned.
At this time two years ago, upwards of 30 percent of beef
processing capacity was offline because large plants shuttered
when meatpackers failed to adequately protect their workers. In
2019, a fire in one plant reduced beef processing capacity by
more than five percent for several months, and just last spring
a ransomware attack on one company shut down one-fifth of the
U.S. meat processing capacity.
These events have ripple effects across our economy, as we
know. As we heard from our witnesses last June, consolidation
and concentration hurts farmers, hurts workers, and hurts
consumers, as well as stymying competition. It means producers
across the country receive fewer bids when they sell their
cattle. It allows the largest meatpackers to muscle out new and
smaller businesses who try to compete, leaving farmers with
limited local and regional processing options and long wait
times.
We have heard concerns about the lack of transparency and
competition loud and clear, as well as the need to ensure
producers of all sizes have options and fair markets. That is
why I was pleased to see President Biden's Action Plan for a
fairer, more competitive, and more resilient meat and poultry
supply chain announced earlier this year. With the funding we
secured in the American Rescue Plan, the USDA is investing more
than $1 billion to promote competition by expanding local and
regional meat processing capacity and provide more options for
farmers. The Administration is also taking steps to ensure that
competition rules, under the Packers and Stockyards Act, are
enforced.
There is no shortage of complex challenges facing our
livestock producers, and it is in the interest of all Americans
to make our food supply chain more resilient.
I look forward to hearing from USDA and our panel of
industry experts for their perspective on these proposals
today.
Now I am going to turn to our Ranking Member, Senator
Boozman, for his opening remarks.
STATEMENT OF HON. JOHN BOOZMAN, U.S. SENATOR FROM THE STATE OF
ARKANSAS
Senator Boozman. Thank you, Madam Chair, and we very much
appreciate having today's hearing. I want to thank our
witnesses for being with us this morning. I look forward to
hearing their testimony and discussing S. 4030, the Cattle
Price Discovery and Transparency Act of 2022, and S. 3870, the
Meat and Poultry Special Investigator Act of 2022.
There is no doubt that the bills we are discussing this
morning are the results of the frustration at the prices
America's farmers and ranchers receive for their cattle in
relation to the prices consumers ultimately pay for their beef
products. There is a significant difference in these two
prices, and I understand and I share the frustration of cattle
producers.
I also understand the desire of some of my colleagues to
propose legislative solutions to address this frustration, and
I appreciate all their hard work bringing this to the
forefront. Before Congress passes any changes to the law, I
believe we have a responsibility to understand the issue we are
seeking to solve and to understand the proposed solution. Since
the sponsors introduced their first versions of the legislation
in November 2021, we have spent many, many hours reviewing the
proposals, talking with USDA officials, and soliciting input
from the Nation's prominent cattle and beef industry
economists. My charge to my staff was to learn all they could
about the legislation and talk to the experts, including cow-
calf producers, backgrounders, feeders, and packers. We
supplemented these efforts with academic analysis. This
morning's hearing is one more step we are taking to learn about
the issues and the cost and benefits of the proposed
legislation.
Over the last few months, as I and my staff have studied S.
4030 and its predecessor, we have learned a few things about
the potential impact of the legislation. I shared this with my
colleagues to help inform the discussion and hopefully allow us
to seek comments and clarifications from our witnesses.
If adopted, the impacts of S. 4030 would include: the
number of cattle marketed under Alternative Marketing
Agreements (AMAs) will decrease and the number of cattle sold
in the cash market will increase. For example, in Texas,
Oklahoma, and New Mexico between 340,000 and 2.5 million fed
cattle will need to move out of formula contracts annually. In
Iowa and Minnesota it is fewer than 2,000 head a year. Using
Texas A&M's analysis and economic cost estimates from Dr.
Koontz, the cost of this shift away from the AMAs will cost
cattle producers between $23 million and $249 million annually,
depending on how the Secretary of Agriculture decides to
implement the law. Over the five-years analyzed by Texas A&M,
the costs are in the hundreds of millions of dollars.
The costs to cattle producers are not all borne equally.
Some regions will be more heavily impacted than others. Nearly
90 percent of the economic costs of this bill are estimated to
be borne by farmers in Kansas, the Southern Plains including
Texas, Oklahoma, and New Mexico.
The conversations I have had with participants in all
sectors of the cattle industry have raised some questions that
I believe we need to consider: How do the proposed solutions
influence packer concentration? What region or sectors of the
cattle industry will ultimately benefit, and what regions or
sectors will bear the cost? Does S. 4030 disincentivize
investment and innovation? Will the utilization of AMAs cap
what tools producers have to manage risk? What will the cattle
industry look like in a decade if this legislation is enacted,
and what will it look like if it isn't? How would these bills
have changed the supply and demand dynamics during the COVID-19
pandemic or other black swan events?
With respect to the Meat and Poultry Special Investigator
Act, I must say that I am very uncertain about the
legislation's purpose and goals. I know the purpose and I very
much enjoy working with Senator Tester, and I know he is very,
very frustrated with this and trying to get some solutions. The
legal experts have shared with me that this newly created
office at USDA will potentially just duplicate functions
already performed by the USDA, the Department of Justice, the
Federal Trade Commission, and the Department of Homeland
Security. Do we really think that creating yet another
government entity is a real solution? Is duplication of
responsibilities and confusing the chain of command among
Federal regulators helpful to our stakeholders? Does the
creation of this office discourage the establishment of new,
small, and mid-sized meatpackers?
Though the focus of this legislation and the sponsor's
interest is focused on the large packers, what are often
referred to as the Big Four in the beef industry, there are
more than 1,000 small packers across the country who are also
subject to the requirements of the Packers and Stockyards Act.
Those small businesses are dotted across rural America, and
they represent the vast majority of the meat and poultry
processing facilities in America. They would also be subject to
investigation by this new law.
Additionally, legislation also impacts the pork, poultry,
and lamb industries, yet none of those stakeholders are
testifying today. I believe the Committee should ensure that
the record reflects any comments and analysis those industries
would like to provide. As I believe there is potential for
confusion amongst the various agencies about who is in charge,
the Committee would benefit from knowing the position of the
Department of Justice on S. 3870.
Finally, I would like to share with the Committee that I
have been in spirited conversation with USDA, and I
unsuccessfully attempted to secure the expert opinion of the
Office of the Chief Economist on S. 4030, to ensure the
Committee has the benefit of the Chief Economist's expert
opinion. I will pose the questions to the witnesses today and
submit questions for the record. It is my expectation and hope
that the Committee will share my expectation that the Office of
the Chief Economist should be empowered to answer any questions
of any Senator fully, completely, independently, and without
fear of reprisal. Furthermore, any effort by any government
official to thwart the Committee's oversight activity should
not be tolerated.
Madam Chair, I ask for unanimous consent to include in the
hearing record the 34 letters and testimonies sent by
stakeholders since we noticed the hearing and the multiple
economic analyses I have mentioned.
Chairwoman Stabenow. Without objection.
Senator Boozman. Thank you.
[The letters can be found on pages 90-503 in the appendix.]
Senator Boozman. I also provided a copy of these documents
to all of our Committee members today.
I yield back the remainder of my time, and again, thank you
all very much for being here.
Chairwoman Stabenow. Thank you so much, Senator Boozman. We
will all work together, and I am confident we will be able to
get questions answered that need to be answered.
Senator Boozman. Thank you.
Chairwoman Stabenow. Thank you.
Now I would like to call on Senator Tester, the only
working farmer in the U.S. Senate, and you are not on the
Agriculture Committee. We benefit from your expertise working
with us, and want to hear from you again today as the senior
Senator from Montana with the most direct involvement and risk
every day, as you are working through the elements on every
level to help bring us food.
We thank you for your leadership. You are a leader on these
issues, and the original co-sponsor of both bills, and we
appreciate having you make some brief remarks before the
Committee.
STATEMENT OF THE HONORABLE JON TESTER, A UNITED STATES SENATOR
FROM THE STATE OF MONTANA
Senator Tester. I will try to be brief. I want to thank you
for the ability to speak in front of this very important
Committee, and I want to thank you, Senator Stabenow, and you,
Senator Boozman, for your leadership on this Committee. I have
worked with you both. You are both good people. We may have a
difference of opinion on some of this stuff, but the bottom
line is we are at a moment in time.
There are two bills in front of you today, and I would be
remiss if I did not thank Senator Fischer, Senator Grassley,
and Senator Wyden for their hard work on this bill. It has been
hard work but it has been great work, and it has been fun
working with you guys, so thank you very, very much.
We have two bills in front of us today, the Cattle Price
Discovery and Transparency Act, which I am going to call the
Spot Pricing Act, and the other one is the Meat Packing Special
Investigator Act. These very important bills are in front of a
very important committee. This indeed is a moment in time. The
reason it is a moment in time is because ag production has
gotten far more consolidated the 44 years since I took over the
farm in 1978. It is not one party's responsibility. The fact is
that both parties have watched this happen, and we have done
nothing.
Today we have an opportunity to do something. Why? Because
we have seen a mass exodus off the land. Rural America is
drying up. On the other side of the equation, we see consumers
that are being treated unfairly in the marketplace, because
there is no competition. Today we can address both of those
issues with these bills.
A citizenry that is well fed is essential if we are going
to have a democracy to survive. With consolidation, we see the
potential for food to become a serious problem in this country.
We need to make sure that our citizenry has access to food they
can afford.
The continual concentration of the marketplace at the hands
of a few would eventually destabilize this country. It will
destabilize this country unless we take advantage of this
moment in time.
In my small town, as an example, when I graduated from high
school there were 1,000 people in that town. Now there is about
600. There were three elevators, grain elevators. Now there are
none. There were two hardware stores. Now there are none. There
were three grocery stories. Now there is one. Maybe the most
distressing is there were five bars, and now there is only two.
Okay. In order for communities to exist in rural America we
need to have a fair marketplace, and if this marketplace is
consolidated, capitalism that works well in a free market does
not work well in a consolidated market where there is
concentration.
Quite frankly, the end result of this is we have got
ranchers that are going broke. Ranchers that are generational,
that have been on the land three, four, five generations are
going broke. Not because they are bad operators. Not because
they made bad decisions. The model does not work for them
anymore. We need to do something about that or we will continue
to see what has happened over the last 100 years.
On the consumer side of things, what COVID did teach us is
when you have big processors and it is hit with something like
COVID they have to shut down. Or you have thousands of people
that are working instead of 100 or less, these close down. What
does that do? It reduces the prices for the farmer and drives
up the prices for the consumer at the retail level.
The fact of the matter is, these packers are doing pretty
darn well. Tyson Foods, in the last quarter of 2021, their net
income rose from $469 million to $1.2 billion. That is one
quarter, okay? They did not come up from 2020 to 2021 up 47
percent, and, by the way, I am all about folks making money. I
think it is a good thing. I think profit margins are great and
we ought to have them. People, there needs to be some
transparency. There needs to be some accountability, because
what we are having in this country is consumers and people in
production agriculture treated unfairly.
This is a moment in time, folks. We have an opportunity to
do something. I do not know what will be said at this table
today, but here are the facts. We have a problem. Today's
marketplace is more consolidated today than it was in 1921,
when this body passed the Packers and Stockyards Act. Rural
America is drying up because we cannot get fair prices at the
farm gate. Capitalism is not working in this particular
instance because of concentration and consolidation in the
industry. Consumers are paying higher prices because without
competition they are set without regard to what people can
afford.
We need some sunlight. We need some sideboards. There are
people that will say these bills do too much. There are people
who say these bills do too little. I can guarantee you one
thing. If we walk out of here today and we do not pass these
bills we will see the same result that we have seen for the
last 100 years, and in the end our food security is put at
risk.
You have a tough job ahead of you. You will discuss it. You
will debate it. Please do the right thing, for the sake of
folks like me who want to pass their farm onto the kids. It is
not about inheritance tax. It is about making sure we get a
fair price at the farm gate.
Thank you very much.
Chairwoman Stabenow. Thank you very much, Senator Tester,
for your passion and your leadership on these issues.
I will ask our first two witnesses from the U.S. Department
of Agriculture to come forward to the table. I understand that
we have a statement that Mr. Green will give on behalf of the
Department, and then both of our witnesses will answer
questions.
Mr. Andy Green is a Senior Advisor for Fair and Competitive
Markets at USDA, where he advises and coordinates USDA's
competition and market regulatory policy. Mr. Green leads the
Department's implementation of President Biden's Executive
order on promoting competition in America's economy. In
particular, he is spearheading the modernization of the Packers
and Stockyards Act rules to promote fair and competitive
markets for producers and growers. Welcome.
Mr. Bruce Summers has served as Administrator for the
USDA's Agricultural Marketing Service since 2018. As
Administrator, Mr. Summers oversees the Ag Marketing Service's
many programs, ranging from USDA meat, produce, and dairy
grading; the USDA Market News; commodity checkoff programs; and
the National Organic Program. He also oversees USDA food
procurement, the Packers and Stockyards Act, and truth-in-
labeling programs. You have a full agenda, Mr. Summers.
Welcome to both of you. I will ask Mr. Green to proceed
first, and then we will open it to Committee questions.
Welcome.
STATEMENT OF ANDY GREEN, SENIOR ADVISOR FOR FAIR AND
COMPETITIVE MARKETS, U.S. DEPARTMENT OF AGRICULTURE,
WASHINGTON, DC
ACCOMPANIED BY BRUCE SUMMERS, ADMINISTRATOR, AGRICULTURAL MARKETING
SERVICE, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC
Mr. Green. Thank you, Chairwoman Stabenow, Ranking Member
Boozman, and members of this Committee. Thank you for this
opportunity to discuss the state of the cattle industry and
rural America and the United States Department of Agriculture's
role in supporting it.
America has the greatest cattle and beef in the world, but
our markets are not working fairly, and they are increasingly
vulnerable to shocks, crises, and other risks that leave them
not working well for anyone. We have all heard from cattle
producers that thin and thinning markets put everyone at risk,
not just those that do the hard work of price discovery, but as
the pandemic brought home clearly, any producer that wants to
price based off of the live cattle market.
We also know the importance of choice in these markets.
Producers are independent-minded businesspeople. Many enjoy
benefits from long-term contractual relationships. Just last
week, we were out in Kansas and Missouri for the Cattle
Contract Library Pilot Listening Session, and visited with
several producers. We heard a diversity of views. Some are
deeply frustrated with the take-it-or-leave-it market. Others
are focused on steady relationships and the benefits that can
be obtained from them. Everyone agreed that rewarding quality
was paramount.
The cattle market is a diverse and complex market, and that
is great, but for markets to function you need transparency and
choice. We are at risk of losing transparency in far too many
parts of these markets, and concentration, particularly at the
local level where cattle procurement takes place, is high. This
makes the markets more vulnerable and also poses unfairness
risks to those who are doing the hard work of price discovery.
The solution, no matter how you approach it, is
competition. Competition supports expanded markets and gives
producers more leverage to negotiate a price that they feel is
fair for their product. It supports the transparency needed to
enable to markets to set prices, allocate supply, and
incentivize quality.
We all know that the competition challenges we currently
face have been decades in the making. To tackle these
challenges, USDA has been deploying as many tools in the
toolkit that we have available. There is no silver bullet to
promoting fair and competitive markets, but there are certainly
steps we can take to ensure that producers are getting a fair
shake. Already the Department has worked to spur competition by
making available financing for new meat processing facilities,
which will create new and better markets for producers. We are
in the process of modernizing the packers and stockyards rule
book to enable clearer, more effective enforcement. We are
working to ensure consumers get the benefits from their hard-
earned food dollar under labels such as ``Product of the USA''
and more.
We are heartened by the focus of this Committee and the
Congress generally on these areas of critical importance. In
particular, we believe that measured and flexible tools to
address the erosion of transparency, price discovery, and
cattle producers' leverage in the cattle market would benefit
all who rely on these markets.
Additionally, a new position and office at USDA with
enhanced authorities would, if appropriately resourced, serve
as a focal point for accountability. It would also enhance
enforcement, effectiveness, and signal the importance that
Congress places on meaningful competition and fairness in the
livestock and poultry industries.
We appreciate the chance to support Congress' consideration
of ways to promote fair and competitive markets. Should these
bills be passed into law, USDA will implement them to the best
of our ability, deploying a fact-based, input-driven approach.
As always, our goal will be to deliver greater choice and fair
prices for both producers and consumers alike and to promote
the strength and resiliency of our supply chains, including the
packers' role in them.
We looking forward to partnering with Congress to work on
this important initiative. Thank you, and I look forward to
taking your questions.
[The joint prepared statement of Mr. Green and Mr. Summers
can be found on page 54 in the appendix.]
Chairwoman Stabenow. Thank you very much, Mr. Green.
Let me begin by speaking about the President's action plan
to create a fair and more resilient meat and poultry supply
chain. I was really pleased to see the President announced that
earlier this year and really focus on this important piece of
rising food prices. It includes, as you know, greater
coordination between the USDA and the Department of Justice, to
enforce our competition laws. In addition, the President's
budget for 2023 requested an additional 40 percent increase for
oversight and enforcement of the Packers and Stockyards Act.
How will the new office created under the Meat and Poultry
Special Investigator Act, that we are here to talk about today,
how will that complement the efforts of the USDA and the DOJ?
Mr. Green. Thank you, Madam Chairwoman. It is absolutely
important that we have the staffing and resources and the right
structure to deliver on the enforcement that the markets need.
Between 2010 and today, there has been a 40 percent decline in
the staffing in the Packers and Stockyards Program, now
Division, and that also does not even count the staffing
challenges or strains on our General Counsel's Office.
The new Special Investigator's Office would, if
appropriately resourced, be a focal point for accountability, a
focal point for bringing in highly skilled capacity that will
supplement what we have today, and would enable us to be
responsive, working with all the different parts of the
regulatory infrastructure that we need to deliver the
enforcement that the markets need.
Chairwoman Stabenow. You would see the special investigator
as really partnering with you and really a focal point to bring
all of this effort together, to really make it effective.
Mr. Green. Absolutely. We all know that when you build a
case you also need to package it and take it into court or into
the administrative process, and that requires a number of
different skills. This new special investigator would enable us
to tap efficiencies, to build the staff we need, and really to
work across the Federal infrastructure to be more effective at
delivering--you know, making sure the rules are enforced so
that farmers and ranchers have a fair shake, the transparency
and the choice that our anti-trust and competition laws provide
for them.
Chairwoman Stabenow. Great. Thank you.
Mr. Summers, as you know I have been advocating for fixing
our domestic food supply chain. All of us on this Committee are
very concerned seeing what has happened because of multiple
things coming at our farmers and our systems, and so on, that
unfortunately are not going away. We know about the pandemic
and the broken supply chains, but we also know about the severe
weather related to the climate crisis. We know about what has
happened in cyberattacks, et cetera, et cetera, and now the war
in Ukraine. I mean, all of this coming at us when we are
looking at operating in a global food supply chain right now.
That was the reason that I advocated so strongly to put
dollars into the American Rescue Plan. We have $4 billion to
address food supply chain issues. The Department is moving
forward. We need to make sure those resources are protected and
can do that.
I know the USDA is using these resources for a wide range
of new investments to support meat and poultry processing--gap
financing grants, loan guarantees, and so on. Could you speak
more about what is being done to support small plants to expand
and work force training, technical assistance, all the things
that need to happen to really support this sector? When we look
at the investments in new local and regional processing
capacity, how can the legislation in front of us, the Cattle
Price Discovery and Transparency Act, help to ensure that these
investments are effective and successful in the long run?
Mr. Summers. Well, thank you for that question. I think you
are right. The two are intertwined. The work that we have done
to reinforce the middle of the supply chain, so to speak, with
the $4 billion in investments that have gone to things like the
Food Supply Guaranteed Loan Program, the Meat and Poultry
Inspection Readiness Program, to name just two of several. I
think it is important as we invest in those programs, and those
businesses in the middle of the supply chain, that we also have
to be mindful that these small, mid-sized businesses, these
local regional businesses, they need a level playing field on
which to compete.
In making these investments in these businesses and
creating these opportunities in the middle supply chain, which
gives producers more options, we cannot neglect the fair-
trading rules. Programs like Mandatory Livestock Reporting
programs, like the Packers and Stockyards Act, really help us
level that playing field for all of these businesses trying to
operate in that middle of the supply chain. I think it is
critical that these new businesses or growing businesses--they
are not all new--have that opportunity in a fair marketplace
that is brought by combining the investments along with the
enforcement programs, like Livestock Mandatory Reporting system
(LMR) and like Packers and Stockyards.
Chairwoman Stabenow. Having information, having the
transparency and so on you believe is important to having that
level playing field. I mean, I am concerned to make sure that
the investments we are putting in now for small and regional
meat processing opportunities, to create competition, that they
are successful long-term, to really deal with the concentration
and consolidation and so on, and create more competition. You
are saying these kinds of efforts on transparency are important
for us to be able to do that?
Mr. Summers. All businesses need information on which to
base their business decisions. The Livestock Mandatory
Reporting system provides information to everyone, available
24/7, for free. It is really a level-setting program that
provides a lot of information to everyone who needs it, to make
their business decisions, their investment decisions. Yes,
ma'am.
Chairwoman Stabenow. Thank you very much. Senator Boozman.
Senator Boozman. Thank you, Madam Chair, and again, thank
you all for being here.
I share Senator Tester's concern for rural America. One of
the bedrocks of rural America is the community banks. We are
not creating any more community banks in the sense a lot of
that is due to the tremendous regulatory burden that they face,
and that is a very costly factor in regard to their operations.
Mr. Green, if the Office of Special Investigator were
established at USDA, do you envision it investigating
producers?
Mr. Green. Its authority would be the same as the existing
Packers and Stockyards Act, and so the Packers and Stockyards
Act stops at the packer. It does not go beyond that.
Senator Boozman. You don't think that it possibly would go
down as far as producers collaborating?
Mr. Green. Sir, we would be consistent with the manner in
which it is enforced today. It is about providing the resources
and the capacity and the, you know, sort of the efficiencies to
enable us to have clear rules, clear and consistent
enforcement, and that is focused on the entities that it
regulates, which are the packers and live poultry dealers, and
then the regulated entities, which are not the producers.
Senator Boozman. It wouldn't. Okay. Would producer-
cooperative packing facilities like the new beef plants being
developed in several of our States or the numerous producer-
owned swine plants that exist be subject to investigation by
this office?
Mr. Green. The definition of packer--I believe I would have
to look at the specific details, but it would----
Senator Boozman. But, that would be the case.
Mr. Green. Yes.
Senator Boozman. Yes. Okay. We are being told by cattle
feeders that as part of DOJ's investigation of the beef packing
sector that Federal investigators have interviewed cattle
feeders and asked them to view their records and justify their
business practices. Do you think this type of scenario could
arise and be a looming threat producers will have to face if a
permanent investigative office is established at USDA?
Mr. Green. I do not want to comment on an ongoing
investigation, particularly one by a different agency.
Senator Boozman. That's not a scenario that is----
Mr. Green. No.
Senator Boozman [continuing]. hard not to envision.
Mr. Green. One could envision it, but it is absolutely our
commitment that we enforce the laws, you know, on the entities
that are covered by them. It is packers, live poultry dealers,
swine contractors, and that is the focal point of the
investigative authority.
Senator Boozman. Well, generally past performance is
indicative of future.
Mr. Green. Yes, sir.
Senator Boozman. That is what we have going on now.
Mr. Green, what unintended consequence do you think a cash
market mandate will have?
Mr. Green. Sir, that is a really important question. I
believe that a lot of the outcomes will be dependent upon
implementation, and so flexibility and resources are very
important. We share with you the desire to understand the
economic impacts, and we want to work with you and be partners.
We want to make the full analysis available to you at the
earliest convenience on those types of questions.
In general, we are intending to be as careful, input-
driven, fact-driven as we possibly can, and take into account
all the different viewpoints of a complex and complicated
industry.
Senator Boozman. Okay. Thank you.
Considering the Administration's interest in expanding new
marketing channels for climate-oriented commodities, and
knowing that a cash mandate makes supply chain coordination
unlikely, wouldn't a significant number of producers be
discouraged from investing in production that qualifies for
USDA's Climate-Smart Pilot Program or recently announced Low
Carbon Beef Process Verified Program? Those would be in that
category.
Mr. Green. I think that we--I hesitate to speculate,
because there are a lot of details that need to be worked out
in implementation. A couple of principles that I think might be
relevant are that, you know, there are a lot of different ways.
We see cattle marketed across the country in very different
ways. I believe that a lot of different producers may choose to
take advantage of some of those opportunities, and they may use
different pricing tools, different procurement means. There is,
you know, process verified and other programs that are all
available in the market. I think promoting the diversity in
choice within the market is one of our priorities.
Senator Boozman. Okay. Mr. Summers, would you comment on
that?
Mr. Summers. It is the equivalent of being on mute on Zoom,
right?
I would agree with what Mr. Green has said. I think----
I concur with Mr. Green's comments. I think there are a lot
of details that have to be worked out. If Congress turns this
legislation into law we will have to engage in rigorous
rulemaking and try to identify those economic factors and costs
and things.
Senator Boozman. Thank you, sir. Thank you all very much.
Chairwoman Stabenow. Thank you very much. I believe we have
Senator Klobuchar virtually with us.
Senator Klobuchar. Yes.
Chairwoman Stabenow. Good morning.
Senator Klobuchar. Good morning. Thank you so much, Senator
Stabenow and Senator Boozman. Thank you to our witnesses.
As you know, I chair the Antitrust Subcommittee of the
Judiciary. This is near and dear to my heart. I just think in
general we have too much consolidation in our country. I would
start by thanking my colleagues, especially Senator Tester, for
the work he has done on the Meat and Poultry Special
Investigator Act. I am a co-sponsor of that bill. We know what
it would do is enhance the USDA's collaboration with other
Federal agencies.
Mr. Green and Mr. Summers, do you believe that increased
interagency cooperation with the USDA, Department of Justice
(DOJ), Federal Trade Commission (FTC), Department of Homeland
Security would produce better evaluations of our markets and an
ability to look at this and make a more resilient food supply
chain?
Mr. Green. Thank you, Senator. Really important question.
We are working under the President's Executive order on
competition with a wide range of regulatory agencies and
experts who bring to the table ideas and information that is
really essential. You know, we want to be deploying every tool
in our toolkit to enhance competition. We have obviously
invested in new meat processing capacities, which is one of the
tools that we can bring to the table, to modernize the Packers
and Stockyards Act.
We need to learn from the Federal Trade Commission around
the retail markets and the opportunities and the challenges of
access to retail, and so we are working with them on reports.
We are working with the Department of Justice to enhance the
coordination on antitrust enforcement in the middle of supply
chain. I certainly think and agree that an enhanced focal point
and enhanced capacity here at USDA would enable us to do even
more and to be even more effective on those ends, to be able to
deliver choice and competition and a fair and clear rulebook
enforced for producers and packers alike.
Senator Klobuchar. Thank you. One of the things that I have
found is that our antitrust enforcers--DOJ, FTC--do not have
enough resources, and Senator Grassley and I have joined forces
and actually passed a bill through the Senate to update the
merger filing fees that will bring in over $100 million to FTC
and DOJ. That bill is now hopefully in the Innovation and
Competition Act that we will soon pass.
I wondered, I know that in your testimony you wrote that
appropriately resources, the meatpacking special investigator,
that I just asked about, would be a focal point for
accountability and enhance enforcement. When you talk about
appropriately resourced, what do you mean?
Mr. Green. Thank you, Senator. I do not have a specific
number today, of course, and I would defer to my budget
colleagues. I would point out that we went back and looked at
the numbers, and because of the changes in costs and flat
budgets we have seen a 40 percent decline in staffing at the
Packers and Stockyards Act programs since 2010. A 40 percent
decline is quite meaningful. Certainly the President's budget
has asked for a 40 percent increase, and I would just leave it
at that. We need people to do the hard work and make sure to be
able to be responsive and to look at these complicated markets
and understand them and be effective.
Senator Klobuchar. You know, another way to look at this,
Senator Moran and I have introduced the RAMP-UP Act to help
small processors meet Federal inspection standards and expand
their operations. We worked on that bipartisan legislation
together.
How does investing in new and existing local and regional
meat processing help promote fairness and competition? Either
of you could take that.
Mr. Green. This is about providing choice, Senator. We know
that when four companies control 85 percent of the supply that
you do not have a lot of choice. We were both out in Kansas and
Missouri, hearing directly from producers around take-it-or-
leave-it markets.
Expanding the choice, expanding opportunities for local
producers to serve local communities is good for those
producers and it is good for consumers who want more choice,
who want local and regional food opportunities.
Senator Klobuchar. Very good. I will end by just saying
this. I have the Competition and Antitrust Law Enforcement
Reform Act that really would look at all of our consolidation
in our country and would do things like, say, if there is a
multibillion-dollar company and a merger that the burden should
be shifted so that it is not just the government proving
things, that the company has to prove that it does not hurt
competition. It does a number of things because of very narrow
court rulings in the last decade. It has made it harder and
harder to bring these cases.
I do not want to end this without mentioning that while we
are doing things industry by industry--I have done work in
pharmaceuticals and today we are talking about meatpacking.
Clearly we must do something on tech because we have not done
one thing. I suggest everyone read the Washington Post
editorial today on this subject--and we are moving on a bill.
One of the better ways to do this, in addition to the
individual markets--not in exclusion to it, in addition to
doing things industry by industry--would be to make some
general changes to our antitrust laws, which has happened time
and time again in this Nation's history. We did not just rest
on the Sherman Act, passed, by the way, by a Republican
Senator, Senator Sherman, or the Clayton Act. We kept changing
and passing new laws to rejuvenate capitalism.
I will end with what Adam Smith warned about, and that is
the standing army of monopolies. While he was known as the
Godfather of Capitalism, he always believed that at some point
you have to step in.
I want to thank both Senators for holding this hearing.
Chairwoman Stabenow. Thank you very much, Senator
Klobuchar.
Senator Hyde-Smith and then Senator Smith. Senator Hyde-
Smith.
Senator Hyde-Smith. Thank you, Chairwoman Stabenow and
Ranking Member Boozman, for this very important hearing. The
Cattle Price Discovery and Transparency Act and the Meat and
Poultry Special Investigator Act, it truly is, as Senator
Tester said, a moment in time for rural America and for
producers who are out there trying to raise these cattle.
I would also like to thank our panels for being here today.
You are very valuable to us, and both sets of panels, this is
what democracy is about, to come and solve problems, and to
come together and do that.
I am an original co-sponsor of these two common-sense
bills, which if enacted into law will bring more fairness and
transparency to our cattle markets.
Today is Tuesday. It is sale day in Brookhaven,
Mississippi, since 1942. We want to be able to pass this on to
generations behind us and to continue to do this, that they can
be profitable and it will be a fair market. Producers are such
hard workers, and all we ask for is a fair market that we can
compete in.
Administrator Summers, you and your colleague, Mr. Green,
make a lot of good points in your written testimony. I tend to
agree an increasingly consolidated industry structure has given
rise to anti-competitive practices that truly does harm
independent cattle producers, especially the small producers.
Four large meatpacking companies account for roughly 85
percent of beef sales nationwide, and as a result cow-calf and
feeder operations have unlimited set of markets and are left
with fewer options selling to those markets. Their cattle and
greater risk for unfair playing fields certainly exist, and
today's competition challenges in our cattle markets did not
happen overnight. We have been at this a long time. These
challenges have been decades in the making and did not just
come about because of the Holcomb fire, in 2019, nor the COVID-
19 pandemic.
Something in the system is broken. Meatpacking companies
are bringing home tremendous profits while producer earnings
are certainly declining and putting people out of business. The
Big Four have increased gross profit shares by 120 percent,
while net incomes have surged by 500 percent. How do we explain
these skyrocketing profits while input costs are rising?
We write a lot of checks at our house, for fertilizer, for
fuel, for chemicals, and we have seen what that does. This is
not consistent with the basic economic laws of supply and
demand.
I commend my colleagues for crafting these bills, which
will promote transparency, accountability, and competitive
leverage for these producers.
Administrator Summers, it is my understanding that the USDA
AMS, Agricultural Marketing Service, enforces livestock
mandatory reporting, LMR, for meatpackers through audits
perhaps every six months. If noncompliance is found, AMS will
ask the packer to correct the problem. If the packer does not
correct the problem, AMS may issue a warning letter or conduct
additional audits. Ultimately, AMS can fine the packer $10,000
for each violation if corrective action is not taken after they
have been duly warned and asked to do this.
I am pleased that this bill seeks to amend Agricultural
Marketing Act of 1946, to increase the penalty from $10,000 to
$90,000 for each violation. My question, Mr. Administrator, for
one of the Big Four or meatpacking companies that may have an
annual net income of $1 billion or more, how much might a
$10,000 penalty dissuade them from not complying with the LMR
reporting, and do you think increasing the penalty to $90,000,
as proposed in S. 4030, could do more to ensure compliance with
LMR? I tend to think the penalty could be increased more than
that. What are your thoughts?
Mr. Summers. Well, thank you for that question, Senator.
You are correct. The Agricultural Marketing Service team audits
every packer every six months, twice a year, to ensure
compliance is being held by the packers.
We have historically a very high compliance rate. For
example, in 2021, our noncompliance rate was less than four
percent. Historically we have seen very high compliance, and
most of the noncompliance fines tend to be kind of office
errors and are corrected very quickly. You are also correct
that the penalty amount of $10,000 has been in place since the
statute was originally passed back in 1999, so it has been more
than 20 years.
I think to build on Mr. Green's points earlier about the
need for flexibility, I think increasing the amount of penalty
gives the Department, and ultimately, you know, any penalties
that are leveled would be leveled by a judge, not by AMS.
Having a penalty of up to $90,000 increases flexibility in the
event, you know, that noncompliance is found that led to a
court action. The administrative law judge would then have that
flexibility to determine what that fine is within that range,
from $0 to $90,000.
Senator Hyde-Smith. Thank you very much. My time is up.
Chairwoman Stabenow. Thank you very much. Senator Smith.
Senator Smith. Thank you, Madam Chair and Ranking Member
Boozman, for holding this hearing today. Thanks to everyone for
being here.
When you go to the grocery store in Minnesota, the price of
hamburger is going up and up and up. Meanwhile, the big beef
processors, which control 85 percent of the market, are seeing
soaring profits. Minnesota cattle producers, they are making
pennies on the dollars while their input prices are also going
up and up.
Market concentration is almost always bad for consumers and
for farmers and ranchers, and that is the problem we are here
today to solve. It is a problem that is getting steadily worse.
Last year I visited the Bagley Livestock Exchange in
Bagley, Minnesota, and the folks there told me that we need
more transparency in the system. They described how the big
players basically can rig the system to make sure that they
have better information than the folks that are auctioning off
their cattle, and it puts them at a grave disadvantage.
Fixing the cattle markets also is a bipartisan issue. I am
grateful for Senator Tester's leadership here, and I also want
to thank Senator Fischer and Senator Grassley. I am so glad to
be co-sponsoring your bill. This legislation will get more
competition and more transparency into the market and is going
to help individual producers and consumers.
I want to focus in a little bit on beginning farmers and
also farmers of color here, because, I mean, it is hard to make
a living in livestock, and it is especially hard for beginning
farmers and farmers of color. Lots of high barriers to entry,
high prices, and on top of that, it often feels like the market
is really rigged against them.
Hannah Bernhardt, who is a beginning farmer in Minnesota,
with a young family, has an operation in Finlayson, Minnesota,
and she raises hogs and sheep and cattle. She told me what
impact this has on her farm. She said, ``If you don't know how
to create a website and sell direct to consumer and also be
lucky enough to have a USDA slaughterhouse that will even work
with a small producer, you don't stand a chance against these
big companies that control the industry.''
Mr. Green and Mr. Summers, I want to ask you about that
specifically. Can you elaborate on how the current system
places beginning farmers and farmers of color at a disadvantage
against these big industry players that have so much market
power?
Mr. Green. Thank you, Senator. We absolutely know that
there is a bottleneck at the center of the supply chain, the
cattle supply chain, and a number of supply chains in
agriculture and across the economy. When you have that much
concentration you both distort the risks and you inhibit market
access, and that certainly is going to impact newer farmers,
farmers of color, those who do not have the market size to be
able to negotiate effectively.
Really, that is what we are trying to do. There is no
single silver bullet, but if you deploy a lot of different
toolkits, whether it is in investing in local or regional
opportunities, modernizing a packers and stockyards toolkit,
updating ``Product of the USA'' labels, and then ensuring that
the market structure is one where there is opportunity, there
is choice, there is transparency, that is how you increase the
competition and you make sure that the market signals--that is
what this is about. It is about making sure that folks can
participate in the market, that those market signals really
flow through, and that everyone that wants to, to be an
independent producer, can participate in the market and have
the choices that they want.
Senator Smith. I mean, the essence of a free market is that
there is good information. I mean, maybe not perfect
information--let us be honest--but good information about what
prices are being asked and offered. Otherwise, you are just a
price taker. You are almost like a contractor because you do
not have any choice really. That is especially an issue for
smaller producers and people just starting, right?
Mr. Green. That is absolutely right. One of the purposes of
the Livestock Mandatory Report Act, established in 1999, was to
balance that asymmetry. The benefits of concentration, one of
them is information flow, and information is power. Ensuring
that the market is transparent, and the same is true for the
Packers and Stockyards Act. All of these competition tools are
about balancing information, balancing market power so that
everyone has a fair shake, and negotiating, taking advantage of
business opportunities as they come available, so they can grow
and compete and we can offer better products and services that
all of us benefit from.
Senator Smith. Right. Absolutely. Well, thank you for that.
I just want to note, before I close, Madam Chair, that I also
think that there is an important role at the USDA for doing
research that really gets at the need and helps people to
understand what the conditions are of the market. Could you
just talk about that briefly? I know this is something that you
have talked about with my office.
Mr. Green. Yes, and it is absolutely essential. These are
complicated issues. These are complex markets. We absolutely
need the research tools and the diverse research infrastructure
needed to do that. I absolutely commend your interest in this
and would love to work with your office on how to enhance those
capacities, at USDA and really outside as well.
Senator Smith. Great. Thank you so much. Thank you, Madam
Chair.
Chairwoman Stabenow. Thank you very much. I might just say
that we do need to strengthen research at the Department. The
last administration really gutted so much of the research that
is critical for USDA, so hopefully--I know it is something that
members on both sides of the aisle care about. Thank you.
I will now go to Senator Grassley--except that Senator
Marshall was just up. No, go right ahead. Go right ahead. You
almost got bumped, Senator Marshall. Senator Marshall, and then
Senator Lujan.
Senator Marshall. All right. Well, I apologize. Senator
Grassley, I do not want to bump a senior member here.
Chairwoman Stabenow. You are in trouble now.
Senator Marshall. I am in big trouble.
Chairwoman Stabenow. Yes.
Senator Marshall. Well, thank you, Chairwoman.
The good comments I hear from both sides of the aisle is
that we agree, there is too much consolidation of industries in
this Nation. I think about that, I think that this body is very
responsible, that overregulation leads to consolidations of
industry, whether it health care or banking or pharmacy or
grocery stores or packing plants. I think we need to look in
the mirror and say, how is overregulation impacting the
situation that we are in right now?
Certainly there is not an issue that I have thought more
about and had more phone calls about in the past year or two
than this particular issue. I think that capitalism without
competition is unfair, and it leads to opportunities for
exploitation. Let me say that again: capitalism without
competition is unfair, and it leads to opportunities for
exploitation. Many of us here in this room agree what the
problem is but we disagree on how to solve it.
I think the solutions are less regulations and improving
competition as well. Specifically, as I start thinking about
some of the issues regarding the second legislation that we are
looking at today, and Mr. Green, I guess I will ask you, do you
lack confidence in the current Packers and Stockyards
Division's ability to carry out its duties?
Mr. Green. We have a wonderful team. They are working
really hard. There are big challenges out there, and there is
benefit from reinforcements. One of the tools that a special
investigator would offer is sort of a reinforcement toolkit
that helps us bridge the range of challenges that go all the
way from the investigation and the analysis all the way to be
able to----
Senator Marshall. Your actions would suggest that the
current Packers and Stockyards' ability, that you do not have
confidence in it, that you need to expand it.
Mr. Green. It is not that I lack confidence. It is that we
have got a lot to do and a lot of complex issues, and we can
only do so many things at a given time.
Senator Marshall. I have just got to tell you, it scares me
when this government starts throwing more money and forming
more committees, and what some of the unintended consequences
of that is going to be. The current Packers and Stockyards
Division has the authority and the charge of investigating
competitive matters. Why do you believe establishing an
entirely new office within USDA is necessary?
Mr. Green. When the Packers and Stockyards Division
investigates a case it then works with our Office of General
Counsel to package it. It often then has to work with the
Department of Justice to bring these cases. There are some
efficiencies to be had by having a new office that, if
appropriately resourced, would enable us to work across all of
those areas to bring these cases more effectively, and to be
able to have the accountability for what the staffing and the
resources we have to do that.
Senator Marshall. Okay. I want to talk about solutions,
solutions that we are suggesting. One of them is the misnomer
``Product of the USA,'' and I think you mentioned that. We have
offered legislation that would replace that with voluntary
labeling, ``Processed in the USA,'' or ``Raised and Processed
in the USA,'' or ``Born, Raised, and Processed in the USA.''
I think especially for small packing plants--you know, I
grew up, every little city had their own packing plant, and now
maybe one out of ten of those cities have a packing plant. We
have overregulated them. We allowed beef to come in from Brazil
with less restrictions on our own packing plants, preferably
going from across State lines is what one of my big concerns
are. I want safe food--of course we want safe food--but I think
there are some ways we can allow those small packing plants to
sell across State lines.
Do you think that reusing, getting rid of this ``Product of
the USA'' label and replacing it with what we are suggesting
would be helpful?
Mr. Green. We certainly share your concerns about whether a
consumer, when he or she walks into the grocery store and sees
``Product of the USA,'' whether they are getting what they
think they are getting. We have launched a review. We are in
the middle of that. We have got to make sure that we really
understand the consumer understanding, the consumer experience,
and we want to understand the economic impacts.
We are committed to making sure we address those concerns
to the greatest degree we can.
Senator Marshall. Again, we are forming committees, we are
praying about it. This has been a very easy issue that we could
fix that could help consumers.
Thank you so much. I yield back.
Chairwoman Stabenow. Thank you very much. Now Senator
Lujan, and then Senator Grassley.
Senator Lujan. Thank you very much, Madam Chair, and to our
Ranking Member, thank you both for holding this important
hearing, and to all of our colleagues who have been working on
this important issue and for reaching out to me and the State
of New Mexico. It is very appreciated.
My opening questions, Mr. Green, were along the lines of
what Senator Klobuchar and Chair Stabenow already touched on,
so I am not going to repeat them. I do want to jump into a
couple of other areas with meat labeling.
As consumers continue to become more invested and
interested in knowing not only how their food is produced and
grown but also where it comes from, the New Mexico farmers and
ranchers I speak with are proud of the products that they grow
and raise, and the hard work to bring quality, nutritious, and
sustainable products to market.
The issue of meat labeling continues to be a hotly debated
topic, and I was disappointed that the issue was not resolved
during the renegotiation of the U.S.-Mexico-Canada Free Trade
Agreement.
Now with that being said, Mr. Summers, your testimony
mentions the Administration's review of the ``Product of the
USA'' label and how that can be helpful in ensuring a fair and
competitive marketplace. What impacts do current loopholes and
a lack of a strong labeling system have on American producers,
on their ability to not only get fair prices for their
products, but their ability to meet consumer preference that
the meat be raised and processed in the United States?
Mr. Summers. Thank you for that question, Senator. The
labeling issues that you referred to are really under the
purview of my colleagues in the Food Safety Inspection Service
rather than the Agricultural Marketing Service, but I might
defer to my colleague, Andy Green, and see if he has comments
on that.
Mr. Green. Thank you, Mr. Summers. Senator, I would
highlight that there are a wide range of products that are
currently covered by mandatory country-of-origin labeling. The
Congress has recognized that and the USDA enforces that on a
regular basis.
With respect to the two products that are not covered by
that, they are covered by a ``Product of the USA'' label that
is under the Food Safety Inspection. We certainly have heard a
number of concerns and challenges. We have heard it from
consumer groups, we have heard it from producer groups, that
they feel that they are not getting a fair shake. When you walk
into the grocery store, when you look at something that says
``Product of the USA,'' does the consumer understand what that
means, that it is a process and it does not speak to the origin
of the meat itself?
We think it is essential that we make sure that we do that
consumer testing to make sure we really understand what do
consumers think when they approach the shelves, and we think
that if we get it right for consumers that that is the
foundation for making sure that the market signals from the
consumer flow through effectively to enable competition to
work.
Senator Lujan. I appreciate that. Mr. Summers, in your
filed testimony you did talk about the Administration's review
of ``Product of USA'' label for meat. Is there anything else
that you would add to that response, based on the filed
testimony?
Mr. Summers. With respect to labeling of food products, we
do, in AMS, enforce the country-of-origin labeling standards.
That does not apply to beef. That was changed in 2015. I do not
have anything to add to, I think, what Mr. Green has said.
Senator Lujan. I appreciate that. I would love to chat with
you a little bit more about complexities that were created
after the change and what resulted after 2015 with that shift,
and what has resulted in the market that we have today and the
increased questioning that I hear from New Mexico producers, at
the very least.
New Mexico farmers and ranchers pride themselves on the
local products they produce and provide to our communities.
Their ability to produce value-added goods creates
opportunities for farmers and ranchers to receive better prices
for their products while allowing them to reinvest more wealth
into the communities that they serve.
Mr. Summers, what are some of the more common barriers
preventing the development of value-added agriculture
operations in rural communities across America?
Mr. Summers. Well, I would think certainly startup costs.
You know, there are a lot of costs associated with starting
some of these value-added operations, especially when you are
talking about processing. I think that is why the
Administration has made investments through some of our grant
programs here in the last year or so, the $4 billion that the
Chairwoman mentioned earlier.
I think that type of capital investment is an important
part of helping these value-added businesses get up and
running.
Senator Lujan. I appreciate that. I mean, that is a
conversation I hope we can have, because as we all know,
whether it is our families or other families, everyone has
those family recipes. I have been encouraging some of those
producers across New Mexico and other States I visited who
produce spirits but may not be licensed. I remind them they can
get licensed now, and there is added value there, and they can
be doing a whole lot more.
Whether it is a jelly, it is a salsa, it is whatever it may
be, there is added value, and there are incredible job
opportunities in every corner of our country here. I hope that
is something we can tackle and that we can look at creating
some more incentives for.
I very much appreciate that, and thank you for the time,
Madam Chair.
Chairwoman Stabenow. Thank you very much, Senator Lujan.
You are making me hungry with salsa and jams and so on. They
all sound great.
Senator Grassley, I think you care about this issue.
Senator Grassley.
Senator Grassley. First, a UC for a letter from Iowa
Cattlemen, and an article from Agri-Pulse.
Chairwoman Stabenow. Ordered, without objection.
[The letters can be found on pages 504-507 in the
appendix.]
Senator Grassley. Second, a great big thank you to you and
the Ranking Member for setting this up and helping move this
legislation along.
In a nutshell, everybody is talking about competition. We
are talking about bringing competition to an industry dominated
by four packers and a cozy relationship with the big feedlots
of four or five States, and they want to keep their chain
moving. They do not care whether there is room for any
independent producers or not. They, in turn, then do not care
whether those cattle are owned by Wall Street bankers or
farmers, and the independent cattle producers in the Midwest
are being hurt.
It is important that we look back at how we get to this
critical turning point. As the livestock industry became
increasingly concentrated in the 1990's, fewer animals were
sold through negotiated purchases. When mandatory livestock
reporting was first considered in 1998, it unfortunately did
not get very far. The American Meat Institute bragged in
publications and about how they killed the bill by hiring high-
powered and well-connected lobbyists. Those same organizations
that worked for the big meat processors in the 1990's are the
same as those who are lobbying against this market reform
today. Luckily, Senator Daschle did not give up. He stayed with
the case, and we now have mandatory livestock reporting passed
soon after 1998. Nobody argues with that legislation today.
In 2002, I first introduced a spot market bill with Senator
Feingold. Since 2002, we have seen more consolidation and
vertical integration in the cattle market. There is now even
greater use of alternative marketing arrangements, resulting in
higher volatility swings.
It always ends the same: more profit for the packers and
independent producers going out of business. Market reform is
needed right now. Just as Senator Daschle did not stop in the
1990's, I do not intend to stop until these bills become law,
and I would like to have my colleagues join us in this effort.
To Administrator Summers, do you believe that the USDA
Marketing Research Service has the expertise and knowledge to
implement this legislation?
Mr. Summers. Yes, Senator. We believe we do have the
expertise and knowledge.
Senator Grassley. Thank you. A report from the University
of Nebraska, the USDA cattle region with the highest cattle
grading is Iowa and Minnesota regions. Over 94 percent of the
cattle in that region grade over 80 percent ``choice.'' This
compares with less than 13 percent from Texas, Oklahoma, and
New Mexico. Our opponents point out that alternative marketing
arrangements are needed to capture the value of better
genetics. Iowa and Minnesota leads in genetics and also leads
in cash sales.
Mr. Summers, can you confirm the information in the
Nebraska study that the Iowa and Minnesota region is the best
region for the quality of cattle?
Mr. Summers. I can certainly confirm that Iowa producers
produce very high-quality cattle.
Senator Grassley. Thank you. The DOJ is investigating the
Big Four packers. USDA, Commodity Futures Trading Commission,
and multiple State attorneys general are conducting
investigations as well. We have seen GBS settle for $42 million
for anti-competitive practices. There have been other meat
segments that have pled guilty to suppressing competition.
Investigations are very important. Greater coordination
between USDA and Department of Justice is needed. Still,
without market reforms, we will likely continue to see Big Four
vertically integrate, destroying family farmers, and raking in
record profits.
Mr. Green, if marketing reform is not enacted, do you
anticipate that we will continue to see vertical integration in
the fed cattle market?
Mr. Green. Yes, sir. The trend lines have certainly been in
that director and they are significant vulnerabilities of the
market, which is why we are here for this conversation today.
Senator Grassley. Thank you. I yield back.
Chairwoman Stabenow. Thank you very much.
Next we have Senator Bennet, and then Senator Fischer.
Senator Bennet.
Senator Bennet. Thank you, Madam Chair, and thank you for
holding this hearing, and I thank the Senators for their
interest in this.
My State, Administrator Summers, is one of the five
livestock mandatory reporting regions, but the price
information generated by cattle trades in Colorado is rarely
reported to the public. As I understand it, this is a result of
your agency's rules of confidentiality, specifically something
referred to as the 3/70/20 guideline.
Administrator Summers, can you explain this guideline and
elaborate as to why USDA has confidentiality rules if they so
often prevent the publication of data that is collected in
Colorado? Additionally, has the agency looked at new ways to
conceal proprietary business information in a way that allows
our information in Colorado to be publicly reported? If so, can
we expect to see any of those ideas implemented soon?
Mr. Summers. Thank you for that really important question,
sir. It is kind of the crux of the matter, in some cases,
right?
Senator Bennet. Thank you.
[Laughter.]
Chairwoman Stabenow. He is going to get a big head, Mr.
Summers.
Mr. Summers. I apologize to the rest of the Committee.
Sir, we have heard a lot about the problem in Colorado. The
statute, the Mandatory Livestock Reporting statute requires
USDA to maintain confidentiality of all parties to a
transaction, buyers and sellers. We cannot release proprietary
information, by the statute.
Several years ago, we developed a policy and a guideline
that we published in the Federal Register, as you referred to,
the 3/70/20 rule, which basically requires certain parameters
to be met and we can guarantee the proprietary nature of the
data is protected. In Colorado there are two packers.
Senator Bennet. Right.
Mr. Summers. The ``3'' in that 3/70/20 rule refers to the
need for three packers, three buyers, to be involved in the
marketplace so we can report data, and that is why about 90
percent of the time in Colorado we cannot report data and
protect the proprietary nature of that information.
Senator Bennet. Are there any other ideas for what
alternatives--because my understanding is there are some places
where sometimes there are three packers, sometimes there are
two packers. You know, things go up and down, depending on what
is going on in the cattle market. That has not been true in
Colorado, obviously, for a long time, this is the main reason
why we cannot get price transparency or discovery.
Mr. Summers. There are very few times when, in Colorado, a
third packer from a different region would come in and buy
Colorado cattle. When they do, we report the data.
The regions, as they were established many, many, many
years ago, before I was the administrator, were established---I
think even it may go back to when it was voluntary. Time has
changed and things have evolved, and that is why we now
struggle with being able to meet the confidentiality standards
in Colorado.
Senator Bennet. I think that is one of the things we are
going to have to work through as we think about this
legislation. I mean, my State is a region, and we do not know
what the implementation of this is going to look like for us,
going forward, and that matters a lot to us. I appreciate that.
Mr. Green, it is nice to see you again. We see each other
regularly on the Banking Committee. It is good to see you back.
Competition is key to any healthy and properly functioning
marketplace. I have strong concerns that only four meatpackers
control 85 percent of fed cattle processing in this country.
One of the bills we are discussing today creates a new Special
Investigator Office at USDA, that has been discussed.
Do you believe that this will resolve those concentration
issues that we are seeing in the beef cattle industry, and if
not, what other things do we need to be considering to actually
get at that issue, which is the intense market concentration
that exists among the packers in this country?
Mr. Green. Thank you, Senator. It is an honor and a
privilege to be here, as well, working on these issues.
There is no single silver bullet. This is a complex market.
We are deploying as many of the tools as we have available. I
think we absolutely believe that a special investigator is one
part of that puzzle. It can add accountability, if
appropriately resourced. It can enhance our ability to do the
complex investigations that are really needed.
We also recognize that we have got to be investing in new
processing capacity, because that is directly increasing the
choice that producers have out there. We want to be using the
consumer transparency tools, the ``Product of the USA,'' and we
have got a review going there. A lot of different tools. We are
partnering with DOJ, and certainly considering important
reforms like we are this morning on cattle markets, more
generally. We are taking a kind of all-of-the-above approach to
addressing that supply chain constraint.
Senator Bennet. Thank you, Madam Chair.
Chairwoman Stabenow. Absolutely. Thank you so much. Senator
Fischer and then Senator Booker. Senator Fischer.
Senator Fischer. Thank you, Madam Chair, and thank you,
Ranking Member Boozman, for holding this hearing today.
As all of you know, Nebraska is the beef State. I represent
every segment of the supply chain, from cow-calf producers to
backgrounders to large and small feed yards. Also we have three
of the four big packers in the State of Nebraska. The livestock
industry contributes $13.8 billion to Nebraska's economy
annual. It is the economic engine of my State.
I first introduced legislation nearly two years ago after
hearing concern from cattle producers in Nebraska but also all
across this Nation. Senator Grassley has introduced legislation
for 20 years. This is not a new issue. This is not an issue
that came about due to COVID. It has existed for years.
The goal of this legislation has not changed. We want to
ensure every segment of the beef supply chain can succeed, by
ensuring robust price discovery and market transparency. We
know negotiated transactions involve a bid and an ask. They
facilitate price discovery to establish the going rate for
cattle. We also know negotiated transactions have drastically
declined over the past 20 years. The decline has been
especially pronounced in some regions of the country.
I understand the value of AMAs. They can provide economic
returns and operational efficiencies. However, AMAs rely on the
negotiated market, often using publicly reported cash price
information to set their base prices. Producers groups almost
uniformly acknowledge concern about cash price information
becoming too thin. Over the past two years we have witnessed
voluntary industry efforts to increase negotiated trade. While
there was some success, ultimately, by the industry's own
standards, these voluntary efforts failed, and they failed
because of packers' lack of participation.
When we look at this we can understand this is why we are
here today. We know more market transparency and price
discovery is needed, and I am pleased that we have half of this
Committee as co-sponsors of this bill. Working in a strong
bipartisan fashion with my colleagues from all the around the
country, our legislation will address these issues.
Madam Chairwoman, I have a letter of support from the
Nebraska Cattlemen about the need for robust price discovery
and market transparency. I wish we could have had a Nebraska
producer here, but as is noted in their letter, quote, ``None
of our producer members we encouraged to testify were willing
to put themselves out front for fear of possible retribution by
other market participants, an unfortunate reality of today's
cattle industry,'' end quote.
This concern demonstrates an imbalance in market power.
Chairwoman Stabenow, I would ask for unanimous consent to
submit this letter from Nebraska Cattlemen into the record.
Chairwoman Stabenow. Ordered, without objection.
[The letter can be found on page 508-512 in the appendix.]
Senator Fischer. Thank you. I would also like to highlight
a series of articles from the Omaha World-Herald. The latest
article discusses that producers' share of the beef dollar has
continued to decline while the packers' share went up 31
percent last year.
Some today will claim that the seller is in the driver's
seat. We all know how out of touch that statement is. If cattle
producers were in the driver's seat, they would set a price and
the packer would take it. Instead, producers take the price
that is offered by the buyer. Producers face a take-it-or-
leave-it market. That is the reality.
Chairwoman Stabenow, I would ask for unanimous consent to
submit these articles from the Omaha World-Herald into the
record.
Chairwoman Stabenow. Ordered, without objection.
[The letters can be found on pages 513-523 in the
appendix.]
Senator Fischer. Mr. Green, in June 2021, USDA's
Agriculture Marketing Service released a report that indicated
18 percent of AMAs have no premium or discount associated with
them. I agree that AMAs may be important to certain value-based
marketing systems, but there are a large number of cattle
procured through AMAs to reward quantity, not quality.
Is it correct that there are a sufficient amount of AMAs
that are not tied to any quality or value-based attributes, and
can you speak to other marketing methods, such as negotiated
grid, which is in this bill, that can contribute to price
discovery while also rewarding quality?
Mr. Green. Thank you, Senator. I cannot specifically speak
to that particular report, but it is absolutely the case
because we put out numbers in June, that we now can see the
distribution of cattle, net prices in AMAs, and we have learned
a lot from that, including that there are some that have very
high premiums of discounts and some that are really very close
to the cash negotiated price.
I would absolutely also agree that the negotiated grid--I
was just out in your neighbor State, Kansas, and also in
Missouri, and hearing a lot of excitement about negotiated
grids as something that producers are interested in exploring
more of, because they do enable the discounts yet also enable
that negotiation around the base price.
It is absolutely important to making sure that prices
discovery is a common good--everyone recognizes that--and that
the contributions for that, and we have the market we need so
that the price can actually be set and so that producers really
have choice and competition.
Senator Fischer. Okay. Thank you. Thank you, Madam Chair.
Chairwoman Stabenow. Thank you very much. Senator Booker.
Senator Booker. Madam Chair, I am going to state,
unequivocally, that New Jersey is not America's biggest beef
producing State.
Chairwoman Stabenow. I am so glad you clarified that.
Senator Booker. I think it is very important to know. I
will say this. In all of America there is no vegan more
passionate about fighting for American ranchers than me.
Chairwoman Stabenow. All right.
Senator Booker. Our ranchers are not getting justice in
this country. I want to sign on to what Senator Lujan says. It
is utter deception to American consumers that we do not label
products of the USA as ``Product of the USA.'' You let Mexican
cattle come into our country, be processed by these big,
multinational corporations, and we label this ``Product of the
USA.'' That is outrageous. That is lying to consumers. That is
deceptive practices, and it should end because ultimately it is
hurting American ranchers. I appreciate that.
The stunning thing that my colleague from Nebraska said--I
just do not understand how stunning what she said is, but we
are almost normalizing it. I found the same thing when I
visited with American ranchers in Illinois. The fact that they
are afraid to come here to testify because of the outrageous
power of these consolidated meatpacking companies is just a
testimony to the unacceptable inaction of Congress over the
last decade or two, to allow these meatpacking companies to
continue to consolidate.
They have reason to be afraid. As Senator Tester said, 40
percent of U.S. cattle producers have gone out of business, not
because they are not good businesspeople, but they have gone
out of business because of this incredible corporate
consolidation. Nearly half of our ranchers have been forced to
sell their herds and their land, land that, in many cases, has
been passed down from generation and generation by their
families. These are great American entrepreneurs being forced
out of business by this growing consolidation of these
multinational corporations.
Four of them, four meatpacking companies--Tyson, Cargill,
JBS, and National Beef--have corrupted the marketplace using
unfair and unlawful practices. This has got to stop. It is
hurting great Americans. It is hurting our industry. We have
seen the devastation to farmers in the poultry and pork
industries, that happens when big packers take control and
pervert our free market system. Unless Congress acts quickly,
that is where the beef industry is now headed.
I am glad that we are here today talking about solutions to
this problem, but I am concerned that Senate Bill 4030 does not
go far enough to address the dire state of cattle markets
today. I look forward to the opportunity to continue working to
improve this legislation as it moves forward. While the bill
gives the USDA two years for implementation, I would hope that
the USDA will move much more quickly, given the emergency
situation that exists in our cattle market.
I have talked to incredible cattle ranchers who are
struggling to stay in business right now. Two more years of the
current system is so unfair. Our cattle ranchers are being hurt
on so many ends, from deceptive labeling practices to the
problem with corporate consolidation.
Mr. Green, I am so happy you are here. In order to stop
these multinational meatpackers who are manipulating our
system, perverting the free market, deceptively marketing to
Americans in my State, enabling stop manipulating the cash
markets, one step I believe Congress should take is to require
the AMAs to contain a firm base price that can be determined on
the date the contract is entered into. Do you agree that
requiring AMAs to have a firm base price would enhance price
discovery, transparency, and producer leverage?
Mr. Green. Thank you, Senator. That is an important idea
that we are thinking about. We are considering it. I do not
have a specific answer for you today. I would highlight a
couple of points, that we saw during the pandemic that when you
did not have a market, that base price collapsed, and it hurt
everyone.
It is absolutely essential. That is one of the reasons why
we are having the conversation today, to make sure that we have
markets setting these prices and not having them declared on
high in a take-it-or-leave-it manner.
Senator Booker. Okay. My time has expired, but I just want
to say, we have watched what has happened to the pork and the
poultry industry and how great traditions of farmers and
ranchers in this country have been perverted by corporate
concentration. These contract farmers live almost like
sharecroppers, in constant, outrageous debt.
If we continue to let the cattle industry go in that
direction we are undermining yet another great American
tradition, and great Americans who are working so hard but
seeing their margins shrink and shrink, and now live in fear
because their parents and grandparents had multiple people
competing for their cattle, now it has shrunk so much that they
are worried to even speak the truth here before Congress
because of retaliation. That is so un-american. That is so
against capitalism. That is so against the free market. The
urgency for us to do something quickly, because every day we
wait, more ranchers are going out of business, not because they
are not good businesspeople but because the market has been so
perverted that they cannot compete. That is unacceptable to me.
Chairwoman Stabenow. Thank you very much, Senator Booker.
We have Senator Tuberville, Senator Brown, Senator Hoeven, and
Senator Gillibrand. I would remind you we have another great
panel that we need to hear from as well.
Senator Tuberville.
Senator Tuberville. Thank you, Madam Chairwoman and Ranking
Member. Thank you very much. This is a very important topic. I
have spent days and days with my State, talking about this
bill. You know, we are up and down with it, back and forth. I
leave it all to my ranchers back home, which we should, because
they are the ones that are affected with this.
You know, back home in Alabama, we produce cattle in every
county, 67 counties, $2.5 million a year industry. Alabama
cattle producers have made it clear to me they do support
actions in our cattle markets to help facilitate better price
discovery for cattle sales and transparency in the marketplace.
However, these bills as presented before the Committee
today are not the answer for those that I represent back in
Alabama. On the bill which creates the Office of Special
Investigator for Competition Matters at USDA, I believe the
Secretary currently today--has the authority to address these
issues, and adding another level of government is not the
answer. We need less government, not more. Considering the
importance of the cattle industry in my home State and across
the Nation I hope we can all work together as a Committee, and
with all sides involved in the cattle markets, to increase
transparency and free market competition without imposing
overreaching government mandates.
Mr. Summers, if enacted, the Cattle Price Discovery and
Transparency Act would divide the entire United States into
five to seven categories, geographically, each of which would
be subject to mandatory minimum thresholds of government-
deemed, approved pricing mechanism. My question is related to
the actual implementation of this type of legislation and what
concerns it could pose for your agency.
The most recent Cattle on Feed report from USDA's National
Agricultural Statistics Service shows that nearly 97 percent of
the fed cattle are found in 1 of 12 States. In fact, of the 12
million head of cattle on feed, as of March 1st--of this year,
only 295,000 head could be found outside those 12 States, the
easternmost of which are Iowa and Minnesota. As an example, I
do not see how the agency can form a region out of the eastern
United States given that there is only one meatpacking
facility, as defined by the bill, and virtually no significant
cattle feeding sector, and this is just one example.
How does your agency plan to develop these regions, given
these immense difficulties?
Mr. Summers. Thank you for that question, Senator. AMS has
a lot of experience in implementing new programs. Two most
recently that come to mind would be the Hemp Production
Program, Bioengineering Food Disclosure Labeling Program, both
brand new, big programs. I bring those up because they involved
extensive rulemaking.
To implement this bill, if it were to become law, we would
do that through a rulemaking process. It would rely almost
entirely on public input. In other words, AMS USDA would
publish a proposal based on input and review of data and
collaboration across the Federal Government, but ultimately
that proposed rule becomes what the public, all of our
stakeholders, from academic to producers to packers to
backgrounders, everybody that is interested in this provides
public comment.
I expect we would receive thousands and thousands of
comments. It is a very deliberative process. It is a very
formal process, the end result being it may be a proposal from
USDA but a very engaged community of stakeholders working to
reach that final rule, based on the intent of Congress and
whatever bill ends up being passed. I am sure it would be
extensive stakeholders feedback through that rulemaking
process.
Senator Tuberville. Thank you. I am going to be out of time
so I will submit some questions for the record. Thank you,
Madam Chair. It kind of concerns me when you brought up
academia involved in cattle. It really does. Thank you very
much.
Chairwoman Stabenow. Thank you very much. I believe we have
Senator Brown with us virtually.
Senator Brown. Thank you, Chair Stabenow. I really
appreciate it. Mr. Green, good to see you again.
I want to first thank Senator Tester--the Chair, Senator
Stabenow, and also Senator Tester--for his work on this bill.
Senator Tester sits with me on the Banking and Housing
Committee, which I chair, and I am ducking out of because this
Committee and this hearing is so important. I called him out
today because we were talking to the Consumer Bureau. We were
having a hearing with Rohit Chopra, the Director of the
Consumer Protection Bureau, and Senator Tester's work on this
issue reminds me so much of the work we have done on consumer
banking issues.
The testimony today, Mr. Green, mentions the need for
legislation like the two bills being discussed today, to be,
quote, ``appropriately resourced.'' Until the recent omnibus,
funding for the Packers and Stockyards Act, as you know, has
been flat since 2010. How has that inhibited your ability,
USDA's ability, to act on behalf of farmers, particularly in
the face of just the increasing corporate consolidation?
Mr. Green. Thank you, Senator Brown. It is great to see you
and be here, as well. You know, as you know, we have had flat
resources, and the reality has meant a 40 percent decline in
the staff within the Packers and Stockyards Division, the
Packers and Stockyards Program. That does not also even count
the constraints on our Office of General Counsel, which we
depend on heavily.
When you have a smaller staff there are certain aspects of
nimbleness, but we certainly would benefit from the ability to
engage in the more robust analysis, to do the more complex
investigations, and to be able to cover more ground, because
these are challenges that producers are feeling every single
day, and if we are not out there enforcing the rules you do
have significant risks that producers are not getting a fair
shake and they are not feeling like they can participate in
hearings or speak their voice, as Senator Fischer highlighted.
We believe resources are absolutely essential, and I
appreciate you asking that question of us.
Senator Brown. Thank you, Mr. Green. Administrator Summers,
I am going to switch to you and then back to Mr. Green for a
third question.
Administrator Summers, what kind of funding and additional
tools does USDA need to beat back the unfair business practices
and ensure that farmers, ranchers, and all consumers are
getting a fair shake? We know from consolidation in the cattle
business, four companies--Senator Tester tells us all the
time--four companies, 80 percent of the beef sales, and what
that means for ranchers, on the one hand, cattlemen on the one
hand, and what it means for consumers on the other.
What kind of additional tools do you need to beat back
these unfair practices?
Mr. Summers. Thank you for that question, Senator. With
respect to, I think you asked about funding. It broke up a
little bit and I was not quite sure. With respect to funding,
we have not had the opportunity to develop that. I think we are
still looking at that and we would have to get back to you.
With respect to the tools and kind of the reasons why, you
know, as companies have gotten bigger, issues have gotten more
complex. Companies sometimes that we are looking at
investigating, the scope of the investigations are tremendous,
and that is why we need additional resources. We need not just
people. We need expertise and we need knowledge and we need to
adjust, I think, some of the specialties within our staff to
meet the needs of what is really the modern marketplace.
Senator Brown. Thank you, Mr. Summers. The last question,
Mr. Green. A lot of factors go into pricing cattle, as you
know--transportation, grain prices, financing. What role could
the Cattle Contract Library play in enhancing transparency and
promoting free markets?
Mr. Green. Thank you, Senator Brown. It is absolutely
essential. As we provided in August, two new reports into the
formula transaction around the net pricing. As you highlight
there are a lot of factors that go into whether that net price
really reflects the price being paid to cattle, whether it is
transportation or financing or risk-sharing or other things.
Having the transparency through the Cattle Contract
Library, that is part of this legislation, that is part of
legislation that has passed the House. Those are useful tools
to help producers have the transparency they need, be able to
make good business decisions that work for them.
Senator Brown. Thank you. Madam Chair, thank you very much.
I yield back the last 25 seconds. Thank you.
Chairwoman Stabenow. Thank you very much. Senator Hoeven.
Senator Hoeven. Thank you, Madam Chair. I appreciate it. I
appreciate you holding this hearing today.
In the Ag Approps Bill this year for 2022 we included $1
million for a Cattle Contract Library Pilot Program to be
administered by the Ag Marketing Service. Mr. Summers, can you
give us an update on implementation of that Cattle Contract
Library.
Mr. Summers. Yes, sir. Thank you for that question. We have
started. As Mr. Green has referred to a couple of times, we
took a team from AMS and we went to Kansas City last week, and
we did a public meeting and invited stakeholders from across
the livestock sector to come and visit with us about what they
would like to see in this Cattle Contract Library Pilot.
We have started the design phase. We have started
collecting information from our stakeholders. Congress did
exempt us from notice and comment rulemaking for the
development of this pilot, gave us until September 30, 2023, to
get the pilot up and running. We believe we will meet that
deadline, no problem, and also believe we will have a chance to
operate this pilot for several months, so we can learn from it
and then hopefully come back, and if the Committee is
interested, talking about the lessons learned from the
operation of that pilot and how it may inform future Cattle
Contract Library, if Congress decides to pass that legislation.
Senator Hoeven. You say launch in September 2023. Can you
get it done before that?
Mr. Summers. Well, 2023 is when the money expires. We are
going to get the pilot up and running before that.
Senator Hoeven. When do you think you are going to launch
it?
Mr. Summers. I hope by the first of the year.
Senator Hoeven. By the first of the year. Then you will be
back to tell us how it is going, right, how it is going to work
and how it is going?
Mr. Summers. I think that is the reason for a pilot.
Senator Hoeven. Yep. First of the year and you will let us
know how it is going. That is good to hear and very much
appreciated.
How about as far as making it permanent, will you also have
a sense of what kind of additional resources that you will need
to do that? As you know, part of this bill is setting up a
permanent program. Do you see this pilot program transitioning
into a permanent program, and what do you need to do to make it
work, and what resources do you need to make it work?
Mr. Summers. I think the pilot would inform a permanent
Cattle Contract Library, if we get the legislation that
establishes a permanent Cattle Contract Library. It would
definitely inform not only how we provide the information but
also the resources needed to operate it.
Senator Hoeven. Right. It would get you off and running,
which is going to set up another question I have here in just a
minute.
First, so the Fischer-Grassley bill provides broad
authority for the Ag Secretary to set minimum levels of
negotiated cash trade transactions throughout the country. How
are you going to go about setting up these minimum thresholds
by region for these cash transactions, and making sure that
there is good transparency and that, of course, it benefits the
producer in terms of price and competition?
Mr. Summers. We will do that through the collaboration
called the rulemaking process, notice and comment rulemaking
process. In my earlier response I neglected--we have a proposed
rule but there is also a Regulatory Impact Analysis, so we will
work with the Office of the Chief Economist to look at the
costs and benefits associated with implementing the law.
It will be done transparently and in collaboration with our
stakeholders, and certainly we would like to continue to work
with Congress as we develop what is going to be a fairly
complex undertaking to establish those regions and the
mandatory----
Senator Hoeven. Right. You want people to have confidence
in it.
Mr. Summers. Absolutely.
Senator Hoeven. Mr. Green, again, you are talking about--
this goes back to a question that I asked just a minute ago. If
Fischer-Grassley moves, Secretary of Ag had a two-year window
to establish regions and define mandatory minimum levels of
negotiated cash trades for each region. A lot of our folks
think that is too long, that you need to do it sooner, that you
need to get going. Would you respond to that?
Mr. Green. We are getting----
Senator Hoeven. Mr. Summers is trying to help you, set you
up here, get you a running start. It sounds to me like he gave
all the right answers.
Mr. Green. I never disagree with Bruce. If Bruce is there,
I am there. We want to get it up and running. We are trying to
understand the market on a real-time basis. We were both
meeting with, you know, a whole range of folks just last week
out in Kansas City. We are committed to moving as fast as we
can.
A lot of outcomes depend on implementation, and so it is
important to be fact-based and input-driven. We want folks to
have a chance to talk to us. There is a balance there.
Senator Hoeven. You have no doubt you can do it sooner.
Mr. Green. We are going to work as hard as we can.
Senator Hoeven. Sounds like a yes.
Mr. Green. Yes, sir.
Senator Hoeven. Thanks to both of you. I appreciate it.
Mr. Green. Thank you.
Senator Hoeven. Thank you, Madam Chair.
Chairwoman Stabenow. Thank you very much.
Thank you to both of you. We appreciate it. As you can
tell, this is of great interest to Committee members.
We are now going to move to our next panel of witnesses. We
appreciate your patience. We will move quickly to that. I know
we have members on the Committee that are going to be
introducing witnesses from their State so we want to proceed to
do that as folks are coming up to the table.
As soon as we are set, I will turn to Senator Hyde-Smith to
introduce our first witness on the panel, as soon as we have
folks all situated. Thank you so much.
Senator Hyde-Smith, if you would proceed. Thank you.
Senator Hyde-Smith. Thank you, Chairwoman Stabenow and
Ranking Member Boozman, for providing me the opportunity to
introduce one of our witnesses on Panel 2, Mr. William Ricky
Ruffin. We refer to him as Ricky, of Bay Springs, Mississippi.
Ricky is testifying on behalf of the United States Cattlemen's
Association and I have known him for many years. He is a cattle
producer. He is an attorney and a strong member of the Ag
community in Mississippi. He has been a great leader for us.
He manages a herd of brood cows and runs stocker cattle on
wheat and rye grass. He is a 40-year member of his county and
State Farm Bureau chapters and will provide valuable
perspective to this Committee regarding the challenges facing
cattle producers in the Southeast.
Thank you very much for being here today, Ricky.
Chairwoman Stabenow. Thank you so much. Welcome.
We will now turn to Senator Marshall to introduce the
witness from Kansas.
Senator Marshall. Well, thank you, Madame Chair.
I am certainly honored today to introduce Shawn Tiffany.
Shawn, thank you so much and welcome to our hearing.
Shawn and his brother, Shane, co-own Tiffany Cattle
Company. I think that you all would agree with me that Shawn
has got to live the dream of running a family company and
living out his American dream. They started in 2007 after they
purchased a feedlot that their dad had managed for several
years near Herington, Kansas. Herington, Kansas is about 30
miles from my mom's family's farm. I am very familiar with the
area.
They built their business from feeding 2,500 head of cattle
annually to now finishing approximately 70,000 heard per year.
They went from 10 customers to over 200 customers. Every
successful business has a vision, a mission, and values and I
certainly appreciate Shawn's values: faith in God, integrity,
stewardship, trust, and diligence. We look forward to his
testimony.
Again, thank you so much, Shawn, and welcome.
Chairwoman Stabenow. Thank you so much, and welcome.
Now Senator Hoeven, our witness from North Dakota.
Senator Hoeven. Thank you, Madame Chair. It is my privilege
to welcome fellow North Dakotan to the Committee today, Ms.
Shelly Ziesch.
Shelly is a fourth generation rancher from Pettibone, North
Dakota. Along with her husband, Robin, she owns and operates
Ziesch Ranch, a diversified farm ranch where they raise beef
cattle, corn, wheat, oats, alfalfa, and soybean, about 600 head
which, up until recently, she and her husband were doing all by
themselves, which I find remarkable. Now she has a daughter and
son-in-law in there, so that is really great, the next
generation. They also farm about 2,000 acres.
She serves on the North Dakota Farmer's Union Board of
Directors since 2018. Three daughters, two involved in ranching
and, as I say--well, one has already returned. Is that the one
that just graduated? Or do you have another one that might come
back?
Mrs. Ziesch. There is another one that might come back.
Senator Hoeven. That is great. We are all about getting
young people into farming and ranching.
We really want to thank her for being here today. I think
she will have a lot of really good information for us.
Thank you, Madam Chair.
Chairwoman Stabenow. Absolutely. Thank you, and welcome.
Senator Bennet.
Senator Bennet. Thank you, Madam Chair, and thanks to
Ranking Member Boozman, as well.
I am pleased to introduce a fellow Coloradan, Dr. Stephen
Koontz, as one of our witnesses this morning.
Dr. Koontz is a professor in the Department of Agricultural
Economics at Colorado State University in Fort Collins.
Before moving to Colorado, Dr. Koontz served on the faculty
at Michigan State University and Oklahoma State University. He
earned a Bachelor's and Master's Degree in Agricultural
Economics from Virginia Polytechnic Institute and State
University, along with a Ph.D. in the same subject from the
University of Illinois.
Dr. Koontz has spent a total of 32 years in academia,
including 24 years at CSU, where his research has principally
focused on the markets for livestock and meat products. On
several occasions, he has helped USDA write in-depth studies on
consolidation and marketing in the beef industry.
Now Dr. Koontz has generously offered to make his expertise
available to the Committee as we consider the Cattle Price
Discovery and Transparency Act.
I am still learning about the bill but here is how this
issue looks from Colorado: in my State there is a consensus
that we have had too much consolidation in the meat packer
industry. It is bad for consumers and it is terrible for
independent cattlemen.
Colorado wants more buyers of all sizes to strengthen
competition and level the playing field. We want a lot more
transparency, which is essential for any healthy marketplace.
I was in Colorado over the past two weeks, Madam Chair, and
there is a real difference of opinion on this bill. My interest
today is learning more about the legislation and making sure
that whatever moves forward represents the best interests of
Colorado.
Thank you again, Dr. Koontz, for your testimony. Thank you,
Chairwoman Stabenow, for your leadership.
Chairwoman Stabenow. Thank you so much, and it is always
wonderful to have a former fellow Michigan State Spartan here
on the panel. Welcome. I have to say that.
[Laugher.]
Chairwoman Stabenow. All right, let us turn to Mr. Ruffin.
Thank you so much for being here today and we appreciate your
moving forward with five minutes of testimony and then whatever
else you would like to submit for the record, we would welcome
it.
STATEMENT OF WILLIAM R. RUFFIN, RUFFIN FARMS, BAY SPRINGS,
MISSISSIPPI
Mr. Ruffin. Thank you, Madam Chair, Ranking Senator.
I appreciate the opportunity to come here. I want you to
know that I am very honored. I never thought I would get an
opportunity to come before this distinguished committee. I
really appreciate it and I am also humbled by it. I appreciate
this opportunity.
I come here today representing the U.S. Cattlemen's
Association and I come to represent producers, backgrounders,
and stockers because that is the part that I am involved in. I
come here to tell you what is going on in the pastures at home.
I will tell you that I am passionate about the cattle
business. I have been in the cattle business my entire life. If
you read my bio on my submitted testimony, you will see that I
have been involved in it my entire life.
I do have a sideline of practicing law but I assure you,
the part of my tax returns where I lose the most money is in
the cattle business. I have a definite interest in that.
I guess probably where it first hit home to me about what
was happening to the marketings system in this country was back
in the 1970's. It actually took place in Senator Grassley's
State. In Iowa, I had a connection there where I could sell
cattle, small groups of cattle, maybe two or three loads, to
just independent farmers who had a bin full of corn and they
would take that corn and sell it through my steers and heifers
that I send them. It was a good relationship. They paid a fair
price. They made money, I made money. Everybody was happy.
Toward the end of the 1980's and 1990's, all of a sudden
that market dried up. I was talking to my man there and he said
they do not have anywhere to sell their cattle. The packer
ownership, the AMAs, they do not have anyplace to sell those
cattle. I mean, the formula cattle and all have taken them away
and they do not have a place to sell them. I lost that market.
Well, if you are in the cattle business you have to be
resilient. I move on from there and I move on to where I call a
group of--we call them order buyers. They are commissioned
sellers. I called them to sell my cattle. I have a group of
producers that we pool our cattle together and we try to sell
those cattle through a group of commissioned sales, which would
be probably five or six. All of a sudden, the first thing I
realized is I am only getting two bids. I asked them why? Our
cattle were sold in the markets in Northern Texas, Oklahoma,
New Mexico, Southern Kansas. The reason is because there is no
cash market there.
I am emphasizing that we have got to have a cash market. We
have got to have an opportunity to sell our cattle. That is the
way we sell them. All of the competition is taken away.
Now I only talk to one buyer. I have to try to guess,
because I do not have the information really to determine
whether I am getting a fair offer or not. I only have one
buyer.
I daresay that if we do not pass this bill where we have
some transparency in this, and we do not make an effort to re-
establish the cash price, I am not going to have any. When that
happens, I will go the way of most of the producers in this
business. We have lost probably somewhere around 12,000 in the
last 20 years in my home State. Our State had around two
million cattle in 1970. Now we have maybe 800,000.
There is a problem. The problem all started taking place
when we got consolidation of our packers and we got
consolidation of markets and the AMAs came in.
I am an advocate of this bill. I realize it may not be
perfect but I do think that we have got to do something because
if we continue to do nothing, which is what most of the
opponents of this bill say, we are going to keep getting the
same results. I would seriously consider that you take this
bill, it may not be a lifesaver but I think it might throw us a
life raft anyway.
I thank you, Senator.
[The prepared statement of Mr. Ruffin can be found on page
60 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Now, Mr. Tiffany, welcome.
STATEMENT OF SHAWN TIFFANY, PRESIDENT-ELECT, KANSAS LIVESTOCK
ASSOCIATION AND TIFFANY CATTLE COMPANY, HERINGTON, KANSAS
Mr. Tiffany. Well, thank you Chairwoman Stabenow, Ranking
Member Boozman, and members of the Committee. I appreciate you
allowing me the opportunity to testify today.
My name is Shawn Tiffany. I am the president-elect of the
Kansas Livestock Association and a member of the National
Cattlemen's Beef Association Live Cattle Marketing Committee
and Board of Directors. I co-own and operate Tiffany Cattle
Company with my brother, Shane. We grew up in the cattle
feeding business and in 2007 had the opportunity to purchase
the feed yard our father managed and that we grew up working
in.
Since then, we have grown to include a second finishing
yard and a grow yard. I also am a partner in a company named
Elevate Ag, a regenerative ag company that produces biological
inputs for farming and grazing systems, reducing dependency on
chemicals and synthetic fertilizer inputs.
I have a bachelor's degree in animal sciences and industry
from Kansas State University. My wife, Nicky, and I live near
Herington, Kansas with our five children.
Price discovery, market transparency, access to additional
processing capacity, and proper oversight of cattle markets is
important to me and all cattle producers. However, neither of
the bills being discussed today represent the right approach to
these issues. I am opposed to these bills and ask that the
Committee not advance either.
The vast majority of cattle producers oppose government
mandating a minimum level of negotiated trade. In February,
members of NCBA adopted policy opposing government mandates on
cattle marketing methods. KLA joined with 29 other NCBA
affiliates in a letter to this committee expressing opposition
to marketplace mandates.
In January, the American Farm Bureau Federation took a
position in opposition to marketing mandates. Having
participated in both the KLA and NCBA policy process, I can
tell you those members overwhelmingly believe cattle producers
should have the opportunity to market their cattle how they see
fit without arbitrary limitations imposed by the Federal
Government.
Tiffany Cattle Company is a custom cattle feeding business.
What that means is the cattle in our feed yards are owned by
other cattle producers. They place their cattle with us and we
provide feed and care during the finishing phase. One of the
services we provide our customers is marketing their cattle
when they are ready for harvest. We work with multiple packers
using several different marketing methods to maximize the value
our customers receive for their high quality cattle. A mandated
minimum level of negotiated trade will limit my ability to
maximize the value my customers receive for their cattle.
Furthermore, a mandate on the packers will force packers to
discontinue some alternative marketing programs to meet minimum
negotiated trade mandates. Which of my customers will lose
their ability to access value added marketing when this
happens? Neither myself, nor my customers, will be given the
option to choose because the mandate, and the power to comply
with the mandate, will rest with the packer.
Cattle producers themselves have gravitated toward the use
of AMAs. There are many reasons for this. AMAs allow a cattle
producer to capitalize on the investments in improved genetics
and production practices on their ranches. AMAs allow the
cattle producer to capture more of the value when their cattle
yield beef products with attributes that the consumer is
willing to pay for.
My brother and I built our first generation business from
10 customers to over 200 customers by having access to quality-
based premium programs. Not only has our own business grown but
those of our customers' as well, because AMAs have allowed them
to be paid for the exceptionally high quality cattle that they
raise.
My typical customer has fewer than 200 cows and will retain
ownership of their calves in order to receive the true value
for their efforts and, just as importantly, to receive the
carcass data back from the packer so they can continue to make
improvements in breeding decisions back at home.
Tiffany Cattle Company is also engaged in efforts to
produce beef with lower total greenhouse gas emissions. This
program requires an AMA to facilitate the supply chain
coordination necessary to connect these products to consumers
willing to pay for that certification. We also feed a high
percentage of Non-Hormone Treated Cattle and Natural Program
cattle. These labels rely on AMAs to ensure the cattle
producer, who has taken on the additional expense of gaining
that certification, is assured access to a market willing to
pay for the added value.
In conclusion, increased use of AMAs is correlated with
improved beef quality. When packers pay for quality, farmers
and ranchers are incentivized to produce it. In the year 2000,
about 60 percent of fed cattle graded choice or better. Today,
that number is more than 80 percent. In my own operation, we
have averaged 92 percent choice or better in all marketings for
the last 10 years. That improved quality has led to better beef
eating experiences, which has led to increased consumer demand
for beef, both domestically and internationally. AMAs have
helped the cattle industry better meet consumer preferences and
consumers are gravitating toward our beef because of the high
quality and the unique brands we have developed.
I ask Congress not to limit my use of AMAs, which have
helped make these quality improvements possible.
[The prepared statement of Mr. Tiffany can be found on page
68 in the appendix.]
Chairwoman Stabenow. Thank you, very much.
Mrs. Ziesch, welcome.
STATEMENT OF SHELLY ZIESCH, OWNER/OPERATOR, ZIESCH RANCH,
JAMESTOWN, NORTH DAKOTA
Mrs. Ziesch. Chairwoman Stabenow, Ranking Member Boozman,
members of the committee, thank you for the opportunity to
testify today.
My name is Shelly Ziesch, and I am a fourth-generation
cattle rancher from Pettibone, North Dakota. On our family
operation, we run about 600 cow/calf pairs. We background most
of our calves and finish a small percentage of them that are
processed locally. We also raise corn, soybeans, wheat, oats
and alfalfa.
I serve on the board of directors for North Dakota Farmers
Union, and I am testifying today on behalf of NDFU and National
Farmers Union.
Achieving greater transparency, price discovery, and
fairness in the cattle market is critical to the survival of
family farms and ranches. In 2020, I chaired a livestock
committee that NDFU established to develop rancher-led
solutions to the challenges we face. In the six-weeks leading
up to our first meeting, the spread between boxed beef and fed
cattle prices increased by over 300 percent. While those price
swings were directly attributed to the pandemic-related
disruptions, they also underscored the dangers of a highly
concentrated food system.
That committee identified seven policy proposals to
increase competition and fairness in the cattle and beef
industries; establish transparent, truthful labeling on beef
products; and increase local and regional slaughter capacity.
One of Farmers Union's chief concerns is the decline of
negotiated trades in the cattle industry. Ranchers need to have
options when marketing their cattle, including cash trades and
alternative marketing agreements. However, in the last 15
years, cash trades have declined from 52 percent to 20 percent.
As the cash market thins, local livestock auctions are going
out of business. If that trend is allowed to continue,
producers will lose those important marketing options. This is
concerning because the cash market provides the transparency
and price discovery ranchers need to negotiate a fair price for
our cattle. The cash market also serves as the basis for all
cattle prices.
In our operation, we sell our cattle through a combination
of cash sales and forward contracts that are negotiated. We use
the cash price we receive to help us determine the fair market
value for the cattle we will sell through those forward
contracts. Without the transparency of a robust cash market, I
am at a severe disadvantage when marketing my cattle regardless
of the marketing arrangement I use.
NDFU was a strong early supporter of Senate Bill 949,
commonly referred to as the 50/14 bill. We believe establishing
a floor for the cash market is critical to promoting a fair and
transparent marketplace. While we are disappointed the 50/14
bill has not attracted a broader base of support, our top
priority is finding a way to move this issue forward. The
Cattle Price Discovery and Transparency Act is an important
step toward protecting transparency in the cattle market.
The Cattle Price Discovery and Transparency Act includes
several provisions that will promote fairness and transparency
in cattle markets. The bill establishes regional minimums for
negotiated trades which will preserve the cash market as an
option for cattle producers and improve and preserve price
discovery. The bill also requires 14-day slaughter reporting,
expedites carcass reporting, and mandates reporting of cutout
yield, all of which will give producers deeper understanding of
supply and demand factors affecting the market.
Finally, the legislation establishes a cattle contract
library, which will cattle producers insight into contract
terms that they should consider or employ when using AMAs.
Farmers Union is also a strong supporter of the Meat and
Poultry Special Investigator Act, which would strengthen
enforcement of existing competition laws. The Packers and
Stockyards Act has existed for over 100 years. A lack of
enforcement has allowed the consolidation and anti-competitive
practices to continue.
The USDA and Department of Justice need stronger tools to
enforce existing antitrust laws. Senate Bill 3870 would give
USDA the authority and resources it needs to make sure our laws
are enforced the way Congress originally intended.
In closing, I want to say that many family farmers and
ranchers, my main goal is to ensure our operation can continue
with the next generations. That is why I spent the last two
weeks trying to save newborn calves during our historic
blizzards in North Dakota. It is why I serve on North Dakota
Farmer's Union Board of Directors, and it is why I am here
today. I urge the Committee to pass these two bills because
they will provide my three daughters and my grandchildren the
transparent and fair markets they need to carry on our family's
ranching tradition.
Thank you very much for the opportunity to testify. I look
forward to your questions.
[The prepared statement of Ms. Ziesch can be found on page
72 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Dr. Koontz, welcome.
STATEMENT OF STEPHEN R. KOONTZ, PH.D., PROFESSOR, AGRICULTURAL
AND RESOURCE ECONOMICS, COLORADO STATE UNIVERSITY, FORT
COLLINS, COLORADO
Mr. Koontz. Thank you.
Chairwoman Stabenow, Ranking Member Boozman, and Members of
the Committee, thanks very much for having me be part of this
hearing.
Chairwoman Stabenow. I am not sure your microphone is up
where it needs to be so we can hear you. Thank you very much.
Mr. Koontz. Is that better? My apologies.
My long-term academic interests have been in the area of
understanding market power, understanding industrial
organization and primarily in the cattle and beef industry.
Occasionally, I am asked to meetings to talk about this topic
and I pose a question to producers. Would you rather have one
bid from a packer with what you know is $200 a head costs? Or
would you rather have three bids from packers with $500 a head
costs?
That is usually where the group of producers, whoever has
invited me to the meeting, starts wondering why they invited me
to the meeting. They are looking for answers but we are really
faced with that as a dilemma. You have concentration in this
industry because it is tremendously efficient.
My analogy is actually a summary of a large body of
literature in the area of agricultural economics. Economies of
size and the resulting efficiency are orders of magnitude
larger than what are found and what are measured in terms of
price impacts. That is a conclusion that comes out of the
literature that I read, that I work in. It is not a conclusion
that there is anti-competitive conduct. In fact, it is rather
competitive within this industry.
It is also important to recognize that the dollars that
come into the industry come directly from the consumer.
Everybody works with what starts as consumer dollars. Then the
dollars are split as they are passed down that market channel.
They have to do through the food service, retail, purveyors and
packers, feedlots, background or stocker operators, and cow/
calf producers last. That is simply the way the market channel
works.
If you lower costs up into the market channel, then what
happens is you wind up with higher prices down at the farm
level and you wind up with lower prices or lower costs for the
consumer. That is a substantial body of the research that I
understand on this industry.
AMAs are very much in that same framework. They are the
real innovation that the industry has gone through the last 10
or 15 years. The folks that I know that developed those and
pursued them, brought them to fruition to where they were
working, were going through very aggressive cost-cutting
exercises, trying to do the right thing in terms of managing
cattle, getting the most dollar out of that process, and they
were very successful at it.
Formulas are worth about $25 a head for the feeding
enterprises that use them and, more or less so, about $25 a
head for the packers that use them. The bottom line is that is
$50. If you transfer animals from the formula bucket to the
negotiated cash trade, you lose whatever proportion of animals
those are. You lose that $50 value. That is going to be passed
down primarily to the cow/calf producer.
I have repeatedly heard that AMAs remove the packer from
the market. What I can guarantee you is if the packer does not
have to buy them, the feed lot does not have to sell them. It
is a one-for-one deal. It is absolutely one-for-one. That does
not mean with what is left we have enough to negotiate a cash
trade that we are comfortable with the price, but the industry
has worked on that. With expanding volumes that we have had in
the last 10 or 15 years, we have much more robust price
discovery.
Price discovery happens in very thick markets, very thin
markets. It is not driven by the volume of cash trade. I have
done some research on that. It is not published. It is ongoing,
but I am very comfortable saying that. I believe that result.
Likewise, there is not any research that shows that
mandating cash trade is going to make for better cattle prices.
That is just not part of the research that I understand.
In my career, understanding the packing industry, there was
really one question going forward. It was what company was
going to have financial stress and what plants were going to
close? This industry was at substantial excess capacity for
almost my whole career, starting in the mid-1990's up until
things changed in 2016. In 2017, you finally had more cattle
than packing capacity. That has been a recent phenomenon and it
has been exacerbated by COVID.
The industries have gotten out of balance in terms of
supply and demand and the resulting price different we see is
largely because of that.
I want to finish with a little bit of outlook in the
market. I think the markets are looking forward that fed cattle
prices are approaching back to record levels. We should see
substantially higher fed cattle prices. That is what the market
thinks come the end of the year. We are also looking at
possibly record high calf prices, if not this fall then the
next fall. It is primarily the forage market that is messing
that up.
How come the return to record prices? We are getting the
supply and demand back into balance in terms of we have had a
substantial drought for a couple of years and we are simply
winding down the cattle numbers.
Thank you.
[The prepared statement of Mr. Koontz can be found on page
81 in the appendix.]
Chairwoman Stabenow. Thank you very much.
First, Mr. Ruffin, and Mrs. Ziesch, the Committee has heard
that producers once received up to five bids on your cattle at
auction. You often only have one or two and there are fewer
regional cattle buyers available for producers like you.
What does it mean for producers' ability to determine they
are receiving a fair price when they only receive a single bid
for their cattle? Mr. Ruffin?
Mr. Ruffin. Thank you, Madam Chair.
Without the information that we can get that this bill may
provide us if it is passed, and I only get one bid, which is
basically what I do for my cattle now, I do not really ever
know exactly what the cash market is. As I said, we sell our
cattle in an environment where there are very little cash
cattle traded. That is in that Texas, Oklahoma and New Mexico
market, and Kansas market.
I do not have, if there is not a cash basis, I have
absolutely no way whatsoever to determine whether or not I am
getting a good value.
The biggest problem is without a cash value, they have put
the independent feed yards out of business. I have no way of
knowing, you know, that is where I got bids for all of my life
in the cattle business. I am here telling you what I have
experienced. I got good bids from those. I felt comfortable
with them.
A fair market value is what a willing seller will pay and
what a willing buyer will take for it. The part we always
forget is when they are not under duress. Well, name me a
person now that is selling cattle in this complex we have now
that is not under duress, the producer side. I always feel
that. I do not feel like I get a fair price.
Chairwoman Stabenow. Thank you very much.
Mrs. Ziesch.
Mrs. Ziesch. Thank you, Chairwoman Stabenow.
Yes, you need competition for them to be bidding. Our best
day at the sale barn where two order buyers were mad at each
other. I am not sure why they were mad at each other, but they
were bound and determined to not let the other person get
certain loads of cattle that day. That was a huge benefit to
us. I mean, it just highlighted exactly why we need more
competition. The next week it was all blown over and they did
not bid--you know, outbid what they wanted to that day.
I just wanted to share that with you, that competition in
those forms are always good just because if you have ever been
to a live auction of any sort, whether it is cattle or
equipment or anything like that, the more bidders you have, the
more competition and the higher the price will be and it
benefits the seller.
Chairwoman Stabenow. Thank you very much. That reminds me
of my going to the 4-H livestock auction and every time I bid,
everybody bids me up. They know I am bidding and so the young
person showing the cattle or hogs loves it when I bid because
they always get a great price.
Thank you very much.
I would ask each of you, also, I think Mr. Ruffin, folks
realize that there is value in alternative marketing
arrangements or formula contracts for some producers. The
Cattle Price Discovery and Transparency Act would still allow
for producers to use these agreements.
I wonder if you could respond to Mr. Koontz's testimony
that the bill and a mandate on negotiated cash sales would lead
to producers losing money.
Mr. Ruffin. I have a tremendous amount of respect for Dr.
Koontz. I never met him until today. I have read his articles
for years.
I, unfortunately, do not have the academic experience or
world in which I can do the research that he has. I can tell
you, from my end of the perspective, which is the producer,
that I do not have any objection to AMAs. I do not have
anything whatsoever that--I have no objection to them having
value added to cattle. I daresay that when you are talking
about the whole market is AMAs, then I have no place for my
cattle to go.
Now I also have heard and seen in other articles that he
has written that he says that the AMAs will cause--that they
will have to be--AMAs, if you take all of the cattle out of the
AMAs, who are you going to take out? If we had a viable cash
market, I daresay there are some of those people who are
selling under those AMA contracts--you have got to remember, we
had no AMA contracts back years ago and cattle traded and they
got fair markets for them.
If you could get a fair market value for your cattle other
than an AMA, I daresay a lot of those people would come back to
a cash market.
Chairwoman Stabenow. Thank you.
Briefly, Mrs. Ziesch, if you could respond, as well.
Mrs. Ziesch. Thank you, Chairwoman Stabenow.
We have already seen this happen in other industries, not
just the pork and poultry, but also the barley industry in
North Dakota. We were former barley growers for malting barley.
They strictly rely on contracts now. You have no outlet for any
barley if you are growing it on the open market. It is strictly
contract growing. If you didn't formerly have a contract with
them, you are not given acres into a new contract. They are not
taking on any new producers.
This is where I can see the beef industry going if this
continues to go as it is. AMAs, I am not saying they should be
disallowed completely but, you know, we need to have limits on
them for the same reason that we do not want it to go the same
way as the barley industry in North Dakota.
Chairwoman Stabenow. Thank you very much.
Senator Boozman.
Senator Boozman. Thank you all very much for being here.
Dr. Koontz, do you want to respond to Mr. Ruffin? I love to
hear Mr. Ruffin talk. I feel like I am at home in Eastern
Arkansas. Regarding AMAs.
Mr. Koontz. You know, more bidders, more buyers is always
better. At what cost?
In particular, in the southern plains, the southern plains,
with the closure of the facility at Plainview, became very much
a region kind of razor's edge. The supply of cattle in that
area could easily be out of balance with the packing capacity.
That region went very aggressively toward using AMAs so that
they knew what was coming, they were able to coordinate.
There were some concerns there about price discovery. Folks
were active in the market. I do think the incentive is on both
sides of the market, if they are not comfortable with what is
being traded, to back out, to move back to trade more cash if
there is an issue there.
What I have done some research on is that that price
discovery can very effectively happen with very few trades.
There is a lot of other things going on. One of the more
important things about price discovery is being able to
anticipate what people are thinking is going to happen next in
that marketplace.
If you go back to prior to COVID, when the shutdowns were
taking place, we did not know what was likely to happen next.
Therefore, you need more market participation potentially in
that environment.
Right now, moving forward, the market is pretty confident
that supplies will tighten up, prices will improve
dramatically, packer margins will decline, and the price
discovery in this situation right now is not tremendously
uncertain.
I would be most concerned about what are the costs and let
the underlying players that are doing that determine how they
market cattle.
Senator Boozman. Mr. Tiffany, low-carbon based non-hormone
treated, and natural beef are all experiencing increased demand
both domestically and abroad. Can you describe your experience
in programs like these and describe what effect a cash market
mandate would have on your ability to pursue those types of
programs for the ranchers that you represent?
Mr. Tiffany. Yes, gladly Senator.
Programs like non-hormone treated, natural, low-carbon
beef, these are not things that you just determine late in the
feeding period that this is how you are going to market your
cattle. Decisions that influence this type of product being
ready at some point in the future happen oftentimes three years
in advance. You have breeding decisions made at the ranch level
prior to gestation, then prior to the lifespan of this animal.
Throughout the life of that animal, they have to be managed and
handled in such a way to where they are still eligible for
these programs.
As we enter into this new market of low-carbon beef, which
I am certainly excited about both as somebody who is passionate
as a steward of our environment but also as somebody who thinks
that the beef industry holds the keys to some of the climate
problems that we face in our world. It is even more so because
at this point it is not even just about the animal, it is about
the grazing systems that the animal is in. It is about the
cover cropping plans that are made oftentimes years in advance
and the carbon sequestration that is involved.
It takes so much management and thoughtfulness to get that
product at some point in the future that I have to know through
an AMA that that market is going to be there in order to make
that investment.
This bill is going to limit what I think many of us in this
room see is tremendous potential for the beef industry.
Senator Boozman. Very good.
Dr. Koontz, if a Federal mandate is adopted that limits
producers' ability to use formula pricing agreements as they
choose, some States or regions could experience losses
approaching $100 million per year. Where do the premiums go?
Will those premiums shift to other segments of the cattle
industry?
Mr. Koontz. I would like to add to Mr. Tiffany's answer
before I get to that. The thing that piggybacks on top of his
response is that many of those programs are going to particular
packers and dedicated plants. They are going to plants that are
specializing in those products or a variety of products. Those
plants may have very little participation in the cash market.
Requiring some sort of minimum trade backs them off of that
specialization. I am sure that that costs.
To get at your concerns, so the premiums that are--you
know, the real advantages that came from AMA development and
use was in cattle management. It was in--the underlying feed
yards were the ones that had developed those programs, that
negotiated them with packers. They are managing those cattle
better in terms of knowing when they get marketed enables those
producers to target those premiums.
If you are required to go into the cash market and you
could for sure chase the premiums through a negotiated grid.
That negotiated grid has the risk that the negotiations fail,
that the cattle are not marketed that week, that are marketed
somewhere in the preceding weeks. Or if you think the
negotiations might fail, you market them early. You wind up
losing the production efficiencies as well as the returns on
the profit side.
Senator Boozman. Good. Thank you, sir. Thank you all.
Chairwoman Stabenow. Thank you very much.
Senator Hyde-Smith and then, unless we have another
Democratic member that returns, the next will be Senator
Marshall.
Senator Hyde-Smith.
Senator Hyde-Smith. Thank you, Madam Chair.
Mr. Ruffin, as a cattle producer in south Mississippi, will
you please share your perspective on how the Cattle Price
Discovery and Transparency Act will address the three main
trends that are negatively impacting the U.S. cattle industry;
thinning negotiated trade, decreasing accuracy of price
discovery, and diminishing competition in negotiated trade?
Mr. Ruffin. Thank you, Senator Hyde-Smith.
I think, if this bill is passed, I think pure and simple it
is going to create some competition back among the bidders on
cattle for people like me who have either feeder cattle, or
stockers as we call them, and cow-calf. The reason that I think
that is because if the packers do have to buy some cattle off
the negotiated cash market, then it is going to cause more
independent feed yards who may be on the verge of bankruptcy
now to be back in the market. If I get more bids, I just get a
better price. That is what I have experienced all my life. I
have not been experiencing that.
Senator Hyde-Smith. Thank you for that answer, very much.
Thank you, Madam Chair.
Senator Boozman.
[Presiding.] Senator Marshall.
Senator Marshall. Okay, thank you, Chairwoman.
Mr. Tiffany, I will start with you. I want you to be as
specific as possible. You mentioned that 92 percent of your
beef is traded as choice. I would imagine there is a premium
that you are getting for that, that you have a long-term
contract, you have worked hard to get that. Your customers that
are at the cow-calf operations have worked hard on their
genetics and then you have a recipe for that animal as well.
If this legislation was passed, what would be the downside
to that premium?
Mr. Tiffany. Well, just to clarify just a bit, Senator,
long-term contracts, that is not what we have. We have access
to those markets because--and they are available to anybody--
for example, in U.S. Premium Beef, if you have shares, whether
owned shares or in our case leased shares, that gives us the
right and the obligation to deliver one animal against that
grid. We go rent those shares or lease those shares because we
want access to that grid for our customers.
My brother and I, as you alluded to, achieved the American
dream. I mean, I was a young boy who wanted to grow up and be a
cowboy. When I achieved that, I decided I wanted to be a
cattleman. We bought our first business with a handshake as our
down payment and our collateral. All we got was a chance.
From that point, we had to make ourselves relevant in the
marketplace and we did that by having access to top notch grids
and markets on behalf of our consumers. We are an independent
feed yard. Not only am I an independent feed yard, I am one
that started from virtually nothing as a 30-year-old kid
looking back.
This bill would, well it would end my business model as it
exists today and it would cause many of my customers to quit
retaining ownership of their cattle, getting that carcass data
back just because it would be so detrimental to the way we
market cattle, it would radically change everything that we do.
Senator Marshall. Can you be even more specific? Are you
going to lose the premium? How is that going to impact the cow-
calf operator?
Mr. Tiffany. What it is going to do is it is going to apply
20-year-old pricing mechanisms to an industry that has far, far
advanced beyond just cash trade. You know, marketing issues are
nothing new. I remember as a boy, with my dad managing a feed
yard, cash trading everything at the time, there were these
same arguments, that the packer has too much power over us.
AMAs allowed producers to get paid for the product that they
are actually producing.
Senator Fischer talked about how nobody from Nebraska came
because they did not want to put themselves out there.
Admittedly, that is a risk. It is a risk worth taking for the
American cattlemen, those of us that are sitting here, that we
take it. I feel strongly that we have got to get this right. It
is incumbent upon you all to do that.
I will acknowledge that price transparency, price discovery
is critical. In reality, this bill does not achieve the goals--
and actually, I appreciate the spirit of the authors of this
bill. I do not feel that this achieves the goals of what this
body is trying to achieve.
Senator Marshall. I think you basically answered this
question but I want to highlight it. You are opposed to
regional negotiated trade mandates. Does that mean you are not
concerned about negotiated trade?
Mr. Tiffany. Oh, I am all for negotiated trade.
Furthermore, I think negotiated grid trade is good, as well.
Those negotiated trades occur in the last two to three weeks of
that animal's life. Like I suggested earlier, these higher end
programs that the consumer is avidly trying to get, that does
not happen in the last two weeks of that animal's life.
Senator Marshall. What provisions of the bill do you
support, do you feel good about?
Mr. Tiffany. Well, I think there is some opportunities in
expanded reporting regions, bringing some of those other States
in. I think a cattle contract library has the potential to be
as well. I am a bit cautious about that, and the reason why is
there are confidentiality concerns.
The other concern that I have, as a small independent feed
yard, is I do not have a battery of personnel that are
statisticians and part of a think tank. My fear is that the big
four, that everybody keeps alluding to, who has those types of
people on their staff, will be able to analyze that data far
better than my team ever can and it might even give them an
additional advantage.
Senator Marshall. Thank you so much. I yield back.
Chairwoman Stabenow.
[Presiding.] Thank you very much.
Senator Grassley.
Senator Grassley. After decades of dealing with this issue,
it is kind of really surprising to get 19 Senators to cosponsor
this and have broad bipartisan support. Eleven members of this
Committee are cosponsors. Lawmakers are beginning to realize in
order to have a sustainable supply of meat we need transparency
in the marketplace and protect the market from collapsing when
there are supply chain disruptions.
I think having right here testimony from North Dakota and
Mississippi shows wide geographic support. The most vocal
support comes from my Iowa cattlemen. During my county
meetings, I hear about the lack of competition all the time.
This bill 4030 is a true compromise. Many producers in the
Northern Plains went more intervention to ensure a robust cash
market. These producers support a bill that would even go
further than what Senator Fischer and I have compromised.
While we also hear from producers who do not want any
government intervention, so the bill does not go far enough for
some organizations and it goes too far for some others. For
that reason, I think that we have something that ought to fly
here.
I am going to start out with Mr. Ruffin. You tell us the
loss of the cow-calf ranchers. The same is true of most States
in rural America. Rural America is being hollowed out by
consolidation and lack of competition. What do you say to
economists who say there not an issue with price discovery or
price transparency?
Mr. Ruffin. The fact that I cannot get but one bid for my
cattle anymore. I mean, that is true. The fact that producers
in my area are going out of business.
I have a group of young people who are in a production
group that we pool cattle together and we are able to get
market prices a little higher because we can sell in truckload
lots, Senator. Those individuals, that is one of those groups
that I used to get prices from four or five commissioned
buyers. Now I get one. I see them dropping off the list. They
are dropping off the list.
Senator Grassley. In Iowa, you might get one bid but you do
not deliver your cattle for 30 days, as well. You imagine
feeding cattle for another, at $7 or $8 for corn is not nice.
I am going to go to Mrs. Ziesch. I want to open by saying
that we have these Fires at Holcomb all the way, then the
pandemic disruptions we have, now labor shortages. Producers
are no strangers to adversities and it seems like we are having
so-called black swan events every year instead of every 100
years. When the market is working efficiently, then producers
up and down the supply chain make money. When these black swan
events happen, like we have seen in the last five years, it
seems like the smaller independent producer on the cash market
gets damaged the most. The lack of resiliency in the supply
chain, Congress spent $8.5 million to help cattle producers.
My question to you, being a producer that is most similar
to Iowa cattlemen, can you tell the Committee how these black
swan events impact and continue to harm your business?
Mrs. Ziesch. Thank you, Senator Grassley.
Yes, I can. I have got a very recent case. We sold through
the sale barn about a third of our cattle. Unfortunately, it
was certainly after Ukraine was invaded. We did not have a lot
of choice in the matter. We had some storms the week before
that shut down all of the sale barns. Of course, everybody
knows that we all, as farmers and ranchers, a lot of us have
bills due at a certain time of the year based on when our
cattle sales are.
With the feed and the price of feed and all of that stuff
that goes into them, it was time for those cattle to go. As a
live product, we do not have that option of putting them in a
bin like we can with our grains and making a better choice
later.
With that being said, we probably lost about $20,000 to
$30,000 that day at the sale barn just because of what happened
overseas. That happens a lot. Most of the cattle buyers that
day that were there were actually on their phones either
reading a book or playing games. It was pretty disheartening
when you only had about two buyers that were actually buying
and even them were only doing it half-heartedly just because
they knew they could take advantage of what the market was that
day.
We realize that we do sell on a worldwide market, that we
have to be aware of what is going on in the world. Sometimes it
does feel like we are being taken unfair advantage of at
different times. Yes, we are very cognizant of disruptions.
Senator Grassley. My time is up. I had a couple of
questions for you, Mr. Tiffany. I will submit them for answer
in writing.
Chairwoman Stabenow. Thank you very much.
Senator Thune. I am not sure if he is coming back to join
us, but we will call on him when he does.
Senator Fischer.
Senator Fischer. Thank you, Chairwoman Stabenow. Thank you
to our Ranking Member. I especially want to thank both of your
staffs. They have been wonderful to work with, with our staff
as we worked through the technical aspects of the bill. I think
that was extremely important. We had USDA come in. There has
been a lot of time and effort by everyone on the Committee. I
thank you and your staffs for that.
We have seen economists over the past few years estimate
wide-ranging figures about the values of AMAs, as much as $65 a
head. However, economists note their research draws conclusions
``from a world that has not happened and measurements from the
real world must be made and extended to the policy proposed.''
Fortunately, through a combination of voluntary efforts aided
by pressure from this Congress, we have real world examples of
increased negotiated trade.
The Texas-Oklahoma-New Mexico region marketed just seven
percent of their cattle in the negotiated market in 2019. That
doubled to 14.2 percent in 2021.
I am a member of NCBA and the policy of that association
has been in support of negotiated sales. In fact, NCBA had a
voluntary program which I referred to earlier in the first
panel. That voluntary program did not work. It did not work
because the packers did not participate. While we can talk
about voluntary programs and that that is the way we want to
go, and to listen to my dear friend Chuck Grassley say that the
bill, it goes too far for some people, not far enough for other
people. I think we have got a sweet spot here. I think we have
found that sweet spot with this bill and with the support we
are seeing for the bill.
NCBA also said if that voluntary program did not work that
we should compel reporting. Well, to me the word compel means
mandate. I am not happy about mandates. I am a rancher. I do
not like mandates on anything. I do not like government getting
involved in a lot of stuff. When you put forward voluntary
programs and it is shown that they do not work and acknowledged
by associations that they do not work, we need to look
elsewhere.
We have done that with this bill. We have seen groups come
together. We have listened to what different groups, different
people want to do, and we have tried to meet that. I think we
have been very successful on it.
AMAs are still going to exist because they do recognize the
premiums that people should get for the genetic improvements
that they have in their herds, for the good things that they
are doing in marketing. Those will still exist. They have
existed for a long time. They will continue.
Mr. Ruffin, as a producer who sells cattle into Texas, you
can speak to real world impacts that we see that negotiated
trade will bring. When Texas-Oklahoma-New Mexico region
increased their negotiated trade, did you experience
significant economic losses, as some economists have claimed?
Mr. Ruffin. Senator, I did not. I guess the problem is,
from where I stand, a small cow-calf producer and backgrounder
and stocker in Mississippi, the price really has not changed
much period, up or down, even though I know that packers are
reaping premium prices for animals. I have seen some reports, I
have no idea if they are true or not, where during COVID last
year their wholesale meat prices went up 100 percent, retail
went up 25 percent. I know personally my calf prices went down
20 percent.
From where I am, no, I have not see it decrease, I have not
seen it increase, not because of more increase in the cash
sales. No.
Senator Fischer. Well thank you, sir. It is good to hear
from a producer that increased negotiated trade did not impose
a cost upwards of $65 a head, as some models have suggested.
This large of a cost would have been noticeable in the real
world and impacted your bottom line. That is what we deal with
every day, is our bottom line.
As I have said throughout this process, Nebraska is the
beef State. We have all segments of the industry in my State.
It has the biggest economic impact on the State of Nebraska. I
want all segments to succeed. That means the cow-calf producer,
the backgrounder, the large and small feedlots, and our big
packers. We have three of the four big packers in the State of
Nebraska. It is important that they succeed, as well.
Unless we see some changes made and be able to look forward
to success for all members of this industry, for all segments,
that will not happen.
Once again, I thank both our Ranking Member and our Chair
for the good work that you and your staffs have done on this. I
thank Secretary Vilsack and the USDA, and I look forward to a
vote on this bill. Thank you.
Chairwoman Stabenow. Thank you very much.
Senator Hoeven and then Senator Braun.
Senator Hoeven. Thank you, Madam Chair.
Shelly, again, thanks for being here. You and your husband
and your family run a cow-calf operation, 600 head. Tell us a
little bit how you market and then how you think this
legislation can help? Obviously, we are worried about getting
more competition for our producers and better transparency.
Talk a little bit about, like you say, your marketing practices
and what you need? What you think can help you, and maybe touch
on this legislation? Because I know you are familiar with it.
Mrs. Ziesch. Thank you, Senator Hoeven.
I just wanted to clarify, too, using Ukraine as a black
swan event or something that affects us, I do not want to make
light of what is happening over there. Our hearts and minds are
with them because they are very similar to us, they are
farmers, they are ranchers. I just wanted to make sure that
that is not taken out of context, that we are very, very aware
of what is going on over there and hope that it is resolved.
Senator Hoeven. Shelly, in fact, some of their herd came
from North Dakota. We actually have exported cattle over to
them, if you can believe it, on a 747. The Price Brothers and
others actually sent restock over to Ukraine. A lot of their
herd, some portion of their herd, is actually North Dakota
based.
Mrs. Ziesch. Yes, that is correct, yes.
How we market ours is about a third of ours we go through a
broker and do a forward contract, basically. He negotiates with
the smaller feedlots or the larger feedlots. We have sold
cattle down into Nebraska, Colorado, Minnesota, and Iowa. He is
with the farmer feeders. He is the one that has the contacts.
It is just easier to go through a broker. We pay him a
commission to do so and we put out a bid based on the cash
market, what is going on at the local sale barns. We decide
what we would like to get for the bid. We put that out there
and say hey, we would like to get this dollar amount for this
weight.
Then he will contact his contacts and they will get back to
us with what they would like to pay and we negotiate that
contract. Sometimes it is a 30-day window of when we would do
delivery. Sometimes they like to do it longer. We used to do it
longer but we thought they were getting a little too much
control and we decided we did not want to do that. We decided
also that we did not want to do more than that 30 percent
because of the same reason, that they seemed like they were
getting a little greedy and had too much control over how they
controlled the market.
The other third will go through the sale barn, which we
sell at about four local sale barns at different times,
depending on what size cattle they are and what the needs are.
Those are regional markets also.
Then the other third we either retain for ourselves for
replacement heifers, we sell replacement heifers to other
producers. We also have a small portion that we use for
processing, which in North Dakota right now we have to book out
about a year, a little over a year, to book processing dates
because we do not have the capacity, our larger processors in
North Dakota right now.
Senator Hoeven. What are the things that you feel in this
legislation or other things would be most helpful to you?
Mrs. Ziesch. I think having the cattle contract library
would be helpful, so a person could see what those AMAs are so
you----
Senator Hoeven. I am glad you said that right at the
outset.
Mrs. Ziesch. The ability to have a more robust cash market
is huge. We have seen sale barns in North Dakota close. Then
you lose that market. You lose access to those different
buyers. A lot of the same buyers do wind up at the same
markets. Depending on how the market went for that week, say if
you wanted to sell on Tuesday or if you wanted to sell on
Friday, it can change rapidly based on the market. It would
help with the cash market, I do believe.
Senator Hoeven. Do you think the approach, this regional
mechanism set up in Fischer Grassley, do you think that works?
Do you think it is helpful? Do you have any recommendations
regarding it?
Mrs. Ziesch. I guess I do not have any specific
recommendations regarding it. I mean, the best you can do is
give it a try and see if it works. As far as regional, I am a
producer. That is kind of out of my area of expertise of
setting up the different regions and that type of thing.
Most recently, I have been in coveralls----
Senator Hoeven. In terms of our region, what is your
thought, for example, for our region? Do you think that would
be helpful?
Mrs. Ziesch. I think it would be. I mean, it cannot hurt.
What we have got going now is not helpful. We are losing
ranches at an alarming speed. When I look around my community,
there is empty ranches sitting there. The ones that are ready
for retirement, they do not have the next generation coming on.
They are going to be empty ranches soon, too.
What we are doing now is not working, so we need to change
something. If not now, I do not know when.
Senator Hoeven. Thanks again for what you do out there, and
thanks for being here today. I really appreciate it.
Mrs. Ziesch. Thank you, Senator Hoeven.
Chairwoman Stabenow. Thanks very much.
Senator Braun.
Senator Braun. Thank you, Madam Chair.
You know, ironically I just came from a health care hearing
and also meeting with the Indiana Hospital Association. I have
been an entrepreneur for 37 years prior to becoming a U.S.
Senator. I can tell you, I operated in markets that had no
barriers to entry, no barriers to entry, 100 percent
transparency. I will never forget the guy in Houston that was a
dealer. He said you are No. 5 on speed dial. I will get to you
when I am not happy with the prices on the other four. That is
a definition of free markets. The other thing would be an
engaged consumer, and information. You have got to have all of
that.
A classic definition of when things get too concentrated
would be close to where this topic of conversation is. Just
before I came in, the four largest meat packers control 82
percent of the market. A lot of it is due to, over time, you
simply evolve into maybe that being a more efficient model.
I had a turkey farm for 32 years. We used an arcane method
called the Urner Barry pricing method, and got into it when
there were open markets still there, where you were not a
contract producer.
All of that has a place. Whenever you get to a point where
you feel you are running out of abundant information and too
few players are controlling the scenery, that is when you get
into trouble. Market concentration, too much of it, hurts all
markets. They sooner or later lose the characteristics of being
true marketplaces.
Health care, which is the biggest sector of our economy,
has gotten to the point where it is a tradeoff between
government taking it over, where many would want Medicare For
All, versus fixing the system.
I think you know where I am coming from. I have got a
simple question. Are we at the point, and I will ask this of
Mr. Ruffin and then of Mrs. Ziesch here in a moment. Do you
have the information you need to feel like you are a
participant in a totally free unfettered market? Or do you feel
it is getting worse and worse, in terms of making a living
doing what you are doing because of the structure of the market
itself?
Mr. Ruffin. Senator, I do not have the information that I
need to determine whether or not I get a fair price for my
cattle. That information is guarded in the industry. I do not
have that. Of course, it is getting worse and worse because, as
they go into these AMAs more, I get less and less information
about that. I do not know what is marketing when or where.
I do get less and less information every day. I cannot
determine what is a fair market value for my cattle. It is
getting worse.
Mrs. Ziesch. Thank you, Senator.
Yes, kind of along those same lines, if we do not have the
cash market to base it off of, we do not know what is going on
farther down the pipeline. We base our prices off the cash
market. If that goes away further, it is going to really be
detrimental to that.
I do have a friend who operates a feed lot fairly close to
us and he sells direct to packers. He said only one time in the
30 years that he has operated his feed lot has he ever been
able to negotiate with the packers. That is because they were
short on cattle in 2014.
Senator Braun. I think what you are saying is emblematic of
not just raising cattle and finding markets. It is emblematic
in so many industries across our country. Never had the benefit
in my own business of doing anything but unfettered
competition. When any market structurally gets to the point
that--not only in agriculture and it is not just in meat
packing. It is across row crops, as well, health care industry.
Any other industry that loses those characteristics of no
limits on competition, no barriers to entry, full
transportation and engaged consumer or an engaged knowledgeable
seller, and the disproportionate nature of where one is at one
end of the spectrum and the other is at the other end of the
spectrum, it invites hearings like this.
Just like I told the health care industry, fix it, become
more transparent before you get government running the
business. Then you will really be complaining about it.
Thank you.
Chairwoman Stabenow. Well, thank you very much.
Thank you to the USDA and thank you to all of you for
really important input for us. We really appreciate your
perspectives on these bipartisan bills.
As we have heard today, there is no shortage of complex
challenges facing livestock producers. USDA has made progress
in increasing opportunities for small and mid-sized processors
but there is a lot more to do.
I look forward to working with colleagues on both sides of
the aisle as we move forward.
The record will remain open for five business days for
members to submit additional questions and statements.
With that, the hearing is adjourned.
[Whereupon, at 12:59 p.m., the Committee was adjourned.]
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